Indian pharmaceutical companies will find it harder to pass on the tariff cost to US consumers should the Donald Trump administration impose them, according to Amit Varma, managing partner at Quadria Capital.
"We are supplying life-threatening drugs to US consumers. If supply chains start getting affected, there will be hue and cry to make sure we circumvent this. If tariffs are in double-digit, there will be hit on balance sheets of Indian companies," Verma told NDTV Profit.
He also pointed out that it is "hard to pull off a complete shift" in manufacturing and entire supply chain to the US. This can only happen in long term, as its difficult to replicate the cost and price efficiency that India has developed, he added.
Varma also noted that in the contract development and manufacturing organisation or CDMO space, contracts are signed for long term supply and hence difficult to change. Therefore, given India's cost efficiency, even if there are marginal dip in operating margins, US clients will not turn away, he said.
Varma also said the diagnostic industry will become more organised as after Covid-19 pandemic, people have realised the importance of early diagnosis and treatment closer to where they live.
"There is huge growth expected in diagnostic sector. There is also scope in preventive and wellness medicine," he said.
Morover, Verma sees further consolidation in the hospital segment as the organised sector is just 10% of the total market. "The industry has matured and regulators will adapt."
As a healthcare-focussed private equity firm, Quadria Capital manages $3.5 billion in assets with exposure in fastest-growing economies in South Asia and Southeast Asia. Its portfolio includes Akums Drugs and Pharma Ltd., Maxvision Eye Hospitals and digital health company MediBuddy.
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