Indian pharmaceutical companies will increasingly move away from the overcrowded and competitive area of generics and invest more R & D spending in niche drugs, according to a new report.

Indian pharmaceutical firms are expected to spend more on R & D in the near future as they target potentially lucrative and relatively underdeveloped niche therapy area drugs markets.

Indian companies such as Ranbaxy, Dr Reddy’s, Lupin and Wockhardt are cited as examples of generics makers that have already been making moves towards niche drug production, with increasing R & D investments.

The generics sector dominates India’s pharmaceuticals market, however, it does not guarantee long-term profitability or sustainable financial growth. Since there are fewer barriers to market entry for generics compared to brand-name drugs, competition in the generics sector is fierce and profit margins are slim. This could fuel the drive towards niche drugs, despite the higher costs involved.

India’s new drug pricing controls may also not be helping companies to make a profit in the generics sector. India recently introduced a new Drug Price Control Order (DPCO), affecting both brand-name and generic drugs, which is expected to lead to price reductions of up to 80% in ‘essential drugs’. Although other proposed legislation that would make it compulsory for doctors to prescribe only low cost generic drugs could work in favour of generics companies.

The fact that many Indian companies already possess considerable manufacturing capabilities and would be able to leverage their experience and infrastructure into achieving scale economies in the development and production of niche drugs could also ease the transition.

India’s pharmaceutical market value is estimated to increase from US$17 billion in 2012 to US$54 billion by 2020.

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Source: www.gabionline.net