The entry of global pharma firms in the generic market will put strain on Indian drug companies, which will have to manage costs and maintain profitability to be able to compete with them, says credit rating agency Fitch.
However, it said that the sharpened focus of global pharma companies on the generic market will also lead to greater outsourced manufacturing volumes to control costs, a move that could benefit Indian firms.
The arrival of "Global Pharma" into the already competitive generic market is likely to further strain in the environment, Fitch said in its Pharma Industry Outlook 2010.
"Indian companies, by contrast, are much smaller and do not have the financial strength to absorb high price cuts or deep discounts. Indian companies' distribution networks in regulated markets is also far below that of Global Pharma."
On the bright side, the rating agency said that Global Pharma would need to control costs.
"This could be either through higher contract manufacturing volumes, or through longer-term relationships and alliances. India is well-placed to benefit from this shift, with the country's strong manufacturing base both in formulations, as well as in key inputs (bulk drugs and APIs)."
Fitch said overall outlook for the year is stable and the Indian pharma industry, which is about Rs one lakh crore, will continue to grow 11-12 per cent in 2010.