Govt halts plan:
Several US hospitals teaming up to manufacture their own generics and sell at no profit. Doesn’t help the case of Indian generic pharma companies.
The most significant manufacturing costs in generic manufacturing are api and labor. The US has to be dependent on Low cost countries like India in both these aspects. Such a move in my opinion will only help Indian companies as more business will be outsourced to us. Given the distributor consolidation that is happening/ has happened in US which actually brought down margins of generic manufacturers one more customer to sell to will only help Indian Pharma companies as to that extent customer bargaining power comes down.
Top Bullish points on Indian pharmaceuticals
• India’s cost of production is nearly 33 per cent lower than that of the US
• Labour costs are 50–55 per cent cheaper than in Western countries. The cost of setting up a production plant in India is 40 per cent lower than in Western countries
• Cost-efficiency continues to create opportunities for Indian companies in emerging markets & Africa
• India has a skilled workforce as well as high managerial & technical competence in comparison to its peers in Asia
• India has the 2nd largest number of USFDA-approved manufacturing plants outside the US
• India has 2,633 FDA-approved drug products. India has over 546 USFDA-approved company sites, the highest number outside the US
Source: India brand equity foundation
More USFDA approvals do not mean better margins for Indian 'big pharma’
Indian pharma is in a transformative phase following the pricing pressure on generic drugs in its key market, the US. While most firms are making a transition to less competitive complex generics and speciality drugs
Source: Cadila health Annual report
On can find an Excellent article : -> http://www.business-standard.com/article/companies/india-s-leadership-in-cost-efficient-generics-is-unchallenged-sanjiv-kaul-118031401437_1.html
Sector analysis HDFC 2018Q4