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Ratings agency ICRA in its latest report has said that continued pricing pressures in the US and European markets coupled with regulatory overhang and cost inflation will affect profit margins of major Indian pharmaceutical firms. It said the revenues for a sample set of 16 Indian pharmaceutical firms are expected to grow by 4-6 per cent in FY2023, marginally lower than the growth of 7.7 per cent in FY2022. However, for FY2024, it expects the sample set revenues to grow by 6-8 per cent primarily driven by the domestic and emerging markets. 

The ratings agency said while revenues for these firms in FY23 will be supported by 5-7 per cent year-on-year growth in the domestic market and 4-5 per cent in the US business, revenues from the European market are expected to contract marginally, given the ongoing macroeconomic challenges and the large base of the previous fiscal which was supported by vaccine sales. Revenues of ICRA's sample set from Europe continue to witness headwinds such as muted demand, the depreciation of the euro against the rupee, and pricing pressures due to increasing competition.

As for the US market, the ratings agency said in line with the trends in the recent past, mid-to-high single digit pricing pressure is expected to continue over the near term for generics, with some normalisation expected only after a few quarters. It said most major Indian pharmaceutical companies continue to focus on emerging markets to fuel their growth, given that they continue to face pricing pressure in the US and the European markets. It added that the growth in emerging markets also continues to be driven by new product launches, strong demand, and depreciation of the rupee against certain currencies.