India is observed to be the largest supplier of generic drugs around the globe. Indian pharmaceutical sector industry supplies more than 50 percent of worldwide demand for various vaccines, 40 percent of generic demand in the US and 25 percent of all medicine in the United Kingdom.
India enjoys a significant position in the global pharmaceuticals sector. The nation also has a huge pool of scientists and engineers who can steer the industry ahead to an even higher level. Presently more than 80 percent of the antiretroviral drugs used globally to battle AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.
The Indian pharmaceuticals market has been observed to exhibit below-mentioned characteristics that make it unique:
• There is a branded generic domain, which makes up for about 70 to 80% of the retail market.
• It has been seen that the local players enjoy a dominant position that is driven by development capabilities and early investments.
• Increased competition in this industry has seen the price levels being driven quite low.
The history of the Indian Pharmaceuticals market around the 1970s was almost non-existent. Today, India has been able to gain massive importance and created a niche for itself in the domain of pharmaceuticals. According to a global report, the Indian pharmaceutical industry ranks 4th in terms of volume and 10th in terms of value.
Market Size and Growth
The pharmaceutical industry was valued at USD 33 Billion in 2017. The industry is expected to grow at a CAGR of 22.4% over the 2015-20 timeline thus, taking the valuation to USD 55 Billion. The Indian pharmaceuticals exports were reported at USD 17.27 Billion in 2018 and have reached about USD 15.52 Billion in 2019 (up to Jan 2019). This growth would majorly be driven by rising incomes, enhanced medical infrastructure, an increase in the ubiquity and treatment of chronic diseases, an emphasis on health insurance coverage, an increase in patented products, and new market being created in the existing white space.
The Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US Food and Drug Administration (USFDA) in 2017. In terms of market share, the industry accounts for about 30% in terms of volume and about 10% in terms of value in the US generics market valued around USD 70-80 Billion.
The biotechnology industry of India comprising of bio-pharmaceuticals, bio-agriculture, bio-industry, bio-informatics, and bio-services, is expected to grow at a CAGR of around 30% and reach USD 100 Billion by 2025.
Investment and Recent Developments
Reports suggest that the Union Cabinet has agreed for the amendment in the existing Foreign Development Investment (FDI) norms in the pharmaceutical sector to allow FDI up to 100%. This is a crucial step that may open up an automatic route for the manufacturing of medical devices subject to certain conditions.
According to data released by the Department of Promotion of Industry and Internal Trade (DPIIT), the drugs and pharmaceuticals sector attracted total FDI inflows worth of USD 15.93 billion between April 2000 and December 2018. Some of the recent developments in the pharmaceutical sector of India are as follows:
• In Feb 2019, the Indian pharmaceutical market grew by 10% year-on-year.
• Between July-Sept’18, the sector witnessed 39 private equity (PE) investment deals worth USD 217 Million.
• Investment in research and development by the domestic pharma companies increased from 5.3% in 2012 to 8.5% in 2018.
• The sector witnessed 46 mergers and acquisitions (M&A) worth USD 1.47 billion in 2017.
The Indian Government plays a key role in building the future of this sector. The government has already taken steps towards reducing costs and bringing down healthcare expenses. Some of the initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
• The budget allocation to the Ministry of Health and Family Welfare has increased by 13.1% to USD 8.98 billion in the Union Budget of 2019-20.
• In Oct 2018, the Uttar Pradesh Government announced that it will be setting up six pharma parks in the state and has received investment commitments of more than USD 712 Million.
• Announced in the Union Budget 2018-19, the National Health Protection Scheme, which is the largest government-funded healthcare program in the world, is expected to benefit about 100 million poor families in India by providing a cover of up to INR 5 Lac per family per year for hospitalization care.
• The Government of India revealed ‘Pharma Vision 2020’ aimed at making India a global leader in the drug manufacturing process. Approval time for establishing and working on new facilities has been reduced to boost investments.
The Metro and Tier-I markets account for about 30% of the Indian Pharmaceutical Sector. During the last 5 years, the metro and tier-I markets have witnessed an estimated growth rate of 14-15% in the overall market. The current momentum is expected to continue, taking the segment to become a USD 33 billion markets by 2020.
As per market trends, growth in these markets will be driven by three factors.
1. Urbanization will lead to 250 million people moving from rural areas to urban centres during the next two decades.
2. The medical infrastructure will expand in terms of the scale of operations and scope of work. Corporate hospital chains will look to extend their hospital network in the top 70 cities.
3. Driven by organized initiatives, compliance has the potential to grow exponentially. While the diagnosis and treatment levels in metro and tier-I markets are 30-40% higher in rural areas, the compliance levels remain rather similar.
Other than these, the spent on medicines in India is projected to grow around 9-12% over the next 5 years, thus making India one of the top 10 countries in terms of medical spending.
The introduction of generic drugs into the market has been one of the prime focuses which are expected to benefit the Indian pharmaceutical companies. Also, penetration into the rural health segment, preventive vaccines, and life-saving drugs will augur well for the pharmaceutical companies.