India’s pharmaceutical sector is rocking it on the global stage. We are the third largest when it comes to volume and on the thirteenth rank when It comes to value. In the global evaluation, we contribute about a 20 percent of it.
We are not only producing them, but also exporting them extensively. We are the largest exporters of generic drugs across the globe. Our generic drugs come up to 20 percent of the total global exports.
Our country is at a very interesting position in terms of the global pharmaceutical trade. We have no dearth of scientists and medical engineers who are coming up with new researches and trials every day. We could take the potential of pharmaceuticals to a whole new level. The drugs that are being used to fight off AIDS, at present, are being sold by India’s top rate pharmaceutical companies.
Global pharmaceutical markets are in the midst of major discontinuities. While growth in developed markets will slow down, emerging markets will become increasingly important in the coming decade. The Indian pharmaceuticals market, along with the markets of China, Brazil and Russia, will spearhead growth within these markets.
Global players in the pharma industry cannot afford to ignore India. The country, many predict, will be the most populous in the world by 2050. India will make its mark as a growing market, potential competitor or partner in manufacturing and R&D, and as a location for clinical trials.
In terms of value, the Indian medicine sector amounts to around 3.1 percent of the world’s pharmaceutical industry, while in terms of volume, we come up to about 10 percent.
If the estimates are to be believed, India’s revenue is about to grow up to 100 billion dollars by the time 2025 rolls by. If that happens, we will be coming up to be the world’s sixth biggest pharmaceutical player, in terms of size and volume. Also, in a social context, this sector will lead to a growth in the number of jobs. The employment opportunities will have been increased by 58,000 by the time we reach 2025.
We are exporting more and more pharma goods every year which is only expected to grow in the positive direction in the coming years. We have all kinds of approvals and licenses any manufacturer might need to produce medicines. Of course, the natural resources, labor and technology in this regard is superior and of utmost quality. This only turns the tables a little more in our direction. We are making huge strides in bio technology and bringing out new ways to conduct agriculture every day. Bio pharmaceuticals is on the onset of some very interesting times, thanks to our current industrial infrastructure. Many new vaccines have been brought out in the recent decades. We now have cures to so many more diseases than we previously did. The industry is growing with every passing minute. Thanks to the export market becoming more and more attractive for the exporters, trades are going uphill.
If someone wants to start up a new business, this field might just be the way to go. Our government is promoting the production of such goods and has, hence, become much more liberal when it comes to approvals and licenses. The speed of procedures has increased. You won’t have to wait long before your application is reviewed. Of course, the profits will most definitely be off the charts, as the market is simply too hot right now. Some smart business sense, integrity and a talented team of experts in your corner can do the trick.
Some of the initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
- The Government of India is planning to set up an electronic platform to regulate online pharmacies under a new policy, in order to stop any misuse due to easy availability.
- The Government of India unveiled ‘Pharma Vision 2020’ aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments.
- The government introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines.
Indian Pharmaceutical Industry
- The Indian pharmaceuticals market witnessed growth at a CAGR of 5.64 per cent, during FY11-16, with the market increasing from US$ 20.95 billion in FY11 to US$ 27.57 billion in FY16. The industry’s revenues are estimated to have grown by 7.4 per cent in FY17.
- Indian pharmaceutical market grew 5.5 per cent in CY2017 in terms of moving annual turnover. In March 2018, the market grew at 9.5 per cent year-on-year with sales of Rs 10,029 crore (US$ 1.56 billion).
- By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and 6th largest market globally in absolute size.
- Increase in the size of middle class households coupled with the improvement in medical infrastructure and increase in the penetration of health insurance in the country will also influence in the growth of pharmaceuticals sector.
The domestic pharma market is currently US $ 10 bn in size and is expected to reach ~US$ 20 billion by 2015 and establish its presence amongest the world’s leading 10 markets. Currently, India is the 4th largest market in the world in terms of volume and 12th in terms of value.
The pharmaceutical sector was valued at US$ 33 billion in 2017. The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach US$ 55 billion. India’s pharmaceutical exports stood at US$ 17.27 billion in 2017-18 and are expected to reach US$ 20 billion by 2020.
Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US Food and Drug Administration (USFDA) in 2017. The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics market.
India’s biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per cent a year and reach US$ 100 billion by 2025. Biopharma, comprising vaccines, therapeutics and diagnostics, is the largest sub-sector contributing nearly 62 per cent of the total revenues at Rs 12,600 crore (US$ 1.89 billion).
The pharmaceutical industry will have a future in India as well as globally. The future perspective of this industry is based on the high burden of disease, good increase in the higher disposable incomes of the individuals, improvements in healthcare infrastructure and improved healthcare financing. The Indian pharma industry has been growing at a compounded annual growth rate (CAGR) of more than 15% over the last five years. The industry has significant growth opportunities. The pharma companies in India will have to rethink their business strategy to sustain the robust growth till the year 2020. The companies are to adopt new business models and think of innovative ideas to the best satisfaction of the consumers. The Pharma companies in India may continue to grow organically and inorganically through alliances and partnerships. They have to focus on improving operational efficiency and productivity continuously. The developments in the health insurance, medical technology and mobile telephony can help the growth of the pharma industry by removing financial and physical barriers to healthcare access in India.
Porter’s Five forces Analysis
Growth drivers of the Pharma sector
1) Increasing incomes & healthcare spends to spur domestic growth
With increasing affordability, shifting disease patterns and healthcare reforms, the total consumer spending on healthcare products and services in India has grown at a CAGR of more than 14% since 2000. According to a research report by the Mckinsey Global Institute, spending on healthcare in India will witness the highest growth rate among all spending categories over the next two decades. Healthcare spend is expected to grow to 13% of average household income by 2025 from 7% in 2005. This will be driven largely by increase in per capita disposable income which is expected to increase to US$765 in 2015 from US$463 in 2005.
The domestic pharma market will thus continue to grow rapidly (~15% sales CAGR over 2009-13) buoyed further by stronger penetration of semi-urban/rural areas and rising share of chronic therapies. McKinsey estimates the domestic pharmaceutical market will more than double to achieve sales worth US$ 20bn by 2015.
2)Significant patent expiries in developed markets present good growth opportunities for Indian generic companies:
A slew of patents will expire in the US and EU over 2011-15, including top-selling brands Lipitor, Nexium, Zyprexa and Plavix. Over this period, products with estimated annual sales of ~US$ 80 bn in the US alone will lose patent exclusivity, and this will translate into an estimated incremental generic sales opportunity of US$ 18 billion (~60% of current US generic drug market); a similar incremental opportunity in developed European markets exists as well. A big share of this revenue will go to companies that secure high-margin first-to-file (FTF) sales which offer marketing exclusivity for 180 days. It is estimated that Indian companies can take about 20% of this S18 bn new market
3) Emerging markets to become the next destinations for pharma companies
“Pharmerging” markets, including the BRIC countries, South Africa, Mexico, Turkey, Poland, Indonesia and Romania, are growing faster than developed markets. According to IMS, a well-known industry research firm, “Pharmerging” markets will increase their share in global pharma from 16% in 2009 to around 25% in 2014-15. Indian generics are replicating their domestic success in markets like Russia, Brazil and Mexico which like India are branded in nature.
4) M&A a potential catalyst
With higher growth prospects in emerging markets, many multinational branded drug companies are trying to expand their presence in generic pharmaceuticals. This has increased their interest in generic companies with an established product portfolio and sales/distribution network in emerging countries including India. The acquisitions of Ranbaxy (by Daiichi Sankyo) and Piramal (by Abbott) are a case in point. This is expected to continue.
5) Biosimilars – potentially a big long-term driver
Biosimilars are reproductions of bio-technologically manufactured bio-pharmaceuticals that partially mimic proteins naturally present in the body. Biosimilars could potentially become an important long-term growth driver for the generic pharmaceuticals industry, with the global annual sales opportunity rising to as much as US$ 10bn by 2015 (once patents for several biologic expire). Indian generic companies still trail overseas rivals in biosimilars. Success will depend on building manufacturing capacity and the emergence of favorable regulatory reforms in the US and EU.