Faster USFDA nod won't boost margins, will lead to intense competition: Analysts

Hyderabad: Indian drug makers may be receiving an increasing number of approvals from the US Food and Drug Administration for drug launches in the United States, thanks to a faster approvals system in place, but this will lead to more intense competition, steep price erosions and thereby thinner margins, experts said.

The FDA approvals may not be so attractive for Indian firms compared to the investments they incur. According to experts, amid faster approvals of late under the Generic Drug User Fee Act (GDUFA), generic drug makers should shift focus to specialty generics to improve margins. "Though the approval cycle for abbreviated new drug applications (ANDAs) has improved, most of them are for simple generic products, with no significant entry barriers," said Alok Dalal, pharmaceuticals analyst with CLSA.

"No major approvals are received for complex and difficult to make products, which helps gain fat margins," he said. Generic drug makers such as Sun Pharma, Dr Reddy's, Cadila and Wockhardt, which focus on specialty and difficult to make medicines, are lagging behind their global peers in obtaining FDA approvals, said Dalal.

"Aurobindo Pharma, Glenmark, Lupin and Jubilant Lifesciences have been receiving increasing number of FDA approvals for launching their products, most of these approvals were given to multiple players, leading to steep erosion in prices and margins in the world's largest market for medicines," he said.