Indian generics firms welcome Obama despite outsourcing comments

By Gareth Macdonald

- Last updated on GMT

Related tags: United states, Barack obama

Barrack Obama’s election as US president has been roundly welcomed by India’s generics sector, despite his somewhat contradictory desire to reduce the level of outsourcing but not "shy away" from globalisation.

At present, Indian drugmakers supply around 16 per cent of all pharmaceuticals imported by the US, the majority of which are generics produced by the country’s thriving contracting sector.

Part of the reason for this is that the US Food and Drug Administration (FDA) has cleared around 80 Indian manufacturing facilities, the most of any country outside North America.

Until recently the consensus opinion was that US demand for Indian generics would continue to grow as consumers seek cheaper options for pharmaceuticals set to lose patent protection over the next few years.

However, the FDA’s September ban on non-branded drugs made by Ranbaxy on quality concerns, coupled with other high profile problems related to pharmaceutical ingredients sourced from Asia, had begun to erode US confidence in products made outside the country.

These factors partially explain why the US president elect’s plans to “increase the use of generic drugs in public programs​,” and “[take] on drug companies that block cheaper generics medicines​,” have been so positively and vocally received by Indian industry players.

One such opinion was offered by Glenn Saldanha CEO of Mumbai-headquartered Glenmark Pharmaceuticals who welcomed talk of Democratic initiatives to boost US generics consumption in an interview with the Financial Express​.

He explained that: “Obama becoming president will be positive for Indian generics manufacturers;” ​adding that in the current economic climate such firms “can play a big role in curtailing healthcare costs​.”

Piramal Healthcare’s director Swati Piramal was also upbeat about the US election results. She said that the Obama victory “will be supportive for the Indian formulation drug manufacturers​.”

Despite the general feeling of optimism in the Indian drug manufacturing sector, some observers have voiced concerns about Obama’s position on outsourcing.

In a debate earlier this year with then rival Democratic candidate Hillary Clinton, Obama said that: “We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States. “

Secretary of the Indian Drug Manufacturers Association Dara Patel was one who raised the outsourcing issue, explaining that: “Any drastic steps by Obama will hit hard the contract manufacturing industry as firms spend millions of dollars to set up FDA approved plants​.”

However these concerns were not shared by Mumbai Religare Securities president of equities Amitabh Chakraborty, who thought that Obama’s comments were more likely to affect India’s IT sector than its drug industry.

He told the Associated Press that: "It doesn't mean offshoring will be stopped. It can't be. Offshoring means lower cost and even a Democratic government is looking for less cost because companies need to be more profitable."

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