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 was 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.
According to a detailed research by Angel Broking, by 2015, India is expected to rank among the top 10 global pharmaceutical markets. The industry is typically growing at around 1.5-1.6 times the country’s GDP growth.
Moreover, according to a FICCI-Ernst & Young study, the increasing population of higher-income group in the country will open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015. Besides, the report said the domestic pharma market is likely to touch US$ 20 billion by 2015, making India a lucrative destination for clinical trials for global giants.
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’s exports of drugs, pharmaceuticals and fine chemicals grew by 29 per cent in 2008-09 to US$ 8.25 billion compared to 2007-08.
According to Mr Anand Sharma, Union Commerce and Industry Minister, the Indian pharmaceutical sector has emerged as one of the major contributors to Indian exports with export earnings rising from a negligible amount in early 1990s to US$ 6.08 billion by 2007-08.
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.
Growth
The domestic pharma market will outshine the global market, growing at a compounded annual rate of 12-15 per cent as against a global average of 4-7 per cent during 2008-2013, according to a latest study by market research firm IMS.
The domestic pharma retail market posted a healthy growth of 10 per cent in May over the previous month. On a moving annual total basis (April 2008 to May 2009), the organised pharma retail market grew by 10.4 per cent to US$ 7.40 billion, which was slightly higher than the previous month’s value of US$ 7.32 billion, according to consulting company, ORG-IMS.
According to a detailed research by Angel Broking, socio-economic factors such as rising income levels, increasing affordability, gradual penetration of health insurance and the rise in chronic diseases would see the Indian formulation market touch US$ 13.7 billion by 2013 with a CAGR of 12.2 per cent.
The domestic formulation industry had registered a CAGR of 14 per cent during FY2003-08 from around US$ 3.9 billion to US$ 7.7 billion, outpacing the global pharma industry growth rate of 7 per cent, said the research.
In addition to that, a projected CAGR of 10.5 per cent in the global generics market and a growing involvement of Indian companies into clinical research services will further add to the growth momentum, according to the research.
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.
Indian drug maker Dr Reddy’s Laboratories has partnered with GlaxoSmithKline to develop and market generics and formulations in emerging markets abroad.
Mumbai-based pharmaceutical firm Lupin is gearing to tap opportunities to the tune of up to US$ 200 million in the US oral contraceptives market.
Diagnostics Outsourcing/Clinical Trials
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).
Research & Development
The search for innovative drug molecules and better technologies by pharmaceutical MNCs is expected to offer a windfall for the smaller research-oriented Indian firms.
MNCs, whose drug pipelines are drying up and more blockbuster drugs going off-patent, are looking for alliances for drug co-development, buying or licensing out innovative molecules which can further be developed into finished drugs.
Moreover, 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.
Piramal Lifesciences, the drug research company of the Piramal Group, will invest US$ 43.4 million in the next two years for developing new medicines.
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—especially targetted at drugs and pharmaceutical research.
In a bid to promote new drug research in the country, the government is mulling creating special purpose vehicles (SPV) with insurance cover which will be used to fund new drug research. The Department of Pharmaceuticals is also toying with the idea of creating drug research facilities and centres that can be used by private companies for such research work on a pay-and-use basis.
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.