Indian Pharmaceutical Industry Faces Profitability Challenge Amid Market Pressures

New Delhi, Oct 28 (KNN) The Indian pharmaceutical sector, renowned for its global prominence, is experiencing significant headwinds as profitability continues to decline.

A recent press release by Vector Consulting Group, highlighted, Industry data indicates a 20-30 percent reduction in profit margins over the past six to eight years, with only a brief respite during the pandemic period.

This downturn is largely attributed to price erosion in the United States market, where consolidation among distributors has strengthened their negotiating position against Indian generic drug manufacturers.

In response to these challenges, pharmaceutical companies have implemented various cost-reduction measures, including downsizing quality assurance departments and curtailing research investments.

However, these short-term solutions may be compromising long-term operational capabilities, particularly at a time when market agility is crucial for capitalising on intermittent supply shortage opportunities.

The industry's operational challenges are further complicated by stringent regulatory requirements, resulting in extended production lead times of six to nine months.

This has led to inventory management issues, with finished goods in U.S. warehouses typically maintaining five to six months of stock, significantly exceeding the optimal two to three-month threshold.

Companies are also incurring substantial costs through emergency air shipments, which account for up to two percent of sales revenue.

Industry experts suggest that transitioning from traditional forecast-based procurement to a pull-based system could enhance manufacturing efficiency, potentially reducing lead times by up to 50 percent and inventory levels by as much as 40 percent.

Additionally, implementing strategic buffer management and improving coordination with API suppliers could yield substantial cost savings and operational improvements.

Quality control remains a critical concern for Indian pharmaceutical manufacturers operating in the U.S. market.

Industry leaders are advocating for a shift from reactive inspection readiness to proactive regulatory compliance, emphasising the importance of robust root cause analysis capabilities to minimise quality incidents and regulatory observations.

In the research and development sphere, companies are grappling with resource allocation challenges, often operating at 60-100 percent above capacity.

This overextension has resulted in delayed project completions and procurement inefficiencies. Experts recommend implementing project flow management systems to enhance R&D productivity, with potential lead time reductions of 30-50 percent.

As the industry navigates these challenges, the adoption of innovative operational strategies and excellence frameworks appears to be crucial for maintaining global competitiveness and ensuring sustainable growth in an increasingly demanding market environment.

(KNN Bureau)