Increased competition, US gov measures to lower drug prices are leading to pricing pressure: Granules' Priyanka Chigurupati

Priyanka Chigurupati, executive director of Granules Pharmaceuticals

Generics maker Granules Pharma has seen a growth of close to 17.8 percent in the US market, the company’s largest revenue generator—almost 50 percent. Granules has 27 generic products in the US market, most of which are in the prescription drugs and OTC (over the counter) segment. The company has seven manufacturing units, one of which is in the US.

“We progressively moved from being an API to a fully integrated player with dominant finished dosage sales,” says Priyanka Chigurupati, executive director of Granules Pharmaceuticals. As per the company’s quarterly results, net sales in March 2023 were at Rs1,013.88 crore, up by 11.07 percent from Rs912.85 crore in March 2022. At the same time, quarterly net profit was down by 3.06 percent, at Rs125.29 crore in March 2023.

“We are also making good inroads within Europe and contribution from the region has been on an upward trend. We are also moving towards manufacturing of complex formulations through differentiated technologies,” Chigurupati tells Forbes India. Edited excerpts from an interview:

Q. What are some of the challenges that the industry has been facing lately?

The generic pharma industry continues to suffer from price erosion in their US generics business, cost inflation and supply chain woes, thereby significantly impacting the margins of players like Granules.

During the pandemic, pharmaceutical companies in general were facing pricing issues for key raw materials due to the shut down in China. The Russia-Ukraine war brought about geopolitical instability, leading to energy costs and logistical costs increasing.

The situation is easing up, currently. China has opened after three years as the government abandoned its ‘zero-Covid’ policy on January 8. It is also good news for global trade and the economy as domestic economic activities resume to pre-Covid levels. The freedom of trans-border movement further promises to have positive ripple effects on international business. We now have good supply; hence the pricing situation [for raw materials] is under control.

Q. How have you been dealing with the pricing pressure in the US market?

The price erosion in the US generics business has significantly impacted margins of generic players. Pricing pressure is the result of customer consolidation, increased competition, and recent measures by the US government to lower drug prices for customers. However, Granules India’s reliability in supplies, quality, regulatory compliance and sustainability initiatives are supporting us, as our partners understand the value that we create in the long term.

Also read: India's 'pharmacy of the world' moniker is under threat. Here's why

Q. In terms of regulations, how is Granules ensuring that it lives up to the US FDA standards?

Known for our process innovation and efficiencies, today, we supply pharmaceutical products to over 300 customers in 80-plus countries. Our exports now contribute over 88 percent of the company’s total revenue. All our manufacturing sites are approved by USFDA, including our recent announced packaging site in the Manassas, Virginia, USA.

We are working in a regulatory environment in which adherence to standards of quality and compliance is mandatory, the failure of which could adversely affect our business performance and loss of business. Our mitigation strategy is directed towards strengthening our capabilities by continuous learning and development initiatives on best practices and regular audits to stay in tune with ever-evolving regulatory expectations. We are ensuring the implementation of stringent review systems and suitable preventive actions are rolled out.

Q. Outside of the US, what are some emerging growth markets for Granules?

We are seeing a steady growth from the European markets. We are moving from offering API to pure play formulations, and making our presence felt and moving up the value chain. We have also identified South Africa, Israel, Australia, Mexico, Chile, Colombia and GCC countries as emerging growth markets. China, Japan and Brazil markets are also on the cards to be explored further.