The Indian pharmaceuticals market is the third largest in terms ofvolume and thirteenth largest in terms of value, as per a report by EquityMaster. India is the largest provider of generic drugs globally with the Indiangenerics accounting for 20 per cent of global exports in terms of volume. Oflate, consolidation has become an important characteristic of the Indianpharmaceutical market as the industry is highly fragmented.India enjoys an important position in the global pharmaceuticalssector. The country also has a large pool of scientists and engineers who havethe potential to steer the industry ahead to an even higher level. Presentlyover 80 per cent of the antiretroviral drugs used globally to combat AIDS(Acquired Immuno Deficiency Syndrome) are supplied by Indian pharmaceuticalfirms.The post-liberalization period witnessed an increasing trendof FDI inflows in India with a high growth rate. The relaxation of policiestowards international trade and investment supported by a positive responsefrom capital exporting countries is also considered as a major determinant ofFDI inflows into India.
Moreover, Foreign Direct Investment (FDI) and the post- liberalization scenario became the most fascinating topics among researchersin the area of international trade and investment. It is an important type offast international expansion to increase ownership of assets, derivelocation-specific advantages and acquire additional knowledge. FDI inindustrial sectors in India has become a point of discussion among theresearchers and industrialists. Whether it is service sector or informationtechnology or telecommunication sector or manufacturing sector, there is acontinuous fluctuation in FDI inflows into these sectors over the years. FDIhas been the target for Indian industrial sectors with a changing pattern ofinflows. FDI in Pharmaceutical Industry has also been among the hot topics ofdiscussions whether it is entry route or entry cap.
The Indian PharmaceuticalIndustry is amongst the top industries in the global pharmaceutical market andranks 3rd in terms of volume of production (10% of global share) and 14thlargest by value. The UN-backed Medicines Patent Poolhas signed six sub-licenses with Aurobindo, Cipla, Desano, Emcure, Hetero Labsand Laurus Labs, allowing them to make generic anti-AIDS medicineTenofovirAlafenamide (TAF) for 112 developing countries. With ever increasing returns,lowering risks and anticipated multifold growth, investors are more interestedin this industry than ever before. Since 2000, the drugs and pharma sector hasattracted one of the highest foreign direct investment (FDI) inflows ofapproximately $12,689 million (April 2000 to September 2014. India: The next R&D destinationThe privatization and globalization policy of the governmentof India in the mid-1990s provided incentives to R&D in the pharma sphere.Innovative products were given exemption from price control, a number offinancial schemes were made available to firms for undertaking R&D,technology collaborations were brought under the automatic approval route, andpatent rights were granted for a period of 20 years for products as well as processes.
This incentivisation created a seismic shift from thepractice of only manufacturing to a practice of innovation. India waspreviously known as the generic capital of the world owing to the widespreadreverse engineering industry, this is now changing and companies in India havestarted to develop and innovate drugs.Morethan 870 multinational companies have set up their R&D operations in Indiasince 1985, the first one being Texas Instruments.16 The prime reasons whyR&D in India is viewed as beneficial are:· Cost effectiveness: The cost of setting up worldclass R&D facilities in India cost a fraction of what they do in the west.The overall R&D costs are about one-eighth and clinical trial expensesaround one-tenth of western levels;17· Skill: A large pool of English speaking technical skill poweris available at a low cost with highly developed R&D oriented skill sets;· Established R&D centers: Pre-established state of theart R&D centers offer logistic convenience and cost effectiveness;· Growing biotechnology industry: Indian biotechnology industryhas grown by leaps and bounds and has some world class players;· Market access: India is one of the fastest growing markets in theworld.
R&D in India allows companies to gain a foothold in this new andgrowing market;· Rising household incomes: The growing middle class inIndia is an attractive market for drugs. With increasing disposable incomes,the market for non-essential drugs, is set to grow rapidly;· Governmental incentives: Post the liberalization era,the Indian government has offered numerous incentives to R&D in India; and· Biodiversity: Some drugs aimed at the Indian market require certaingene specific R&D and clinical trials. India’s rich genetic biodiversityoffers a perfect destination for such R and clinical trials.PharmaR in India is expected to witness exponential growth in the near future,and with the growth of the economy and the pharma industry in India, innovationassumes new economic importance in the Indian pharma industry.Future of Indian pharma industry The Indian pharma industry has come a long way and madesignificant progress in infrastructure development and technical and Rcapabilities. With the integration of the Indian pharma market with the globalmarket, new issues are being faced and tackled by the industry. Some oldchallenges such as IPR and pricing continue to be contentious issues in themarket.
The trends of increased foreign interest in the markets and increasedinvestments in R are expected to stay. With numerous strengths and agrowing consumer class, the pharma industry in India may face certain legacyand new issues, but it is expected to grow multifold and continue to be anattractive investment destination.Market SizeThe Indian pharma industry, which is expected to grow over 15 percent per annum between 2015 and 2020, will outperform the global pharmaindustry, which is set to grow at an annual rate of 5 per cent between the sameperiod!. The market is expected to grow to US$ 55 billion by 2020, therebyemerging as the sixth largest pharmaceutical market globally by absolute size,as stated by Mr Arun Singh, Indian Ambassador to the US.
Branded genericsdominate the pharmaceuticals market, constituting nearly 80 per cent of themarket share (in terms of revenues).India has also maintained its lead over China in pharmaceuticalexports with a year-on-year growth of 11.44 per cent to US$ 12.91 billion in FY2015-16, according to data from the Ministry of Commerce and Industry. Importsof pharmaceutical products rose marginally by 0.80 per cent year-on-year to US$1,641.
15 million.Overall drug approvals given by the US Food and Drug Administration(USFDA) two Indian companies have nearly doubled to 201 in FY 2015-16 from 109in FY 2014-15. The country accounts for around 30 per cent (by volume) andabout 10 per cent (value) in the US$ 70-80 billion US generics market.India’s biotechnology industry comprising bio-pharmaceuticals,bio-services, bio-agriculture, bio-industry and Bioinformatics is expected togrow at an average growth rate of around 30 per cent a year and reach US$ 100billion by 2025. Biopharma, comprising vaccines, therapeutics and diagnostics,is the largest sub-sector contributing nearly 62 per cent of the total revenuesat Rs 12,600 crore (US$ 1.88 billion).InvestmentsThe Union Cabinet has given its nod for the amendment of theexisting Foreign Direct Investment (FDI) policy in the pharmaceutical sector inorder to allow FDI up to 100 per cent under the automatic route for manufacturingof medical devices subject to certain conditions.
The drugsand pharmaceuticals sector attracted cumulative FDI inflows worth US$ 13.85billion between April 2000 and March 2016, according to data released by theDepartment of Industrial Policy and Promotion (DIPP).Some of themajor investments in the Indian pharmaceutical sector are as follows: India’s largest drug maker Sun Pharmaceutical Industries Limited has entered into a distribution agreement with Japan’s Mitsubishi Tanabe Pharma Corporation to market 14 prescription brands in Japan. Syngene International Limited will be setting up its fourth exclusive Research and Development (R&D) center named Syngene Amgen Research and Development Center (SARC) for a US-based biotechnology company Amgen Incorporation in Bengaluru. India’s third largest drug maker Lupin Limited plans to file its first bio similar Etanercept for approval in Japan, world’s second largest drug market, in 2017. Rubicon Research Pvt Ltd, a contract research and manufacturing services firm, is in advanced talks with Everstone Capital and a few high-net-worth Individuals (HNI) to raise up to Rs 240 crore (US$ 35.79 million), which will be used to increase the company’s manufacturing capabilities.
Lupin Ltd plans to acquire a portfolio of 21 generic brands from Japan-based Shionogi & Co Ltd for Rs 10.08 billion (US$ 150.3 million), which will help to strengthen its presence in the world’s second largest pharmaceutical market.
International Finance Corporation (IFC), the investment arm of the World Bank, plans to invest up to US$ 75 million in Glenmark, which is looking to raise around US$ 200 million for expansion and the launch of several new products in India and other emerging markets over the next three years. Cipla Limited plans to invest around Rs 600 crore (US$ 89.47 million) to set up a biosimilar manufacturing facility in South Africa for making affordable cancer drugs and its growing presence in the market.
Russian Pharma, a firm which specializes in de-addiction and pain management products, plans to invest Rs 100 crore (US$ 14.91 million) in a R&D center and a manufacturing unit in Kandla, located in Kutch District in Gujarat. Pink, Blue Supply Solutions Pvt. Ltd, a clinical supplies provider, has raised Rs 1.5 crore (US$ 0.22 million) in a seed round of funding from Term Sheet.
io, a transaction-focused service provider for start-ups and investors.Government InitiativesThe Government of India unveiled ‘Pharma Vision 2020’ aimed atmaking India a global leader in end-to-end drug manufacture. Approval time fornew facilities has been reduced to boost investments. Further, the governmentintroduced mechanisms such as the Drug Price Control Order and the NationalPharmaceutical Pricing Authority to deal with the issue of affordability andavailability of medicines.Mr Ananth Kumar, Union Minister of Chemicals and Petrochemicals, hasannounced setting up of chemical hubs across the country, early environmentclearances in existing clusters, adequate infrastructure, and establishment ofa Central Institute of Chemical Engineering and Technology. Some of the majorinitiatives taken by the government to promote the pharmaceutical sector inIndia are as follows: The Government of India plans to set up around eight mini drug-testing laboratories across major ports and airports in the country, which is expected to improve the drug regulatory system and infrastructure facilities by monitoring the standards of imported and exported drugs and reduce the overall time spent on quality assessment. India is expected to rank among the top five global pharmaceutical innovation hubs by 2020, based on Government of India’s decision to allow 50 per cent public funding in the pharmaceuticals sector through its Public Private Partnership (PPP) model.
# Indian Pharmaceutical Association (IPA), the professional association of pharmaceutical companies in India, plans to prepare data integrity guidelines which will help to measure and benchmark the quality of Indian companies with global peers. The Government of India plans to incentivize bulk drug manufacturers, including both state-run and private companies, to encourage ‘Make in India’ programme and reduce dependence on imports of Active Pharmaceutical Ingredients (API), nearly 85 per cent of which come from China. The Department of Pharmaceuticals has set up an inter-ministerial co-ordination committee, which would periodically review, coordinate and facilitate the resolution of the issues and constraints faced by the Indian pharmaceutical companies. The Department of Pharmaceuticals has planned to launch a venture capital fund of Rs 1,000 crore (US$ 149.11 million) to support start-ups in the research and development in the pharmaceutical and biotech industry.Road AheadThe Indian pharmaceutical market size is expected to grow to US$ 100billion by 2025, driven by increasing consumer spending, rapid urbanization,and raising healthcare insurance among others. Going forward, better growth indomestic sales would also depend on the ability of companies to align theirproduct portfolio towards chronic therapies for diseases such as such ascardiovascular, anti-diabetes, anti-depressants and anti-cancers that are onthe rise.The Indian government has taken many steps to reduce costs and bringdown healthcare expenses.
Speedy introduction of generic drugs into the markethas remained in focus and is expected to benefit the Indian pharmaceuticalcompanies. In addition, the thrust on rural health programs, life saving drugsand preventive vaccines also augurs well for the pharmaceutical companies.ConclusionThere is no doubt aboutthe growth of the pharmaceutical industry. India may rank among the topfive global pharma markets by 2030. Yet the domestic companies find itdifficult in the current scenario. Some of the players quit theindustry. Foreign companies are adding more competition to the domesticmarket by launching products in both branded and generic categories.
Itis the bounden duty of the Government to take care of domestic companies inthis industry so that they have to align themselves to the existingscenario. With numerous strengths and a growing consumer class, thepharma industry in India may face certain legacy and new issues, but it isexpected to grow multifold and continue to be an attractive investmentdestination.