US pharmaceutical sector anticipated to expand by 7-9% in FY26 according to ICRA, amidst cautious optimism regarding US links
In the world of pharmaceuticals, the US market, which has been experiencing a growth spurt, is expected to moderate in the upcoming financial year (FY2026). The year-on-year growth is anticipated to slow down from nearly 10% in FY2025 to a range of 3-5%. This slowdown can be attributed to price erosion and declining sales of lenalidomide, a key revenue contributor.
Meanwhile, in India, the pharmaceutical industry is forecasting a "moderate growth" of between 7 and 9% in FY2026. This growth is expected to be driven by the domestic market, where revenues are projected to increase by 8-10%.
In the US, the regulatory oversight remains with the U.S. Food and Drug Administration (FDA). Scrutiny by the FDA poses a risk, as warning letters, import alerts, and the imposition of failure-to-supply penalties can delay product launches.
On the other hand, the European market is witnessing growth, particularly in the launch of drugs related to nicotine-replacement therapy, injectables, and respiratory products. Research and development (R&D) spending in Europe is projected to remain steady at 6-7% of revenues, with companies focusing on complex molecules and specialty products over generics.
In terms of capital expenditure, the total expenditure of companies reviewed by ICRA is set to reach Rs 42,000-45,000 crore in FY2026, including Rs. 25,000 crore in inorganic investments. However, no new facts were presented regarding the total capital expenditure or the inorganic investments made by these companies.
In India, the Centre's GST exemptions and rate reductions on select lifesaving/ general medicines, and some medical supplies and equipment, are expected to enhance affordability and accessibility. Yet, no new facts were presented regarding the impact of these exemptions and rate reductions on the Indian pharmaceutical industry.
Recent debt-funded acquisitions by leading players signal a rising risk appetite, as these acquisitions aim to expand geographic and therapeutic footprints. However, no new facts were presented regarding these acquisitions or their impact on the industry.
The ICRA's sample set companies continue to report a double-digit expansion in revenues, with the operating profit margins (OPM) expected to remain resilient at 24-25% in FY2026. In Europe, these companies are expected to witness annual revenue growth of 10-12% in FY2026, following a 18.9% increase in FY2025.
In the domestic market, sales force expansion, improved productivity of medical representatives, deeper rural distribution, and new product launches are expected to support the predicted 8-10% revenue growth. Yet, no new facts were presented regarding these strategies or their impact on the domestic market.
The US government's proposal for a 'most favoured nation' (MFN) pricing policy could further impact Indian exporters, adding another layer of uncertainty to the pharmaceutical industry's outlook.
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