Indian Pharma Industry in 2020_An essay by M. Gayithri

INDIAN PHARMA INDUSTRY IN 2020 

     Synopsis

·       Introduction

·       Indian pharmaceutical industry

·       Global market

·       Domestic demand

·       Bulk Industry growth

·       Custom duty increase

·       Government initiatives

·       Growth rate in 2020

·       Pharma 2020; global perspective

·       Riding on good growth wave

·       Pharma exports can cross $20 billion by 2020

·       Road to 2020

·       Indian pharma 2020; propelling access and acceptance realising true potential

·       Conclusion

                                                                    

                                                                   

INTRODUCTION:

                The Indian pharmaceutical industry today is in the first rank of India science based industries with wide ranging capabilities in the complex field of drug manufacturing and technology .The Indian pharmaceutical industry is estimated to be worth $ 4.5 billion, growing at about 8-9 %annually. It ranks very high in the third world. In terms of technology, quality and range of medicines manufactured from simple headache pills to sophisticated antibiotics and complex  cardiac compounds, almost every type of medicine is now made indigenously. India is expected to feature in the top 10 pharma markets globally by revenue by the year 2020. This is largely due to its huge population base changes in patient profile, increase the average life expectancy of an Indian, rapid increase in the number of urban centres and an evolving and highly active contribution by the private sector enterprises.

INDIAN PHARMACEUTICAL INDUSTRY:

                 The number of purely Indian pharmaceutical companies is fairly low. Indian pharmaceutical industry is mainly operated and controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in Indian at lower cost. Most pharmaceutical companies operating in India. Even the multinational employ India almost exclusively from the lowest ranks to high level management. India sold $9 billion worth of formulations bulk drugs. 85% of these formulation were sold in  India. While over 6% of the bulk drugs were exported mostly to US and RUSSIA. It has been estimated that 250 of the largest companies control 70% of the Indian market. In 1970, the patent act made the multinational companies to represent only 35% of the market down from 70% 30 years ago. Very few pure Indian pharma companies exist in the global market today. The industry is mainly operated and controlled by dominant foreign players having subsidiaries in India due to the availability of cheap labour and that too at the lowest possible cost. India arrived on the global scene with its innovatie generic drugs and active pharmaceutical ingredients (API) .

GLOBAL MARKET:

                  In terms of global market, India currently holds a modest 1-2 % , but it has been growing at approximately 10%per year . India gained its foothold on the global scene with its innovatively engineered generic drug and active pharmaceutical drug (API). There are 74 US FDA approved manufacturing facilities in India , more than in any other country outside the US and  in 2005, almost 20% of all Abbreviated New Drug Application (ANDA) and to the FDA were  field by Indian companies. The Active Pharmaceutical Industry has now become the third largest producer in the world and is poised to grow into an industry of $20 billion by 2015 from the current turnover of $12 billion.

DOMESTIC DEMAND:

                 The industry has enormous growth potential factors listed below determine the rising demand for pharmaceuticals:

·       The growing population of over a billion.

·        Increasing income.

·       Demand for quality health care service.

·       Change lifestyle has led to change the disease patterns.    

·       Increased demand for new medicine to combact lifestyle related disease.   

                 More than 85% of the formulations produced in the country are sold in the domestic market. There has also been a record increase in consumption of drugs world wide . India with its large population has recorded the therapeutic segmentation in healthcare market with changes in pattern of drug consumption in turn affecting its  population . India is largely self sufficient in case of formulation.

BULK INDUSTRY GROWTH:

                The export market growth has been one of the most outstanding features of Indian pharmaceutical Industry. In recent years export has been increasing annually at more than 20%. The proportion of export in net sales for the studied 120 companies was 44%. The export market was found to be larger than the domestic market not only for large companies such as Ranbaxy. Most of these exporting firms depend on bulk drug supplies small export to unregulated market in Africa and Asia and formulation sales in the domestic market. Over 60%of India’s bulk production is exported. India’s pharmaceutical exports are turnover of Rs 87 billion. Domestic pharmaceutical export growing at 30% per annum. The global market is attributed to increased  Abbreviated New Drug Application (ANDAs) approval in the market. 

CUSTOM DUTY INCREASE :

                 During January of this year the government increase customs duty on medical devices from 5-7.5% and also 4%special additional duty. During the first week of February 2016 of the government has withdrawn custom duty wavier from 76 drugs. This will increase the cost of the  pharma products by which the ultimate customers will be affected. The government is to look into this matter and reduce the burden imposed on the industry and also on the customers.

               

GOVERNMENT INTIATIVES:

              Some of the initiatives taken by the governnemt to promote the pharmaceutical sector in India are as follows:

·       The government of India unveiled ‘pharma vision 2020’ aimed at making India a global leader in end to end drug manufacture.

·       Approval time for new facilities has been reduced to boost investments.

·       The government introduced mechanism such as the drug price control order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availabilityof medicines.

·       The departmemt of pharmaceuticals has prepared a ‘pharma vision 2020’ document. The objective of this document is for making India as one of the leading destinations for end to end drug discovery and innovation.

·       The government of India provides support by way of world class infrastructure, internationally competitive scientific manpower for pharma R&D and venture fund for research in the public and private domain.

·       The government is also embarking on major multibillion dollar initiative with 50 percent public funding through a public-private partnership model to harness India’s innovation capability.

·       This vision will put India into one of the top five pharmaceutical innovation hubs by 2020. This vision also targets to achieve a global niche with one  out of every five to ten drugs discovered worldwide by 2020 originating from India.

·       The government is also taking various policy initiatives for the pharmaceutical sector. These  initiatives include tax-breaks to the pharmaceutical sector and weighted tax deduction at 150% for the R&D expenditure incurred.

·       The government also take steps to streamline procedure covering development of new drug molecules, clinical research etc.Indian government launched two schemes :

                      New Millennium Indian Technology leadership Initiatives and

                       The drugs and pharmaceuticals research programme which is specially targeted at drugs and pharmaceutical research and drugs also for imparting traing to industy professionals.

               The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedly introduction of generic drugs into market has remained in focus and is expected to benefit the Indian Pharmacetuical Companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also argurs well for the pharmaceutical companies.

                       GROWTH RATE IN 2020: 

                           

                     The Indian pharma industry has been growing at a compounded annual growth (CAGR) of more than 15% over the last five years and has significant growth opportunities. The industry to  sustain this robust growth rate till 2020, companies will have to rethink their business strategy. Companies are focusing on improving operational efficiencies and have also used the traditional growth levers to drive growth. These initiatives have yielded results but some have also brought in new set of challenges, which companies will have to address for achieving profitable and sustainable growth. Companies have traditionally increase the field force o penetrate newer markets. To sustain the robust growth for the future, the companies will have to adapt to new business models to serve their customers better. The companies that will adapt to the newer dynamics of the market more likely to be successful.

     PHARMA 2020 ; GLOGAL PERSPECTIVE:

                  From vision to decision : envisages a positive outlook for the industry. `Globally, the industry is at the crossroads of many challenges, and at the same time, seeing new trends in technology advances, coupled with socio-demographic changes and increasing demand for medicines will revive the Pharma industry’s fortunes in another 10 to 20 years. But it will all depend on the decision pharma companies will take between now and the end of the decade to capitalise on the opportunities the next decade holds. The pharmaceutical industry will have a future in India as well as globally. The future perspective industry is based on the high burden of disease, good increase in the higher disposable incomes of the individuals, improvements in health care infrastructure and improvements in healthcare financing. The Indian pharma industry has been growing at a compounded annual growth rate of more than 15% over the last five years. The industry has significant growth opportunities. The pharma industry in India will have to rethink their business strategy to sustain the robust growth till the year 2020. The companies are adopt new business models and think of innovative ideas to the best satisfication of the customers. The pharma industry in India may contine to grow organically and inorganically through alliances and partnerships. They have to focus on improving operational efficacy and productivity continuously. The developments in the health insurance, medical technology and mobile telephony can help the growth of the pharma industry by removing financial and physical barrier to healthcare access in India.

  RIDING ON A GOOD GROWTH WAVE:

                    The Indian pharma industry has been consistently growing at a CAGR of more than 15% over the last five years. The healthy growth reflects the inherent strengths of the industry and improving healthcare standards in the country. If this trend continues, the Indian pharma industry is likely to be one of the top 10 global markets value by 2020. In India, socio economic changes and urbanisation along with sedentary lifestyle are leading to rapid epidemiological transition. As a result , the Indian population is becoming affluent, living longer and increasingly suffering from lifestyle-related ailments such as obesity, heart disease, stroke, cancer and diabetes. The number of Indian people suffering from these diseases is set to double by 2020. This change is patient demographies will fuel the demand for quality and affordable treatment in the domestic market.

   PHARMA EXPORTS CAN CROSS $20 BILLION BY 2020:

                        NEW DELHI : India’s pharmaceutical exports can cross $20billion by 2020 even though the value of shipments to countries including the US have been hit. This is due to increasing interest from neighbouring countries countries, including china, on which India has been heavily dependent for crucial ingredients for its formulations, Ravi Uday Bhaskar, director general of the Pharma Export Promotion Council. The local industry needs to focus on strengthening its active pharmaceutical ingredient (API) business in addition to manufacturing generic formulations to achieve this goal. An API is that part of a drug that produces its therapeutic effects. The rapidly growing pharmaceutical market in India exported to be worth USD $55 billion by 2020, becoming the sixth largest market globally in absolute size. Inaugurating the 34^th annual convention of American Association of physician of India origin. India’s ambassador to the US Arun singh said the Indian pharmaceutical market is growing rapidly from USD $6 billion by 2020. In 2020, India is likely to be among the top  three pharmaceutical markets by incremental growth and 6^th largest market globally size.

   ROAD TO 2020:

             As the industry embarks on its road to 2020, it has taken a giant leap in understanding the newer technologies of genomics, proteonomics, etc, which have led to the production of new medicines, diagnostics tools and lines of research. However, there is still a lot to learn about the human body and even better things lie ahead. Companies will have to re-evaluate their product portfolio, pipeline and development strategy. They will need to revise their budgeting and forecasting processes, billing and payment systems, and almost everything about the way they  have been going to the market. We believe there are number of things companies can do to equip themselves for the journey to 2020 and increase their chances of reaching the end of the road in a good shape.

   INDIA PHARMA 2020; PROPELLING AND ACCEPTANCE REALISING TRUE POTENTIAL:

                    The Indian pharmaceutical market is in the midst of exciting times which growth has accelerated considerably industry structure has changed through a spate of high profile acquisitions. Traditional commercials models are fast losing the ability to differentiate. New opportunities are going critical mass. Discontinuities in the broader healthcare landscape are further intensifying these dynamics. In order to refresh our market projections profile the different opportunities and outline new imperatives for the industry and the government while doing so we have extended from the research horizon to 2020.

   CONCLUSION:

                  The Indian market provides significant growth opportunities for the pharma industry. However, for the industry to sustain a robust growth rate of 15-20% till 2020, companies will have to rethink the way they have been doing business. Pharma companies will continue to grow inorganically through alliances and partnerships. They will continue to focus on improving operational efficiency and productivity. However, to meet the requirements of changing business models and think of innovative ideas to service their evolving customers faster and better. Developments in the health insurance sector, medical technology sector and mobile telephony can help the growth of the pharma industry by removing financial and physical barriers to healthcare access in India. Overall, the various regulatory interventions require careful consideration by the pharma industry. How companies adjust to the regulatory environment as they seek to capitalise on the opportunities provided  by the Indian market will be an interesting space to watch in the coming months. As emerging markets become increasingly important and as India’s role among these markets become progressively significant, both domestic and pharma MNCs will need to adapt their business models, organisations and processes and create customised strategies. There is no doubt about the growth of pharmaceutical industry. Foreign companies are adding more competition to the domestic market by launching products in both branded and generic categories. It is the bounden by the duty of the government to take care of domestic companies in this industry so that they have to align themselves to the existing scenario. With numerous strengths and a growing consumer class, the pharma industry in India may face certain legacy and new issues, but it is expected to grow multifold and continue to be attractive investment destination.