India’s pharmaceutical sector will touch US$ 45 billion by 2020, according to a major study by global management and consulting firm, McKinsey & Company. The reasons for this optimism are well founded. In the period 2002–2012, the country’s healthcare sector grew three times in size, touching US$ 70 billion from US$ 23 billion. India's pharmaceutical market experienced a similar boom, reaching US$ 18 billion in 2012 from US$6 billion in 2005. The report further states that the Indian pharmaceutical market will be the sixth largest in the world by 2020.
The rise of pharmaceutical outsourcing and investments by multinational companies (MNCs), allied with the country's growing economy, committed health insurance segment and improved healthcare facilities, is expected to drive the market’s growth.
India is today one of the top emerging markets in the global pharmaceutical scene. The sector is highly knowledge based and its steady growth is positively affecting the Indian economy. The organised nature of the Indian pharmaceutical industry is attracting several companies that are finding it viable to increase their operations in the country.
The domestic pharmaceutical market has reported total sales of Rs 6,883 crore (US$ 1.12 billion) in the month of July 2013, a growth of 13.5 per cent, according to IMS Health. The major factors responsible for this growth are increasing sales of generic medicines, continued growth in chronic therapies and greater penetration in rural markets.
India currently exports drug intermediates, Active Pharmaceutical Ingredients (APIs), Finished Dosage Formulations (FDFs), Bio-Pharmaceuticals, and Clinical Services across the globe. The exports of pharmaceuticals from India grew to US$ 14.6 billion in 2012–13 from US$ 6.23 billion in 2006–07, registering a compound annual growth rate (CAGR) of around 15.2 per cent. The Ministry of Commerce has set a target for Indian pharma sector exports of US$ 25 billion by 2014 at an annual growth rate of 25 per cent.
Among the top pharma companies, Abbott with total sales of Rs 452 crore (US$ 73.67 million), Cipla with Rs 322 crore (US$ 52.48 million), Sun Pharma with Rs 313 crore (US$ 51.02 million), and Zydus Cadila with Rs 268 crore (US$ 43.69 million) were the fastest growing companies in the month of September 2013. In terms of growth, Sun Pharma (17.8 per cent) is ahead of peers such as Cadila (1.8 per cent), Cipla (0.8 per cent) and McLeod (0.7 per cent).
The cumulative drugs and pharmaceuticals sector has attracted foreign direct investments (FDI) worth US$ 11,391.03 million in the period April 2000–September 2013, according to data published by Department of Industrial Policy and Promotion (DIPP).
India, with almost 200 United States Food & Drug Administration (USFDA)-approved drug manufacturing facilities, is the biggest foreign supplier of medicines to the United States (US). Exports to the US rose nearly 32 per cent last year to US$ 4.23 billion. India accounts for nearly 40 per cent of generic drugs and over-the-counter products and 10 per cent of finished dosages used in the US.
Generic drugs have a dominant position in the rapidly expanding Indian pharmaceutical industry. India's exports of generic drugs have been growing at a rate of 24 per cent over the past four years. In 2012, the country was recognised by the Supply Annual Report of UNICEF – the United Nations’ children’s fund – as the global leader in the supply of generic drugs.
The Department of Pharmaceuticals has projected an investment of Rs 3,000 crore (US$ 489.19 million) to set up 10 more National Institute of Pharmaceutical Education and Research (NIPER) over the next few years.
Some of the major investments in the Indian pharmaceutical sector include the following:
The Government of India has allowed 100 per cent FDI through automatic approval route in the new pharma projects but the foreign investment in the existing pharma companies needs approval from Foreign Investment Promotion Board (FIPB).
The Cabinet has approved Pharmaceuticals Purchase Policy (PPP) for 103 medicines to ensure optimum utilisation of the installed capacity of the pharma central public sector enterprises (CPSEs) and availability of quality medicines at low prices to the masses, besides ensuring drug security of the nation.
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, said the Directorate General of Foreign Trade (DGFT).
The Government of India has made tax breaks available to the pharma sector and a weighted tax deduction of 150 per cent for any R&D expenditure incurred. It has also introduced 19 dedicated special economic zones (SEZ) to help stimulate pharma sector investment across the country.
The government has signed a bilateral agreement with the Republic of Hungary for promotion and development of traditional systems of medicine.
The Indian pharma industry is on a good growth path and is likely to be in the top 10 global markets in value terms by 2020, according to the PwC-CII report titled “India Pharma Inc: Gearing up for the next level of growth”. High burden of disease, good economic growth leading to higher disposable incomes, improvements in healthcare infrastructure and improved healthcare financing are driving growth in the domestic market, the report highlighted.
The small and medium enterprises (SMEs) are expected to play a significant role in the growth story of the country's pharma sector as they contribute 35–40 per cent to the industry in terms of production with a turnover of about Rs 35,000 crore (US$ 5.70 billion).
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 merger and acquisitions (M&A) in the pharmaceutical and healthcare sector, according to consulting firm Grant Thornton.
Exchange rate used INR 1= US$ 0.01630 as on 11 December 2013
References: Consolidated FDI FDI Policy, Department of Industrial Policy & Promotion (DIPP), Press Information Bureau (PIB), Media Reports, Pharmaceuticals Export Promotion Council