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Indian Pharmaceutical Industry: an overview

August, 2013


India is now among the top five pharmaceutical emerging markets globally and is a front runner in a wide range of specialties involving complex drugs' manufacture, development, and technology. The Indian pharmaceutical industry is a highly knowledge based industry which is growing steadily and plays a major role in the Indian economy. As a highly organised sector, the number of pharmaceutical companies are increasing their operations in India. The industry is expected to touch US$ 35.9 billion by 2016.

The Department of Pharmaceuticals has prepared a 'Pharma Vision 2020' document for making India one of the leading destinations for end-to-end drug discovery and innovation. The department provides requisite support by way of world class infrastructure, internationally competitive scientific manpower for pharma research and development (R&D), venture fund for research in the public and private domain and such other measures.

Sector Structure/ Market Size

The domestic pharma market has reported total sales of Rs 6,370 crore (US$ 1.03 billion) in the month of May 2013, registering a growth of 6.8 per cent, as per IMS Health. The major factors responsible are increasing sales of generic medicines, continued growth in chronic therapies and a greater penetration in rural markets.

The cumulative drugs and pharmaceuticals sector has attracted foreign direct investments (FDI) worth US$ 11,304.91 million during April 2000 to April 2013, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).


The Indian pharmaceutical industry would continue to experience strong growth as structural growth drivers continue to remain impervious. The industry is expected to revert a growth of 10-12 percent in 2013-14, according to a study by ICRA. It is also expected that in-organic investments will gain momentum in the medium-term as companies plan to create stronger presence in emerging markets and build expertise in select therapy areas.

Among the top 10 companies, Cipla with total sales of Rs 302 crore (US$ 49.13 million), Sun Rs 297 crore (US$ 48.32 miliion), Alkem Rs 222 crore (US$ 36.12 million) and Sanofi Rs 186 crore (US$ 30.26 million) were the fastest growing corporations for the month of May 2013.


Pharmaceutical exports from the country during 2012-13 stood at US$14.6 billion, up from US$13.2 billion the previous year, as per P V Appaji, Director General, Pharmexcil.

The Ministry of Commerce has targeted Indian pharma sector exports at US$ 25 billion by 2016. The Government has also planned a 'Pharma India' brand promotion action plan spanning over a three-year period to give an impetus to generic exports.

In order to boost the export capability, Export-Import Bank of India (Exim Bank), has decided to expand the scope of its finance to pharmaceutical companies for extended repayment periods. Eligible export oriented companies can avail finance from Exim Bank for a maximum repayment period of 10 years with a moratorium of up to 36 months.

"Of the export markets, Indian pharma will focus on the US market which presents significant opportunities for the next two years for generics, due to patent cliffs and recent changes in healthcare policies," said the India Ratings report on outlook for Indian pharmaceuticals for 2013.


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'.

Global demand for generic drugs from Indian companies is booming as developed nations battle rising healthcare costs. As a result, generics companies are increasingly focusing on expanding presence in relatively under-penetrated markets (i.e. France, Spain & Italy), branded generic markets of East Europe and niche areas like complex generics, OTCs etc.

Diagnostics Outsourcing/ Clinical Trials

India is fast becoming the preferred destination for high-end pathology and diagnostic services. The highly fragmented diagnostics and pathology labs market in India is pegged at US$ 3.4 billion, according to a report by PricewaterhouseCoopers.

An increasing number of hospitals from the UK, US, Middle East and neighbouring countries are tying up with Indian diagnostic centres to conduct laboratory tests. The Indian diagnostic services market is expected to grow at a compound annual growth rate (CAGR) of around 26 per cent during 2012-2015 on back of huge investments, fast expansion into tier II & III cities, and strong government support strengthening the healthcare infrastructure in the country.

According to RNCOs research report "Booming Clinical Trials Market in India", the number of clinical studies by domestic and global players has sharply risen. India, over the last decade, has developed significant capabilities in clinical trials, along with certain capabilities in project management and data management.According to RNCOs research report "Booming Clinical Trials Market in India", the number of clinical studies by domestic and global players has sharply risen. India, over the last decade, has developed significant capabilities in clinical trials, along with certain capabilities in project management and data management.


Some of the investments in the sector are:

  • Piramal's healthcare vertical plans to invest US$ 2.5 million to upgrade their antibody drug conjugate (ADC) manufacturing suites. The upgrade will give Piramal two commercial grade ADC suites at the Grangemouth facility, while retaining clinical phase manufacturing capacity in other suites on-site
  • Dr Reddy's Laboratories (DRL) has launched Donepezil Hydrochloride tablets in the US market following the approval by the United States Food and Drug Administration (USFDA)
  • US-based drug maker MSD has tied up with Mumbai-based Lupin to market MSD's 23-valent Pneumococcal Polysaccharide Vaccine in India. Lupin would have a non-exclusive licence to market, promote and distribute the vaccine under a different brand name
  • Aurobindo Pharma, Natco Pharma and Glenmark have received approvals from the US Food and Drug Administration (USFDA) to launch their migraine drugs in the US market
  • Elder Pharmaceuticals has acquired UK-based Max Healthcare. The acquisition is through Elder's fully-owned UK subsidiary, NutraHealth, and will mark the re-entry of Elder Pharma into the over-the-counter (OTC) pharmaceutical category
  • Zydus Group has launched LipaglynTM (Saroglitazar), a novel drug targeted for treating diabetic dyslipidemia or hypertriglyceridemia in Type II diabetes. The drug has been approved for launch in India by the Drug Controller General of India (DCGI)

Government Initiatives

The Foreign Investment Promotion Board (FIPB) has cleared seven FDI proposals for investment in the Indian pharmaceutical companies. Currently, 100 per cent FDI in pharma sector is permitted through automatic approval route in the new projects but the foreign investment in the existing pharma companies requires FIPB approval.

In the Union Budget 2013-14, investment allowance of 15 per cent on new plant and machinery has been allowed. The allowance is expected to increase investments in new projects while simultaneously providing tax benefit to the industry.

In order to provide relief to the common man in the area of healthcare, a countrywide campaign in the name of 'Jan Aushadhi Campaign' has been initiated by the Department of Pharmaceuticals, Government of India, in collaboration with the State Governments, by way of opening up of Jan Aushadhi Generic Stores in the Government Hospitals by way of supply of generic medicines through Central Pharma Public Sector Undertakings, to make available quality generic medicines at affordable prices to all.

Road Ahead

In spite of some recent adverse developments, 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 see the largest number of merger and acquisitions (M&A) in the pharmaceutical and healthcare sector, according to consulting firm Grant Thornton. A survey conducted across 100 companies has revealed that one-fourth of the respondents were optimistic about acquisitions in the pharmaceutical sector.

The pharma companies such as Cipla, Ranbaxy, Dr Reddy's Labs and Lupin might soon be part of the government's ambitious 'Jan Aushadhi' project. In an attempt to commercialise the project, the Government is likely to rope in the private sector to bulk-procure generic drugs from them.

Exchange Rate Used: INR 1= US$ 0.01627 as on August 14, 2013

References: Consolidated FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council