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Pharmaceuticals

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Pharmaceuticals

November, 2012

Introduction

The Indian pharmaceutical industry is on a growth path and is expected to be amongst the top 10 global markets in value terms by 2020, according to a joint report prepared by Confederation of Indian Industry (CII) and PricewaterhouseCoopers (PwC). The Indian pharma industry has been growing at a compound annual growth rate (CAGR) of more than 15 per cent over the last five years and has significant growth opportunities.

India Inc has occupied a larger seat in the global league tables. Three out of the top 10 fastest growing generic companies globally are now from India. On the list are Glenmark Pharmaceuticals, Dr Reddy's and Sun Pharma. Significant product launches and market exclusivity of drugs going off-patent have contributed to the development.

Further, India and Netherlands have signed a memorandum of understanding (MoU) in health and medicine for mutual benefit. Besides, Lithuania is also seeking Indian investments in the pharmaceuticals sector.

“India is a unique market, always very intriguing. India presents challenging paradigms and gives tremendous opportunities. I see the healthcare sector as one of the biggest business opportunities,” said Terri Bresenham, President and CEO, GE Healthcare India, and MD, Wipro GE Healthcare. India is the first country to have a large number of multinational healthcare providers, added Bresenham.

Sector Structure/ Market Size

The Indian pharmaceutical market is expected to grow at a CAGR of 15.3 per cent during 2011-12 to 2013-14, according to a Barclays Capital Equity Research report on India Healthcare and Pharmaceuticals.

The outlook on the Indian pharmaceutical industry remains favourable, according to a report by ICRA and Moody’s. Domestic formulation market stood at Rs 58,300 crore (US$ 10.66 billion) and has been ranked third in terms of volume and tenth in terms of value, globally. From 2011, trends have been changing, multinational companies (MNCs) are focusing on chronics, branded generics and launching patented products, besides expanding their field force and focusing on tier-II as well as tier-IV towns. Domestic market grew at 15 per cent, while pharma MNCs’ revenue grew at 18.7 per cent.

Exports

India's exports of drugs, pharmaceutical and fine chemicals increased by 27 per cent to Rs 60,000 crore (US$ 10.97 billion) for the year ended March 2012, according to data compiled by Pharmaceutical Exports Council of India (Pharmexcil). Moreover, the size of the Indian formulations market, which currently stands at around Rs 62,000 crore (US$ 11.33 billion), is growing at 15-20 per cent annually.

Pharmexcil further plans to have warehouses in Africa and Latin America under co-operative marketing model and is in talks with a few associations in the respective countries.

Growth

The cumulative drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth US$ 9,682.17 million between April 2000 to August 2012, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).

The Foreign Investment Promotion Board (FIPB) has cleared eight proposals of foreign drug companies including those of Pfizer Ltd, B Braun, Sutures India and Ordain Health Care Global, to buy stakes in local companies.

Moreover in October 2012, FIPB has cleared 14 FDI proposals worth Rs 113.35 crore (US$ 20.72 million) including three from the pharmaceutical sector.

Generics

India has launched a sustained global campaign to capture an estimated US$ 40 billion worth of additional market for generic medicines. India produces a fifth of the generic medicines of the world and accounts for about 70 per cent of medicines supplied to poor countries through humanitarian agencies.

Generics will continue to dominate the market while patent-protected products are likely to constitute 10 per cent of the pie till 2015, according to McKinsey report ‘India Pharma 2015 - Unlocking the potential of Indian Pharmaceuticals market’.

Cipla is partnering with South Africa's Aspen Pharmacare to cater to the Australian market. Under the pact, Cipla would develop generic products to be launched by Aspen in Australia. Also, the company had acquired the over-the-counter and pharmaceutical divisions of Australian drug maker Sigma Pharmaceuticals for US$ 800 million.