• Pharma companies are increasingly reassessing the economic viability of certain generic products for  Abbreviated New Drug Application (ANDA) filings due to heightened competition and the high costs  involved. This has led to a more selective approach in ANDA filings with the USFDA. Additionally, the ratio  of ANDA filings to approvals has fallen below 1x, significantly reducing competitive intensity in the US  generics market. This shift has altered the trajectory of price erosion and increased the demand for critical  drugs. 

• Between FY13 and FY18, Indian pharma companies faced severe regulatory challenges that adversely  impacted their operations and ability to launch new products in regulated markets. However, over time,  these companies have established robust systems, resulting in significant improvements in this critical area.  The proportion of Form 483 observations classified as Official Action Initiated (OAI) by the USFDA has  decreased from 22% in CY14 to 10% in CY23. Most recent OAI classifications have been issued to small to  mid-sized companies, and data integrity issues have notably declined. 

• The implementation of the Bio-Secure Act 2024 is expected to benefit Indian pharma companies involved  in Contract Research and Manufacturing Services (CRAMS). Innovator companies will likely shift their  research base for Phase I, II, and III trials to alternative destinations. CRAMS players are anticipated to  gain from increased contributions from innovator pharma companies, a gradual recovery in biotech funding,  and the commercialisation of more molecules in the discovery and development phases. 

• The semi/unregulated markets demonstrated volatile growth rates from FY18 to FY24, with a CAGR of  approximately 6%. This segment, which contributed about 35% to 40% of total exports during this period,  is projected to achieve a CAGR of 8% from FY25 to FY27 due to an increased established base portfolio  combined with new product launches. 

In FY24, Indian pharmaceutical companies saw an improvement in margins, increasing by approximately 100 to  120 basis points from the previous year’s 22% to around 23%. This improvement is primarily due to an enhanced  product mix, underpinned by the introduction of new products. CareEdge Ratings projects that the PBILDT% will  further increase by about 50 to 100 basis points in FY25. This expected growth is attributed to several strategic  initiatives, including entry into complex and specialty segments, selective ANDA filings, expanded market  penetration in the Rest of the World (ROW), enhanced productivity of medical representatives domestically, and  reduced raw material costs. Additionally, the expiration of patents on key molecules in chronic therapy areas like  Diabetes (Gliptins) and Cardiovascular (Sacubitril Valsartan) is likely to further boost margins. 

"The Indian pharmaceutical sector is poised for robust growth, with projections indicating an approximate 9%  increase during FY25-FY27. This growth is driven by structural trends such as domestic market expansion— anticipated from a 4% price increase, new product introductions, a growing share in chronic therapies, and deeper  market penetration in tier-2 and tier-3 cities. These developments are supported by increasing consumer  awareness, enhanced digital engagement, and strategic industry consolidation through mergers and acquisitions  to bridge gaps in brands and therapeutic areas. 

In the export sector, growth is expected from diversifying into specialty molecules, capitalizing on opportunities in  the off-patent market, and increased penetration into ROW markets. Historically, the credit profile of Indian  pharmaceutical firms has been stable, sustained by robust profitability and a minimal reliance on debt—a trend  that is likely to continue," stated D. Naveen Kumar, Associate Director.