India is getting recognition as a strong, powerful and fast growing economy. As a result, the pharmaceutical industry is attracting many global entrants. Increasing purchasing power of the growing middle class population, high orientation towards health consciousness, quality and price driven mindset and optimal entry options have reshaped the market structure of pharmaceutical business. The behaviour and bargaining power of different interest groups like patients, healthcare providers and regulatory authorities are expected to reinforce India as a safe haven for pharma business in the long run.
Market structure
Structurally, five forces - market attractiveness and drivers, regulatory forces, social and business forces, capacity and capability of healthcare providers and market dynamics - are expected to help India evolve into a land of potential pharmaceutical market for players across the globe.
Market Attractiveness & drivers
Changing demographics: India has the second largest population in the world. More than 60 per cent of population is young and working. The proportion of old persons is not more than 7 per cent. Younger population with disposable income coupled with greater consciousness presents itself as a captive consumer class for health goods, including diagnostics and medicines.
Uncovered potential of rural markets: As India resides predominantly in rural areas, it represents a huge business potential. In 2005, rural market has contributed 40 per cent of total retail sales. The potential of rural markets has been identified by every domestic and multinational company. This market is yet to be fully tapped. This has significance today, as healthcare infrastructure is bound to increase. With increase in health infrastructure and more coverage through liberalised health insurance products, there will be larger affordability to boost the demand even from rural markets. The encouragement to set up hospitals in uncovered areas provided in the recent budget through a 5 year tax holds will strengthen demand for medicines in rural and semi-urban areas.
Several corporate hospitals have laid down their plans and acting on them to improve their coverage and service to patients beyond metro cities. Increasing healthcare infrastructure, health insurance products and availability and affordability of relevant medicines will improve the potential of rural markets in India.
Regulatory forces
Regulatory mechanisms to monitor prices have been a dominating aspect since last 3-4 decades in India. Due to the governance of such regulatory authorities, Indian medicines are perhaps most economical in the world. It is not an issue with India alone but it is an issue of all Asian countries, where population deserves differential pricing. Domestic companies are accustomed to such pricing mechanisms, while several MNCs need to think about differential pricing for India and Asia.
Social & business forces
Patient awareness: Increasing patient awareness through the use of technology driven tools like internet, e-communication and media, access to both tacit and explicit healthcare knowledge has been a significant development in the recent past. This will act as a strong driver for both increasing the demand for medicines and changing dynamics of health market.
Changing mindset - From healthcare to health cure: While looking for better and newer medicines, Indian population have better propensity to spend on medicines as well as nutraceuticals. This will result in both increase in volume and value of pharmaceutical market in India.
As this population leads to intensity of different types of disease burden, there will be an increase in lifestyle diseases. They will seek faster and better medicines and will not mind paying slightly higher prices, if therapeutical superiority is perceived and experienced.
If you consider lifestyle diseases like diabetes, you may find that the existing diabetes population is around 41 million. Among these diabetes patients, who are taking treatment, either through oral hypoglycemic agents or through insulin is not more than 3 million. This may imply the kind of potential we have in India is not being captured or those who are suffering from diabetes or detected for diabetes are not ready to treat themselves.
This leads to a different kind of attitude, which is usually displayed in Indian population by sufferers and non-sufferers. Sufferers tend to become hypocondriate, while non-sufferers truthfully believe that they do not possess any such illness till they become suddenly aware or the illness gets manifested bringing a bigger shock.
However, in view of the demographic dividend, better economic status, more health consciousness and spread of health insurance, domestic companies and MNCs together can create wealth, while serving the Indian population meaningfully.
New hypothesis - Prevent & cure: It has been observed over decades that medicines, which are available though western medicine systems are capable of managing diseases. However, a new hypothesis is emerging. This new hypothesis is to prevent these diseases as well as try to cure them with the help of nutrients. A proper balance of nutrients is likely to provide curative dimension to the diseases. This is a new opportunity in India as well as all over the world. Nutraceuticals can be affordable, while providing cure element of health.
Business forces: Business of pharmaceuticals needs growth of top line and bottom line. Drivers for top line include new products, new offerings and collective force of all marketing mix with organisational resources. These resources are dependent on other factors like economy, political, policy making backup and general attribute of society towards pharmaceuticals.
In case of bottom line, pharma industry has both society and business issues. They may several times clash or go hand in hand. If they clash, it adversely affects bottom line. If they go hand in hand it improves bottom line. As a result, it is an important force.
Capacity & capability of healthcare providers
Healthcare providers like pharmacists, dieticians, hospitals, paramedicos, physicians, surgeons and other specialists are getting equipped with new methods of healthcare delivery. Wellness industry has taken birth in India through preventive measures including vitamins and health foods.
Market dynamics
Value/volume: India is a country, which is capable of creating substitutes and specialty drugs at lower price and good quality. Considering this aspect of competency, India has potential to increase volume for any national or MNC, provided they consider pricing as an important element in their business mix.
IPR & patents: Besides pricing, regulatory affairs relating to intellectual property rights (IPR) and patents create pressure for every domestic or multi-national organisation to establish right safety profiles and balance power in every situation.
Different market segments: India continues to become a branded generics market even after January 1, 2005. Obviously the potential, which exists to treat elite patients as well as masses either through patented medicines and/or branded generics, is immense.
Expanding market structure: Considering the pace at which India is emerging for nutrients, functional foods and other preventive and curative medicines, existing market with penetration in rural markets will give different market structure for pharmaceutical companies.
In this scenario, India should herald the beginning of vast changes in the pharmaceutical industry, and these will be directly linked to the changes and developments in the global markets. India will thus emerge as a definite global destination.
(Dr R B Smarta is the founder and managing director of Interlink Business Consulting Firm in pharmaceutical & healthcare industry)