Sector structure/Market size

The Indian pharmaceutical industry is driving product development and breaking new grounds in medicine research worldwide.

The Indian domestic pharmaceutical market is estimated to be US$ 10.76 billion in 2008 and is expected to grow at a high compound annual growth rate (CAGR) of 9.9 per cent till 2010 and thereafter at a CAGR of 9.5 per cent till 2015.

Currently, the Indian pharmaceutical industry is one of the world's largest and most developed, ranking 4th in volume terms and 13th in value terms. The country accounted for 8 per cent of global production and 2 per cent of world markets in pharmaceuticals.

The Indian pharmaceutical offshoring industry is slated to become a US$ 2.5 billion opportunity by 2012, thanks to lower R&D costs and a high-talent pool in India.

Exports

India exported drugs worth US$ 7.2 billion in 2007-08 to the US and Europe, followed by Central and Eastern Europe, Latin America and Africa.

A report by industry research firm, RNCOS forecasts that pharmaceutical exports will grow at a CAGR of 18.5 per cent between 2007-08 and 2011-12. This growth will be fuelled by multi-billion dollar patent expirations and growth in the global generics market.

Pharmaceuticals exports (valued in US dollar terms) registered an impressive growth rate at 30.7 per cent during April-October 2008 compared to the corresponding period last year.

Growth

India's pharmaceuticals market is expected to grow by about 12-13 per cent in 2009, says a study by consulting firm IMS.

During February 2009, India's drug retail industry continued its healthy growth recording 13.3 per cent higher sales over the same month last year.

A recent study by Yes Bank estimates the domestic formulations market to touch US$ 21.5 billion by 2015.

The Indian vaccine market was worth US$ 665 million in 2007-08 and is growing at over 20 per cent. Exports contribute over US$ 360 million, while the domestic market for vaccines is US$ 300 million.

Rural Market

According to estimates rural areas account for 21 per cent of the country's pharmaceuticals market. In 2006-07, the rural Indian pharmaceuticals market was estimated at around US$ 1.4 billion, having grown at about 40 per cent in 2006-07 against 21 per cent in the previous year.

Pharmaceutical Retail

India has 5.5 million chemists and druggists, and the organised retail market accounts for just 2 per cent of the industry but is posting a year-on-year growth of 30-40 per cent. The country's pharmaceutical retail market is expected to cross the US$ 10 billion mark in 2010 and be worth an estimated US$ 12 billion- US$ 13 billion by 2012.

Generics

According to a report by IMS Health, the Indian generic manufacturers will grow to more than US$ 70 billion as drugs worth approximately US$ 20 billion in annual sales faced patent expiry in 2008. With nearly US$ 80 billion worth of patent-protected drugs to go off patent by 2012, Indian generic manufacturers are positioning themselves to offer generic versions of these drugs.

The Indian diagnostics and pathology laboratory business is presently around US$ 864 million and is growing at a rate of 20 per cent annually.

Moreover, the US$ 200-million Indian clinical research outsourcing market will reach up to US$ 600 million by 2010, according to a joint study done by KPMG and the Confederation of Indian Industry (CII) in September 2008.

Research & Development

• In a bid to boost R&D in the pharmaceutical sector, the government will provide US$ 422.96 million for establishing six National Institutes of Pharmaceutical Education and Research over the next five years.
• Biotechnology major, Biocon, will be investing US$ 20.11 million in the next fiscal in enhancing its R&D.

Government Initiative

The Government has taken various policy initiatives for the pharmaceutical sector

• Government has offered tax-breaks to the pharmaceutical sector. Units are eligible for weighted tax deduction at 150 per cent for the R&D expenditure incurred.
• Steps have been taken to streamline procedures covering development of new drug molecules, clinical research etc.
• Government has launched two new schemes—New Millennium Indian Technology Leadership Initiative and the Drugs and Pharmaceuticals Research Programme—specially targeted at drugs and pharmaceutical research.

Investment

• According to Ministry of Commerce, domestic investment in the pharmaceutical sector is estimated at US$ 6.31 billion.
• The drugs and pharmaceuticals sector has attracted FDI worth US$ 1.43 billion from April 2000 to December 2008.

Road Ahead

The Indian pharmaceutical industry will see tremendous growth in the coming years as consumer spending on healthcare is increasing in India. Consumer spending on healthcare is expected to increase from 7 per cent of GDP in 2007 to 13 per cent of GDP by 2015.

Exchange rate used: 1 USD = 49.8153 INR