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Indian Pharmaceutical Industry
India is among the top five emerging pharma markets and has grown at an estimated compound annual growth rate (CAGR) of 13 per cent during the period FY 2009–2013. The Indian pharmaceutical market is poised to grow to US$ 55 billion by 2020 from the 2009 levels of US$ 12.6 billion, according to the report titled 'India Pharma 2020' by McKinsey & Co.
A new cluster of countries is contributing to the growth of the pharma industry, resulting in a robust jump in exports of drugs. The country's pharma industry accounts for about 1.4 per cent of the global pharma industry in value terms and 10 per cent in volume terms. Both domestic and export-led demand contributed towards the robust performance of the sector.
An increase in insurance coverage, an ageing population, rising income, greater awareness of personal health and hygiene, easy access to high-quality healthcare facilities and favourable government initiatives are some of the important factors expected to drive the pharma industry in India. The Government of India has unveiled 'Pharma Vision 2020' aimed at making India a global leader in end-to-end drug manufacturing.
On improved utilisation of manufacturing facilities, the domestic pharmaceutical market is likely to see high revenue growth and profit margins. Pharmaceutical sales in India are expected to grow by 14.4 per cent to US$ 27 billion in 2016 from US$ 22.6 billion in 2012, according to a report by Deloitte called '2014 Global Life Sciences Outlook'.
India's pharmaceutical exports stood at US$ 14.84 billion in FY 2013–14. The United States (US) is the country's biggest market for pharma exports accounting for about 25 per cent, followed by the United Kingdom (UK). "India has been able to make its name as a quality supplier of affordable medicines across the globe. We are expecting around 12 per cent growth this fiscal (2014–15)," said Mr P V Appaji, Executive Director, Pharmaceutical Export Promotion Council of India (Pharmexcil).
Pharma exports from India will be more than the size of the domestic sales by FY 2015, according to a report by India Ratings & Research. The country provides generic medicines to almost 200 countries. It is responsible for about 40 per cent of the generic and over-the-counter drugs consumed in the US. Indian generics market is expected to grow to US$ 26.1 billion by 2016 from US$ 11.3 billion in 2011.
The allowance of foreign direct investment (FDI) in India's pharma sector was well received by foreign investors. The cumulative drugs and pharmaceuticals sector attracted FDI worth US$ 11,588.42 million in the period April 2000–February 2014, according to data published by Department of Industrial Policy and Promotion (DIPP). Some of the major investments and developments in the Indian pharmaceutical sector include the following:
Ashland Speciality Ingredients has opened a centre of excellence (CoE) focused on pharmaceuticals in Hyderabad, Andhra Pradesh. The expertise offered here would be predominantly in oral solid dosage form and a range of technical services for drug companies.
Sun Pharma has agreed to buy out Ranbaxy for US$ 4 billion. The landmark deal makes the combined Sun–Ranbaxy entity the fifth largest generic drug-maker in the world, with estimated revenues of US$ 4.2 billion for the year ended December 31, 2013.
Natco Pharma Ltd has received tentative approval for Oseltamivir Phosphate capsules from the United States Food and Drug Administration (USFDA). Tamiflu (Roche's trade name for Oseltamivir Phosphate) had US sales of approximately US$ 495 million for the 12 months ending September 2013, according to IMS Health.
Strand Lifesciences has received a US patent for virtual liver, which would aid the pharmaceutical industry in understanding liver-related issues better. A virtual liver would help in predicting and assessing hepatotoxicity of novel drug compounds in pre-clinical studies.
Jubilant Life Sciences has received a nod from the USFDA to market a generic diuretic medicine. The drug is used to treat fluid retention in the body caused by conditions such as congestive heart failure and cirrhosis of the liver.
ChrysCapital has invested around US$ 40 million in Torrent Pharma, expanding its portfolio of healthcare companies and taking up the total exposure in the sector to nearly US$ 300 million.
As per extant policy, FDI up to 100 per cent, under the automatic route, is permitted in the pharmaceuticals sector for Greenfield investment. Hundred per cent FDI is also permitted for investments in existing companies under the government approval route. Further, the Government of India has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines.
The government plans to create a special entity in partnership with private firms for a 'Brand India Pharma' campaign with the objective of improving the image of drug exporters. The special purpose vehicle (SPV) will be in operation in the next few weeks, said Mr Rajeev Kher, Commerce Secretary, Government of India.
The Andhra Pradesh government has announced a new life sciences policy for the state at the 11th edition of BioAsia 2014 in Hyderabad. According to the new policy, the state will provide subsidies in power, water and provide land for setting up of new life science industries in the state. The state government is planning to attract an investment of Rs 20,000 crore (US$ 3.33 billion) by encouraging more industries in the segment.
In a move to simplify the barcode procedures for pharmaceutical companies and to ensure quality, the Government of India has decided to treat mono cartons containing medicines as primary level packaging, as per the Directorate General of Foreign Trade (DGFT).
The Ministry of Chemicals and Fertilisers has unveiled a scheme that will enable pharma units in different clusters across the country to set up common infrastructure facilities with substantial financial assistance from the government.
Road Ahead
India Ratings and Research has revised its outlook on the pharmaceuticals sector for FY 2014–15 to positive from stable on the back of increased exports. With the support of Pharmexcil and the government in the form of Brand India Pharma project iPHEX, the sector would continue to grow and meet the healthcare requirements of the developing world. The country will also see the largest number of mergers and acquisitions (M&A) in the pharmaceutical and healthcare sector, according to consulting firm Grant Thornton.
With 70 per cent of India's population residing in rural areas, pharma companies have immense opportunities to tap this market. Demand for generic medicines in rural markets has seen a sharp growth.
The non-small cell lung cancer (NSCLC) therapeutics market value in the Asia–Pacific region is expected to grow at a CAGR of 6.3 per cent to touch US$ 2.9 billion by 2019 from US$ 1.8 billion in 2012, according to GBI Research. An aging population and increasing number of NSCLC incident cases will be the main drivers behind this anticipated growth in India.
Exchange rate used INR 1= US$ 0.01667 as on May 08, 2014
References: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council
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