India is entering a new era with accession to TRIPS-compliant patent regime, a move much awaited by many multinational pharmaceutical companies. Many foreign companies will now be looking for opportunities in low volume high value product launches, excellent chemical and process engineering skills, move towards international standard GMP compliance, English speaking workers and the largest number of USFDA approved plants outside US have figured India as suitable partner for multinationals.
India is becoming the second fastest growing GDP in world, after China. India demonstrates considerable potentials for collaborative and outsourced R&D in drug development, biotechnology and chemicals. The Indian pharmaceutical market is estimated to be $ 5.1 billion in year 2004. It has become 1 per cent by value of the global pharmaceutical and ranks 13th globally. India is ranked 4th by volume amounting to 8 per cent of the global pharmaceutical market. In 2003-2004, domestic pharmaceutical consumption was about 38 per cent while indigenous industry contributed 60 per cent of the consumption. According to industry sources, bulk drug production in India is valued at $ 1.76 billion with more than 400 drugs and 100 manufacturers in market. The market is highly fragmented with about 15,000 small licenced generic manufacturers and about 250 R&D based pharmaceutical companies. OTC market is estimated to grow with 18-20 per cent projecting huge potentials for the multinationals entering in India.
India presents major opportunities for multinational pharmaceutical companies in clinical trials, contract research and manufacturing. The licensing opportunities for big pharmaceutical companies as well as the collaborative business model including services give access to low cost smart intelligent base, indigenous technology and most importantly the large domestic market. The most important advantage India presents is low cost that includes the low development costs, low fixed asset costs, low clinical trial costs and low cost workers.
Several improvements have been seen in India in contrast to the image it presented to world until recently. Infrastructure in India is improving and there are investments in huge projects such as the golden quadrilateral road project. The significant growth and capability is demonstrated by Indian IT industry. The Indian biotechnology sector is developing with government initiatives and private sector participation with tremendous opportunities to be explored and paving ways to more fruitful partnerships with biotechnology companies and world class research institutes. Ministry of Health and Family Welfare in India have initiated several measures to ensure the quality of drugs available in India. Steps have been taken against counterfeit drugs which accounts for 15-30 per cent products in the market.
New health insurance initiatives in India have increased the affordability of the middle class population. There are about half a million people who can afford good quality healthcare expenditure. However, the problem remains as urban areas are the important private sector investment centres and the rural areas still do not have access to good healthcare system. Due to India's vast rural population, only one third of the country's inhabitants have access to medical care. Although the government is investing in healthcare for the underprivileged, around 65 per cent of hospitals and 85 per cent of hospital beds are in urban areas. This situation is expected to improve in future with access to better medical facility.
The OTC segment is expected to grow with the increasing collaborative pharmaceutical industry and government initiatives along with proper regulatory framework which will enhance the business. The new DPCO and National Health policy post patent reform 2005 is expected to encourage investment for drug R&D in India. The growth opportunities can be seen in the chronic segments such as diabetes, cardiovascular, central nervous system disorders, cancer and other maladies. As second largest population base India presents significant clinical trial opportunities because of the low cost and large diverse pool of untreated patients. Major pharmaceutical companies such as Aventis, Novartis, GlaxoSmithKline, Eli Lilly, Pfizer and Novo Nordisk have started clinical trials across India especially in Andhra Pradesh and Gujarat States. What is required in India is strategic identification of market viability. The estimation of opportunities and forecasting the market is an important step towards assessing the commercial viability for drug development and clinical trials. Segmentation is important as for clinical trial opportunities, segmenting the clinical trial service providers will help in estimating the market. Large and small hospitals and contract clinical trial providers could be a plausible segmentation for clinical trial service providers in India.
What's Coming
With the introduction of patent reform in 2005 to meet obligations under TRIPS, pharmaceutical product patents are allowed for a period of 20 years in India covering all products with patent issued after January 1995. The patent reform 2005 will have important implications for both Indian and European pharmaceutical companies. After 2005, European pharmaceutical companies will face strategic choices on exploring opportunities and achieving growth in changing Indian pharmaceutical market environment. However patent reform is also presenting an important competitory risk with an expectation of increasingly Indian pharmaceutical companies looking for growth opportunities in Europe. Some Indian pharmaceutical companies are targeting some European market and several have made acquisition in Europe in order to prepare a base. Indian companies are specially targeting Italy, France and Spain for generics. Indian pharmaceutical companies are fine tuning their strategies and enhancing their product portfolio based on biotechnology and chemical research drug development which will impart the significant value addition to partnership seeking European pharmaceutical companies.
- (Mahesh Sawant is Industry Analyst- Healthcare Practice, Frost & Sullivan India. The author can be reached through sdedhia@frost.com )