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Obama effect: Pharma outsourcing first victim?

Source: PTI
January 27, 2009 17:53 IST
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With Barack Obama taking over as the President of the United States, outsourcing of activities from the US to the Indian market might get adversely affected, hitting the pharmaceutical sector the most, a top industry official said.

"President Obama has a conservative stance on outsourcing of services since he wants to create jobs and protect existing ones (in the US). As the Indian pharma industry is sustaining mainly on outsourcing, especially from the US, the future does not appear very smooth," pharma major Promed Group's President Deepak Bahri told PTI.

The Promed group manufactures and delivers branded as well as generic pharmaceutical formulations to Russia, CIS, south-east Asian countries, the UK and EU.

There will be increased competition in the US generics market since the US Food and Drug Administration-approved plants will enable many players to enter into the US market, earlier ruled exclusively by a few big companies, Bahri said.

"Companies that are cost-effective and good in supplies will survive," Bahri said.

With the global economy in a recession, it would make business sense for Indian pharma companies to address the CIS markets.

"CIS nations are taking aggressive steps to address their healthcare sector. Therefore, Indian pharma companies should be ready to grab the opportunities available in these markets," he said.

Though the healthcare system in the CIS countries are in a process of reformation, there are several challenges for the drug manufacturers. 

"The shift towards the generic market has opened the gates for a variety of international companies and the market has become fiercely competitive," Bahri added.

Pharma companies have experienced a dip in profit margins on account of the global slowdown, Bahri said, attributing it to competition from China and appreciation of the Rupee against the US dollar.

Indian companies, however, have proved their manufacturing and research and development capabilities and the CIS nations can benefit enormously by establishing tie-ups with Indian pharma companies, he said.

"Today, the markets have evolved with time. In countries like Russia, consumers are ready to pay a higher cost for quality and there are international competitiors who are fighting for a share of these growing markets," he said.

The global meltdown could negatively impact Indian pharma exports but "good relationships with the target audience help to sustain longer in the markets," Bahri said.

Marketing of pharma products calls for a strong field-force network complimented with a robust supply-chain. A growing product portfolio is the key to beat competition and this will ensure a constant flow of income into the business," the Promed chief said.

The Promed Group is an emerging Indian pharmaceutical entity offering pharmaceutical products to global markets and has clocked a growth rate of 119 per cent for the period April-December 2008 as compared to the year-ago, Bahri said.

In the last five years, the company has recorded a Compound Annual Growth Rate of 34.49 per cent, an absolute growth of 340.80 per cent and an average yearly growth of 68.01 per cent.

The group clocked a turnover of Rs 100 crore (Rs 1 billion) in FY 08.

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