The US has been experiencing a drug shortage recently, leading to negative consequences for patients and healthcare providers, compounded by soaring consumer costs. This presents an opportunity for Indian pharma companies to meet the demand for generic drugs in this US$ 527 billion market, and expand exports in the coming years. But regulatory concerns remain a major disruptive influence on trade that needs to be resolved.
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The US pharmaceutical market is the largest in the world and is valued at US$ 527 billion in 2022, expected to grow at a compound annual growth rate of 3.67% from 2023 to 2030. Recently, the market has been experiencing a drug shortage, leading to negative consequences for patients and healthcare providers and soaring consumer costs.
The US Food and Drug Administration (FDA) has stated that over 130 drugs were in short supply, 14 of which are cancer treatments. This shortage has had a significant impact on patients and healthcare providers. Due to the intense competition and inventory liquidation post-COVID, price erosion had intensified. But recently, it is down to single digits, predicted at 6-8% for FY 24. The drug shortage in the US is attributed to a number of reasons for the drug shortage in the US. These include:
- Manufacturing challenges: Drug manufacturers have been facing a number of challenges in recent years, including quality issues, price erosion, regulatory issues and supply chain disruptions of raw or bulk material.
- Regulatory issues: The US Food and Drug Administration (FDA) has been increasing its scrutiny of drug manufacturing plants in recent years. This has led to some plants being shut down or placed under restrictions, which has further reduced the supply of some medications.
- Changes in the market: The pharmaceutical market in the US is constantly changing. New drugs are being developed. While the medications are cheap to manufacture, pharmaceutical companies are not incentivized to do so because they don’t bring in large profits.
- Exit of some bankrupt generic firms: The exit of some bankrupt generic firms in the USA contributed to drug shortages. It led to reduced availability and supply gaps in the market, increasing the existing drug shortage situation in the country.
Drug shortage impact on consumers
The drug shortage in the US has had a significant impact on consumers. Patients are compelled to switch to different medications, which can be difficult and even dangerous, especially for those with chronic conditions. Healthcare providers may have to make difficult decisions about which patients to prioritize, and they may also have to spend more time managing drug shortages. Drug shortages impact consumer costs in various ways:
- Drug shortages impact on reduced sales and increased prices: The average drug shortage affects at least half a million consumers; more than two thirds of those impacted were consumers ages 65 to 85 (32%), 55 to 64 (24%) and 45 to 54 (17%).
- Drug shortages impact consumers’ ability to fill their prescriptions: There was an observed decline in sales volume of between 28-35% after the shortage.
- Drug shortages lead to higher prices: Analysis of the data indicates a 16.6% hike in the price of drugs in shortage, driven mostly by an increase in price of generics (14.6%). In some cases, the increase in the price of substitute drugs was at least three times higher than the price increase of the drug in shortage.
Opportunity for Indian pharmaceutical companies
India’s pharmaceutical industry is currently valued at US$ 50 billion, and is expected to reach US$ 65 billion by 2024 and US$ 130 billion by 2030. The country has an expertise in generic drugs with 20% of global market share by volume, has the highest number of FDA approved labs in the world outside of the US. This positions India well to address the drug shortage in the US market and tap an excellent opportunity to make further inroads.
Source: Department of Commerce
Trade between the US and India in the pharmaceutical sector has grown significantly. In 2023, the US imported US$ 6.8 billion worth of pharmaceutical products from India with a growth of 5.71% YoY. Lovely Sharma, founder of Lavanya Remedies, highlighted in an interaction with IBT, “The reason for drug shortage in the US is the quality concerns. That’s why they have discontinued manufacturing. Export business has definitely gone down because they are checking the quality of every shipment going to the US. Business is very slow in the market now.”
He further added, “While there is drug shortage in the US, it presents an opportunity for India’s pharmaceutical market to experience growth and fill that gap. India, being a major producer of generic drugs with a strong track record of quality manufacturing has the potential, skills, and availability of raw materials to grasp this opportunity. It is crucial for Indian companies to act now and strategically, ensuring that India seizes this opportunity before China does.”
The recent discovery of serious quality issues at Intas Pharmaceuticals, a major generic drug manufacturer in India, highlights a major challenge that Indian pharma firms face while exporting to the US. According to Anil Jauhri, ex-CEO of NABCB, “For a country which claims to be pharmacy to the world, our regulations are not yet on par with international standards. It is crucial that we undertake a comprehensive review of our regulations and make necessary amendments to align with global norms, such as adopting WHO good manufacturing practice (GMP) guidelines. To strengthen enforcement, we should consider establishing a pool of competent third-party agencies, similar to the FSSAI and CDSCO notified bodies, to conduct audits and ensure compliance. Regular audits, along with surprise inspections by regulators, can create a robust two-tier surveillance mechanism.”
Additionally, our drugs with WHO GMP certificate or CoPP are not acceptable in all countries. Mr Jauhri feels that India needs to create a system of certifying drugs to global regulations and negotiate with other countries to accept this system for easier access. This will eliminate the need for USFDA or other regulators to come and inspect India’s pharmaceutical plants, thereby adding huge cost to our industry.
