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Rediff.com  » Business » E&Y pegs vaccines as USP for generics industry

E&Y pegs vaccines as USP for generics industry

February 11, 2006 03:10 IST

The Ernst & Young's first ever healthsciences report has predicted global leadership in vaccines and heightened merger and acquisition activity for the domestic bio-pharmaceutical market. 

Launched Friday, 'Health Quotient' -- Ernst & Young's report -- outlines the issues and opportunities in the Indian pharmaceuticals, biotech and healthcare sectors. 

"Health Quotient is the firm's first-ever healthsciences report dedicated to the Indian bio-pharma market. The industry is on the threshold of strong growth driven by the consolidation in the global generics market, the untapped potential in the domestic market, distribution-led reform and a surge in medical tourism," said Utkarsh Palnitkar, healthsciences industry leader for Ernst & Young India, while summarising the report. 

The country is all set to attract global generics majors as merger activity intensifies. Globally, one of the key drivers for generics consolidation is the vertical integration into active pharmaceuticals ingredients, which demonstrate relatively more resilient profit margins, as per the report. Indian companies are not only strong in API cashflows, but also have 75 US Food and Drug Administration approved plants. 

The report states that vaccines would enhance India's competitiveness in the future as the country has large institutional buyers, a generics-driven market and relatively lesser interest from large multinational players, which are focusing on developing "blockbuster" drugs. 

'Health Quotient' also forecasts that the distribution network, which accounts for 35 per cent of the retail drug cost, has been lagging behind and is set for a major overhaul. Consolidation would both rationalise overall costs and improve efficiency. 

The driving forces for change are likely to be VAT implementation, growing institutional sales, emergence of pharma retail chains and manufacturer's focus on cost rationalisation. 

On 'Medical Tourism', the report foresees as much competition as there is opportunity. 

Calling India a relatively late entrant in this market, it said that the country will face stiff competition from other Asian destinations such as Thailand, Singapore and Malaysia. 

The 3rd Ernst & Young CEO Conclave at Bio Asia 2006, where this report was presented, was attended by the likes of Kewal Handa of Pfizer, Sanjiv Kaul of ChrysCapital, Habil Khorakiwala, Wockhardt, and Krishna Ella of Bharath Biotech.

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