The Indian Pharmaceutical Industry is considered the "lifeline‟ industry because its products play a critical role in remedying the suffering of diseased persons. The Indian pharmaceutical sector is a significant player in the global pharmaceutical industry. India is the third-largest producer of pharmaceutical goods globally (in terms of volume) and the twelfth-largest producer (in terms of value). With a 20% volume share in the global supply of generic drugs, the industry leads the world in both production and sales of vaccines, accounting for 60% of the global market. The cumulative FDI in the pharma sector is estimated at US$ 21.22 billion from April 2000-December 2022. This sector contributes significantly to the strength of any economy by producing millions of employment and increasing export revenues. India's pharmaceutical sector is predicted to be worth US$ 65 billion in 2024 and US$ 130 billion in 2030.
By 2025, India's market for medical devices has the potential to reach US$ 50 billion. The COVID-19 pandemic highlighted India's status as an innovator as well as a supplier of necessary and life-saving medications to every region of the world whenever needed. With increased internet penetration and smartphone access, e-commerce has seen exponential development across all categories - from fashion to groceries, individuals have begun acquiring the majority of their needs online. As a result of this radical shift in purchasing habits, e-pharmacies have developed as a potential sector, allowing customers to buy from the comfort of their own homes. There are currently close to 50 e-pharmacies in India, with estimates indicating the market size (2019) at US$ 0.5 billion, accounting for 2-3% of the total Indian pharmacy sales. The market is predicted to increase at a compounded annual rate of 44% to US$ 4.5 billion by 2025. Along with increased client absorption, there has been a secular increase in investor interest in e-Pharmacies, with the industry attracting US$ 700 million in investments in 2020.
E-Pharmacy Industry in India
A web-based pharmacy is an online system that allows customers to purchase medicinal medications and E-services online, allowing them to obtain medicines/services in the comfort of their own homes in a timely manner. The Indian pharmaceutical market was primed for upheaval, and Covid-19 provided the much-needed impetus for the e-pharmacy structure.
E-pharmacies are gradually encroaching on the role traditionally played by local chemists, by providing over-the-counter medicines for common ailments, chatbots for instantaneous first aid, reviews of local doctors/assistance in finding doctors, suggestions for labs for taking tests, home delivery of medicines, explaining details about the medicines, etc.
Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. India also has the highest number of US-FDA-compliant Pharma plants after the USA. By 2030, the total market size of the Indian Pharmaceutical Industry is estimated to reach US$ 130 billion.
Growth Drivers of E-Pharmacies
Internet penetration is expanding because of low-cost smartphones and 4G internet access. The country is predicted to have 850 million internet users by 2025 as a result of the Digital India campaign.
With evolving customer tastes and digital channel utilisation, e-commerce penetration is predicted to reach 11% in 2024.
People are turning to organised and digital channels that give assurance against the possibility of counterfeit pharmaceuticals as they become more aware of the problem.
E-Pharmacy largely serves the medical needs of chronic patients. The changing lifestyles of the people are causing an increase in chronic and lifestyle diseases in the Indian population.
Supply Chains of Traditional Retail Pharmacy and e-Pharmacy
The pharmaceutical industry in India is highly broad, having capabilities in both small-molecule and large-molecule development. There are organisations that operate throughout the pharma value chain, while others specialise in certain parts. The Indian pharmaceutical environment is extremely fragmented, but in terms of revenue distribution, the top 30 pharma companies account for around 70% of the overall market. In the post-pandemic era, the key difference will be Indian pharma's ascend to being innovators, by developing novel pharmaceuticals, digital solutions, and personalised health care, hence improving quality, accessibility, and cost across the care pathway.
E-commerce potential in the pharmaceutical sector is increasing, bringing online sales of pharmaceutical products inside its scope, and generating an appealing stream for investments and businesses. Doorstep delivery of pharmaceuticals cleared the way for e-pharmacies in the country, which will operate alongside brick-and-mortar pharmacies. Traditional pharma retail in India is primarily unorganised and fragmented, with about 8.5 lakh unorganised shops accounting for more than 90% of total sales. The unorganised nature of the space leads to a slew of problems, including frequent stockouts, the selling of counterfeit and subpar medications, and limited access.
Source: Vector Consulting Group
From Amazon to Reliance, significant competitors have entered the battle to scale up, consolidate, and take a piece of the online pharmacy business, which is predicted to grow sevenfold to US$ 2.7 billion by 2023. With increased consumer support, e-pharmacies such as Tata 1mg, Medlife, PharmEasy, Netmeds, and others are fiercely vying for a major piece of India's US$ 42 billion pharmaceuticals industry. The business and distribution models of these E-commerce enterprises stand in sharp contrast to the current pharmacist network.
Regarding foreign investments in pharmaceuticals, 100% FDI is authorised for greenfield projects via the automated method, while 74% is allowed for brownfield projects via the automatic route and the rest is permitted via government approval.
Digital transformation in the Indian pharma sector
Source: Data Security Council of India (DSCI) and Deloitte
The Ministry of Health and Family Welfare introduced a draft to change the Drugs and Cosmetics Rules, 1945 ("Rules") in its notification G.S.R. 817 (E) dated August 28, 2018.
The Prime Minister of India, Mr. Narendra Modi, unveiled the NDHM on August 15, 2020, the 74th Independence Day of India, with the goal of creating an ecosystem for providing improved healthcare services in the country. The country's existing digital infrastructure comprises Aadhaar Unique Identity (UID), JAM trinity (Jan Dhan-Aadhaar-Mobile), and Unified Payments Interface (UPI), which identify and link individuals while simplifying their day-to-day lives through digital methods. This solid digital infrastructure foundation serves as a platform for NDHM to further expand and improve healthcare in the country through digital management. The Ayushman Bharat Digital Mission (ABDM) seeks to create the framework required to sustain the nation's integrated digital health infrastructure. It would use digital highways to bridge the existing gap between the various players in the Healthcare ecosystem.
Its objective is to make the domestic pharmaceutical industry more effective and competitive so that it may dominate the global market and guarantee the accessibility, availability, and affordability of high-quality pharmaceuticals for mass consumption.
The following sub-schemes are included in this Central Sector Scheme:
In September 2020, the government announced a production-linked incentive (PLI) scheme for the pharmaceutical industry worth US$ 844.50 million (Rs. 6,940 crore). The production-linked incentive (PLI) scheme was introduced to encourage Indian manufacturers to produce critical key starting materials (KSMs), drug intermediates (DIs) and active pharmaceutical ingredients (APIs). To support this, the government granted funds worth US$ 932.66 million. The scheme covers 41 products under the following four categories-
(i) Target Segment I – Key Fermentation-Based KSMs/Drug Intermediates
(ii) Target Segment II - Key Fermentation-Based Niche KSMs/Drug Intermediates
(iii) Target Segment III – Chemical Synthesis-Based KSMs/Drug Intermediates
(iv) Target Segment IV – Other Chemical Synthesis-Based KSMs/Drug Intermediates/APIs
This programme allows 3 Bulk Drug Parks to receive grants in aid for the construction of Common Infrastructure Facilities (CIF), up to a total of US$ 120.9 million (Rs. 1,000 crore) per park, or 70% of the project cost of the CIF or 90% of the project cost of the CIF in the case of North-eastern States and Hilly States. The Scheme's overall financial outlay is US$ 362.9 million (Rs. 3,000 crore), and it will be in effect from FY21 to FY25.
Its objective is to promote the pharmaceutical and medical device industries by bringing together experts from the fields of academia, industry, and policy to exchange knowledge and experience for the betterment of the two industries. This is done by conducting research, planning awareness campaigns, building databases, and promoting the industry. The scheme would operate from 2020-21 to 2027-28, with a total financial outlay of US$ 416.16 million (Rs. 3,420 crore).
The scheme's goal is to provide simple access to standard testing and laboratory facilities by establishing world-class Common Infrastructure Facilities at medical device parks, resulting in higher competitiveness, lower production costs, and improved availability and affordability of medical equipment, thereby developing a stable ecosystem for domestic medical device manufacture.
The scheme's selected participants will be eligible for incentives on incremental sales of eligible items based on yearly threshold requirements of minimum cumulative investment and minimum percentage growth in sales of eligible products as specified in the scheme's full instructions. Active Pharmaceutical Ingredients, as well as other types of pharmaceutical products, are eligible under the plan. During a period of six years, the scheme offers incentives for incremental sales to selected members. The tenure of the scheme is from FY21 to FY29 with a total financial outlay of US$ 1.82 billion (Rs. 15,000 crore). Under this Plan, the selection of 55 applicants has been authorised. The scheme covers pharmaceutical goods under three categories.
To assist Micro, Small, and Medium Pharma Companies (MSMEs) with a track record of success in achieving compliance with national and international regulatory standards.
Its goal is to increase the existing pharmaceutical clusters' capacity for long-term expansion by establishing shared facilities.
The Program intends to promote, develop, and export the pharmaceutical sector by providing financial support for seminars, conferences, exhibitions, mounting delegations to and from India to promote exports and investments, conducting studies/consultancies, and facilitating growth, exports, and important issues affecting the Pharma sector.
The Ministry's scheme “Strengthening of Pharmaceutical Industry (SPI)" with a total financial outlay of US$ 60.49 million (Rs. 500 crore) extends support required to existing pharma clusters and MSMEs across the country to improve their productivity, quality, and sustainability. The Scheme has 3 components / sub-schemes:
The world is starting to recognise the potential of India's pharmaceutical sector. The industry is still in its nascent stages, but it has enormous potential to scale and flourish. As it evolves, new offers and technologies will undoubtedly ease our medication-purchasing journey. As the market moves towards becoming a one-stop shop for one's healthcare requirements, e-pharmacies are already on board, combining services such as doctor consultations and diagnostics. With the proper legislative backing, collaboration, and ecosystem growth, the pharmaceutical sector has the potential to become "the pharmacy of the world." There is no better moment than now to leverage the power of technology and digital transformation across the value chain to propel this growth and empower Indian pharma to create new paradigms in the global arena. Leading pharmaceutical companies have already started on this road and are investigating in cloud, big data/analytics, automation, and AI to build smart, effective organisations and, at the same time, use technology to generate enormous value for doctors and patients. The Indian government also released two batches of incentive schemes to boost the sector and reduce global reliance: PLI 1 worth US$ 844.50 million (Rs. 6,940 crore) for bulk drug manufacturing and PLI 2 worth US$ 1.82 billion (Rs. 15,000 crore) for manufacturing of various product categories such as biopharmaceuticals, complex generics, API/Key Starting Material (KSM)/drug intermediaries, and repurposed drugs.