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The Indian pharmaceutical industry is one of the world leaders and has made impressive strides in the past decades. Some statistics bear out India’s dominance in this sector - India is the largest provider of generic drugs globally; Indian pharmaceutical sector supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK.
Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by value and supplying medicines to over 200 countries in the world. India’s pharma sector, which is currently valued at around US$ 49 billion, is expected to touch US$ 130 billion the by the year 2030.
By 2047, which will mark India’s 100 years of independence, the pharma industry is expected to reach a figure of US$ 500 billion and be the number one manufacturer in the world. India’s pharmaceuticals market is expected to grow between six and eight per cent on a year-on-year (YoY) basis in FY23.
Covid, the game changer
The pandemic was a huge challenge that made policy makers, governmental agencies and the manufacturing sector realise the criticality of the healthcare sector, particularly the healthcare infrastructure in the nation’s development plans. Covid-19 inflicted enormous hardships and sufferings. At the same time, it has opened up new opportunities for pharmaceutical companies, private hospitals and medical device manufacturers.
The Covid-19 pandemic challenge, which primarily affected the healthcare and pharma sector presented unprecedented challenges to the sectors. Meeting these challenges has helped build a foundation for the healthcare and pharma sector towards making the country self-reliant in terms of vaccines, drugs, medical devices and equipment. Post the pandemic, India is not only manufacturing all the vaccines under the national Covid-19 immunisation programme but is also exporting them. At least a dozen Indian firms are either developing Covid-19 vaccines or antiviral therapeutics.
Various policies and packages such as production-linked incentive scheme for APIs and medical devices, the recent scheme for pharmaceuticals, and promotion of bulk drug parks were introduced by the government. Going forward, one of the underlying economic fundamentals is that countries will have to increasingly invest more in healthcare. India’s healthcare industry too looks set for high growth momentum in the coming years.
Challenges
In the domestic, drug prices are controlled by the drug price control order. This puts a pressure on pricing and as a result, there is strong pressure on revenues and subsequently on costs. In the international market, threats derived from pharmaceutical multinational companies are emerging as tough obstacles which will be needed to be tackled. Any export will depend on the importing policies of other countries.
There is a need to streamline the industry especially in terms of regulations. Different countries have different regulations. Industry-regulator understanding is important for growth. Common regulatory standards like those in the European Union need to be worked out globally so that it is helpful for the pharma industry. The IPR regime in India too continues to be a challenge.
The MRP based GST levy results in an additional burden on companies with higher tax. The dependence on imports for Active Pharma Ingredients (API) has to be tackled with on an immediate basis. Quality issues continue to be a cause for concern and Indian companies have to go through the detailed process of getting approvals to conform to various standards such as state-level GMP, WHO-approved GMP or the USFDA.
There is a need for streamlining regulation that will speed up approvals without compromising on quality. The issues relating to the quality of imported drugs in the target markets will only increase and there will be greater scrutiny from regulators on quality norms. India has already faced the highest number of USFDA inspections since 2009. A high standard of quality maintenance is the only way to ensure that the industry will pass all scrutiny from regulators.
As the Indian pharmaceutical sector expands its markets, the need to invest both in R&D and in upgrading quality standards cannot be over emphasised.
To be recognised as a producer and reliable supplier of high-quality pharma products, it is imperative for Indian companies to address the issues of maintaining quality standards very seriously.
Future prospects & opportunities
At the macro level, the focus will be to make India is to shift production from generic manufacturing to value addition. More focus on patents for innovative drugs is required, instead of concentrating primarily on generic drugs. There is a need for policymakers to work on the sustainability and development of the industry, while the companies must lay more emphasis and focus on enhancing innovation capabilities. In addition, at the level of corporate strategy, firms should establish collaborations and alliances and expand their industrial marketing vision.
Also, the intention of both the government and industry will be to locally manufacture currently imported medicine and equipment so as to decrease dependence on imports and giving healthcare security to India. Innovation, technology and entrepreneurship will drive India towards this. Cost-cutting measures remain a priority for Indian companies.
The Covid related disruptions resulting in high raw material costs and logistic expenses have put pressure on the level of free cash flow generated. The large pharma companies generally have large cash balances, which typically account for 14-16 per cent of their revenue. With the significant improvement in the free cash flow generated in the near term, M&A activities will continue to provide inorganic push to the industry.
India is an outsourcing destination for clinical trials of vaccines and for the manufacture of anti-viral therapeutics by other countries. This trend is expected to rise as several nations are developing vaccines and drugs against highly infectious diseases.
There are a large number of drugs that went off patents, providing many pharmaceutical companies with huge opportunities to enter the market. India is a country where good skills are available at a lower cost. This is a big impetus in making it emerge as an attractive destination for contract research and manufacturing.
With growth in government spending on healthcare as well as growing per capita income, the long-term perspective for the development of the pharmaceutical sector looks attractive. India can also become a global outsourcing hub for pharmaceutical products due to its low-cost production ability combined with FDA-approved manufacturing plants. Establishing expertise in specialty and innovation-heavy pharmaceutical areas such as complex generics, novel biologics and bio-similars, preventive medication and those with unmet therapeutic needs will be the next to drive growth in the coming years.
(The author is a pharma consultant)
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