India is considered a global pharma powerhouse due to its ability to produce high-quality and low-cost generic drugs. It exports about 50% of its products to the global market. Currently, India ranks 3rd worldwide for production by volume and 14th by value. The pharma vision 2020 was aimed at making India a global leader in end to end drug manufacturing. The low cost of production and the R&D efficiency of Indian pharma companies has led to competitive exports. The exports of this industry stood at US$ 16.3 billion in FY20. This sector is expected to grow to US$ 100 billion, while the medical device market is expected to grow US$ 25 billion by 2025. Pharmaceutical export includes bulk drugs, intermediates, surgical, drug formulations, biologicals, Ayush, and herbal products. Further growth of the industry would also depend on the ability of companies to align their products towards chronic therapies for diseases such as cardiovascular, anti-diabetes, antidepressants, and anti-cancers, which are on the rise.
Pharma is one of the few sectors in India that have consistently shown a growth rate, despite economic slowdown. In 2020, over 20,000 registered drug manufacturers in India sold $33 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70% thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise.
In terms of the global market, India currently holds an accountable share and is known as pharmacy of the world and biggest generic supplier. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$70–80 billion US generics market. Growth in other fields notwithstanding, generics are still a large part of the picture. India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry 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 UK. India is the largest contributor in UNESC with over 50-60% share
Effect of covid-19 on the pharmaceutical industry
There is a tremendous opportunity for growth in this sector, especially in the wake of the pandemic. The developments in the field of microbiology, medical research, and the healthcare industry, in general, will give a boost to the pharma powerhouse. It’s been a world leader in the supply of affordable vaccines in the past years. There is enough evidence to support the fact that India will continue to be a global leader in the fight against the covid 19 pandemic. It is now ready to supply vaccines to the rest of the world.
The neighboring nations, Nepal and Bhutan have reached out to India for vaccines. Both the countries have requested about 12 million and 10 million doses respectively. Bangladesh has also signed a contract with India in November for about 30 million doses of covishield. Moreover, India has agreed to give priority to Sri Lanka when supplying the Indian vaccine to other countries. The vaccine was developed in the united kingdom. However, oxford’s AstraZeneca vaccine will be manufactured in India by India’s serum institute. In effect, medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medical spending.
However, the focus will also be on global storage and supply systems and how India is going to reach out to these countries. Last year, at the United Nations general assembly, the Indian prime minister said that India’s vaccine will not only be available for India but the entire humanity.
One of the biggest milestones crossed by India was in the year 2000-2002 where the Indian facilities were being audited by the US FDA and when we started exporting to the US. Since then, the supply to the USA has drastically increased. He also feels that the entire healthcare ecosystem is quite phenomenal. India has repeatedly proved its worth with the whole war against HIV and now again with the budding war against cancer.
One of the key challenges is that there isn’t enough innovation in India. According to Kiran Mazumdar Shaw, chairman and MD of Biocon, the Indian pharmaceutical industry can become a US$ 100 billion worth sector, with the right support and incentives. But the industry is over-regulated and extremely hard to grow as it is capital intensive. The investment needs are ignored and neglected. At the same time, we have a reputation for providing the highest quality drugs that too at the lowest cost. Nevertheless, we do our best to keep up with the expectations.
“Volume growth in India is going to be significant. It is almost 2X compared to what is produced in other parts of the world. We have also developed our technologies, we use our Active Pharmaceutical Ingredients (API) and we are still innovating and spanning the whole work.” – Umang Vohra
He also mentions that the industry is collaborating with the government. They have started to benefit from the various initiatives and campaigns that are recently adopted. This is done to make sure the medicines are available to the needy and at affordable prices. The focus is also being directed towards inclusive healthcare on the manufacturing side. It is considered as a huge manufacturing footprint. The amendment for the 100% FDI will encourage participation in the sector making the industry self-sufficient and at the same time help in servicing the patient’s needs.
FDI and The Government
The Union Cabinet has agreed to the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector to allow FDI up to 100% under the automatic route for manufacturing of medical devices subject to certain conditions. The drugs and pharma sector attracted cumulative FDI inflows worth US$ 16.54 billion between April 2000 and June 2020 according to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT). The Government of India is planning to set up an electronic platform to regulate online pharmacies under a new policy to stop any misuse due to easy availability. The government also offered US$ 942.8 million production linked incentives between 5-20% for incremental sales and plans to set up three mega drug parks to drive sustainable cost competitiveness.
Indian companies are also starting to adapt their product development processes to the new environment. For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and thus a legitimate competitor in the global industry. Local firms have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities.