The Indian pharmaceutical industry today is the fourth largest market in Asia Pacific after Japan, China and South Korea. However, the US $ 12 per capita spending is among the lowest in the world, similar to the level of Pakistan and Vietnam. Pharmaceutical expenditure in 2007 was an estimated 1.5 per cent of GDP.
■ A highly organized knowledge -based Industry, the Indian pharma Industry is valued at Rs. 90,000 crores growing at about 15 per cent p.a.
■ Grown from a mere $ 0.3 billion to $ 24 billion in 2009.
■ Exports at Rs. 45,000 crores this year
■ Ranks third in volume and 13th in value in the world
■ One reason for lower value share is lower cost estimated to be lowered further by five per cent to 50 per cent as compared to developed countries.
■ 10 per cent of world's production but 1.5 per cent of value
■ Exports of pharma consistently outstripping the import value from 96-97 to 08/09. The trade balance increased from Rs 2157 crores in 96-97 to approximately Rs 30,000 crores in 08/09. This is in comparison to India's merchandise export during the first five months of 09-10 posting a decline of 31.0 per cent as against a high growth of 52.3 per cent during the same period last year.
An NPPA study reports that there are 10563 manufacturers in India, with 8174 producers of formulations and 2389 manufacturers of bulk drugs (including five central public sector units). These units indigenously produce the complete range of over 57,000 formulation packs - from simple headache pills to sophisticated antibiotics and complex cardiac compounds and about 400 bulk drugs.
Approximately 80 per cent of the domestic production consists of very affordable formulations, and more than 85 per cent of those formulations are sold in the domestic market, whereas at least 60 per cent of bulk drug production is exported. Estimated 40 per cent of global API requirement is met by India.
The industry meets around 70 per cent of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and ingestible.
Nearly 97 per cent of India's drug market consists of second-and-third generation drugs no longer subject to patent protection in the developed world.
The industry has expanded drastically in the last two decades to include hundreds of allied manufacturers of machineries, providers of services and CROs etc.
India, with a population of more than one billion, is now considered the second largest pharmaceutical market in terms of volumes consumed. It is estimated that India's pharmaceutical market has the potential to grow to US$ 20 billion by 2015, maintaining about 12 per cent CAGR. It is estimated that it will touch $ 30 billion by 2020. However, with the much needed government support as requested by the industry, this target can be met earlier, even by 2013.
The WHO estimates that by 2010, about 60 per cent of the world's cardiac patients will be found in India. In the past 50 years, rates of coronary disease among India's city dwellers have increased from four per cent to 11 per cent . Nevertheless, infectious diseases are on the decline and life expectancy is increasing. Since these lifestyle-related segments are growing more rapidly, for the pharmaceutical industry, this translates into enormous future potential. Given that these segments are set to increase in terms of value, their contribution to the total pharmaceutical market will also be increasingly attractive.
For the industry to grow further, reforms especially in respect of Industrial Disputes Act, Contract Labour Act and Trade Unions Act etc need to be taken up at the earliest.
Opportunities for investment & trade
India is a moderately attractive proposition to multinational pharmaceutical companies in the Asia Pacific, as illustrated by its ninth position in BMI's regional Business Environment Rankings table for Q209. While the fast-growing population in India will present one of the main drivers of pharmaceutical growth in the coming years, low per capita consumption and emphasis on generics hamper the level of market development. Similarly excess of red tape, underdeveloped infrastructure and deficient legal framework remain barriers to investment.
Domestic investment is estimated at Rs. 31.43 thousand crores (from Aug.'91 to July '08 (based on IEMs filed). The industry attracted FDI of US $ 1401.60 million in the period 2000-01 to 2008-09. Surprisingly 82 per cent of FDI is accounted by five countries, Mauritius, Singapore, USA, UAE & Canada.
Technologically strong and totally self-reliant, the pharmaceutical industry in India with its low cost of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade will prove more and more to be the ideal source. During 2007-2009, there were 208 foreign collaborators.
Investments in pharmaceutical sector are now expanding into areas of innovative R&D focused outsourcing opportunities like clinical trials, data management services, pharmaceutical informatics, lead discovery and optimization, pharmaco-kinetics and pharmaco-dynamics and pre-clinical drug discovery in combinatorial chemistry, chiral chemistry, new drug delivery systems, bioinformatics and phyto-medicines.
Global developments & indicators
■ According to a survey by National Council of Applied Economic Research,the Business Confidence Index reported a sharp rise of 21 per cent in October v/s July 2009.
■ The Japan's Capital Bank kept its key interest rate unchanged at 0.1 per cent in its policy board meeting.
■ China drew 5-7 per cent more foreign direct investment in October than a year earlier in Oct. It attracted $ 7.1 billion compared with $ 6.7 billion in Oct. 08.
■ Organization for Economic Co-operation and Development has upgraded its growth forest for Chinese Economy to 10.2 per cent in 2010 & 9.3 per cent in 2011.
■ In fact near negligible borrowing cost in the US has led to a flourishing carry trade that has pushed up dollar inflows into high return assets.
■ India has received portfolio inflows of $ 17.9 billion during the first half of 09-10 compared to outflow of $ 5.5 billion during same period last year. This has raised asset prices and had put pressure on rupee to appreciate. It is understood that the govt. is mulling the imposition of capital controls.
In the near future, India as a leader among emerging pharma markets, will provide greater access both to generic and innovative new medicines. India's primary care will improve as the Government focuses more on implementing rural healthcare schemes and make top quality medicines available in rural areas. India's resurgent economic growth will shift the focus more and more away from infectious diseases and tend toward cardiovascular, diabetes and other chronic stress - related illnesses.
Increasing costs for research and development and low productivity have been compelling major pharmaceutical companies worldwide to outsource and invest part of their research and manufacturing activities in India. India's renewed emphasis on R&D and new drug discovery will highlight India as the preferred destination for outsourcing clinical trials and clinical research with both high quality and lower costs.
The reverse brain drain caused by Indian scientists and pharma experts returning to India will also prove to be advantageous to the industry
Conclusion
For attracting heavy investment into the industry, industry and the government will have to focus commonly on factors such as
■ Public private partnerships
■ New affordable products developing new business models through innovation
■ New therapies including FDCs
■ Optimum pricing
■ Greater access to healthcare
■ A focused scientific approach etc
The Indian pharmaceutical industry will continue to make and market affordable quality medicines to common man in India and all over the world. India is increasingly becoming a globally integrated economy with greater opportunity for domestic entities.
-The author is president of IDMA