Mumbai, Aug. 24: Indian companies may be wary of scrutiny by the US Food and Drug Administration (FDA), but they are also likely to invest more over the next four years to comply with the strict norms set by the regulator.
Ratings firm Crisil has said in a report that capital expenditure by the top 20 pharmaceutical companies from India is expected to go up to Rs 50,000 crore by 2018. This translates into an average capex of Rs 12,500 crore annually compared with Rs 9,000 crore in each of the last four years.
According to Crisil, one of the reasons for this rise are stricter regulations of the US FDA that will prompt companies to invest more in upgrading their facilities.
Domestic pharmaceutical companies, including Ranbaxy and Wockhardt, have faced the US FDA’s ire for non-compliance with Amercian manufacturing standards at their Indian plants.
“The FDA scrutiny of Indian manufacturing plants has been increasing of late. So, companies will have to invest in upgrading facilities proactively to enjoy uninterrupted benefits from the opportunities coming up,” the rating agency added.
Companies are also looking to take advantage of greater opportunities from patent expiries and the rising use of generic drugs (off-patent medicines) in regulated markets, particularly the US.
Drugs worth $130-150 billion are expected to go off patent between 2012 and 2017 even as the demand for generic drugs from the regulated markets will remain strong, creating the need to develop infrastructure and processes to comply with the FDA regulations.