Introduction
India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK.
India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers who have the potential to steer the industry ahead to an even higher level. Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.
Market Size
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 FY18 and have reached US$ 19.14 billion in FY19. Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals.
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.
Investments and Recent Developments
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for manufacturing of medical devices subject to certain conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 15.98 billion between April 2000 and March 2019, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Some of the recent developments/investments in the Indian pharmaceutical sector are as follows:
- Between Jul-Sep 2018, Indian pharma sector witnessed 39 PE investment deals worth US$ 217 million.
- Investment (as % of sales) in research & development by Indian pharma companies* increased from 5.3 per cent in FY12 to 8.5 per cent in FY18.
- In 2017, Indian pharmaceutical sector witnessed 46 merger & acquisition (M&A) deals worth US$ 1.47 billion
- The exports of Indian pharmaceutical industry to the US will get a boost, as branded drugs worth US$ 55 billion will become off-patent during 2017-2019.
Government Initiatives
Some of the initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
- In October 2018, the Uttar Pradesh Government announced that it will set up six pharma parks in the state and has received investment commitments of more than Rs 5,000-6,000 crore (US$ 712-855 million) for the same.
- The National Health Protection Scheme is largest government funded healthcare programme in the world, which is expected to benefit 100 million poor families in the country by providing a cover of up to Rs 5 lakh (US$ 7,723.2) per family per year for secondary and tertiary care hospitalisation. The programme was announced in Union Budget 2018-19.
- In March 2018, the Drug Controller General of India (DCGI) announced its plans to start a single-window facility to provide consents, approvals and other information. The move is aimed at giving a push to the Make in India initiative.
- 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.
Road Ahead
Medicine spending in India is projected to grow 9-12 per cent over the next five years, leading India to become one of the top 10 countries in terms of medicine spending.
Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.
The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.
Exchange Rate Used: INR 1 = US$ 0.0159 as on March 31, 2019
References: Consolidated FDI Policy, Department for Promotion of Industry and Internal Trade (DPIIT), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council, AIOCD-AWACS, IQVIA, *Top 10 companies as per research by HDFC Securities
REPORTS
Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. India contributes the second largest share of pharmaceutical and biotech workforce in the world. The pharmaceutical sector in India was valued at US$ 33 billion in 2017. India’s domestic pharmaceutical market turnover reached Rs 1,29,015 crore (US$ 18.12 billion) in 2018, growing 9.4 per cent year-on-year (in Rs) from Rs 1,16,389 crore (US$ 17.87 billion) in 2017. The Indian pharmaceuticals market stood at Rs 12,492 crore (US$ 1.79 billion) for the month of September 2019 and recorded sales of Rs 36,725.2 crore (US$ 5.25 billion) in the three months ended September 2019. Indian pharma companies received a total of 415 product approvals in 2018 and 73 tentative approvals. Affordable medicines under the Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) have led to savings of Rs 1,000 crore (US$ 143.08 million) for Indian citizens in FY19.
With 71 per cent market share, generic drugs form the largest segment of the Indian pharmaceutical sector. Based on moving annual turnover, Anti-Infectives (13.6 per cent), Cardiac (12.4 per cent), Gastro Intestinals (11.5 per cent) had the biggest market share in the Indian pharma market in 2018.
Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years. Pharmaceutical exports from India, which include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals reached US$ 19.14 billion in FY19 and US$ 5.17 billion in FY20 (up to August 2019). The exports are expected to reach US$ 20 billion by 2020. In FY18, 31 per cent of these exports from India went to the US. Healthcare sector witnessed private equity investment of US$ 1.1 billion with 27 deals in first half of 2019.
Medical devices industry in India has been growing 15.2 per cent annually and was valued at US$ 5.2 billion in 2018 and expected to grow US$55 billion by 2020.
The ‘Pharma Vision 2020’ by the government’s Department of Pharmaceuticals aims to make India a major hub for end-to-end drug discovery. The sector has received cumulative FDI worth US$ 16.25 billion between April 2000 and June 2019. Under Budget 2019-20, total allocation to the Ministry of Health and Family Welfare is Rs 62,599 crore (US$ 8.96 billion). Rs 6,400 crore (US$ 915 million) has been allocated to health insurance scheme Ayushman Bharat- Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). As per Union Budget 2019-20, Rs 1,900 crore (US$ 0.27 billion) have been set aside for research of the total amount and Rs 62,659 crore (US$ 8.96 billion) allocated for Ministry of Health and Family Welfare.
As per Economic Survey 2018-19, government expenditure (as a percentage of GDP) increased to 1.5 per cent in 2018-19 from 1.2 per cent in 2014-15 for health. Indian pharmaceutical sector is expected to grow at a CAGR of 22.4 per cent and medical devices market is expected to grow to US$ 55 billion by 2020. FDI increased to 74 per cent in existing pharmaceutical companies and 100 per cent for new projects.
Resource: India Brand Equity Foundation