The Indian Pharmaceutical Industry
The Indian Pharmaceutical Industry (IPI), estimated at US$ 9 bn, has grown at a CAGR of 7% during the last six years. It is ranked 4th in volume terms and 11th in value terms globally.
By: Bharat Book Bureau
The Indian Pharmaceutical Industry (IPI), estimated at US$ 9 bn, has grown at a CAGR of 7% during the last six years. It is ranked 4th in volume terms and 11th in value terms globally. India’s share in the global pharmaceutical market is less than 2% in value terms as drug prices in India are one of the lowest in the world. Exports contributed to more than half of IPI’s turnover during 2005-06 and have been a major growth driver for the industry growing at a CAGR of 19% during the last six years.
The playing field for the domestic pharmaceutical companies changed completely with the advent of product patent regime from January 2005. The IPI is now exposed to a host of new opportunities and risks. This has led the domestic pharmaceutical
companies to pursue various strategies on the business and R&D front with the aim of achieving long-term sustainable growth under the new regulatory regime. Besides changes in the patent laws, the issues with respect to drug pricing and the Union Pharmaceutical policy will shape the regulatory environment for the industry in future.
The changing dynamics of the global pharmaceutical industry especially that of the regulated markets like USA and Europe have presented a number of opportunities for IPI to capitalize on. Some of the major concerns facing the global pharmaceutical
industry are higher healthcare costs, competition from generics, patent expiries of blockbuster drugs, drying R&D pipelines and increasing R&D costs. These translate into a significant growth opportunity for IPI in the form of exports of generics to regulated markets and contract manufacturing/
research. The various strategies adopted by Indian pharmaceutical companies focusing on each of the six segments are then identified and explained. The top-28 Indian pharmaceutical companies are classified based on their current orientation visà-vis the value road. These companies are mapped according to their current and future focus segments on the value road which are likely to shape their growth in the near to medium term. CARE Research believes that the growth of the Indian pharmaceutical companies in the domestic market get restricted with the MNCs introducing newer patented drugs in the country. Under this scenario, the growth for the formulation companies is likely to come from the generics opportunity in the regulated markets and geographic expansion in the semi/non regulated markets. The value of drugs going off-patent in regulated markets is estimated at US$ 70-80 bn during the next five years and this represents a huge opportunity for Indian pharmaceutical companies to establish their presence in these markets. Pricing pressure in the regulated markets, high litigation expenses and counter strategies followed by innovator companies are factors that could dampen the growth of Indian pharmaceutical companies pursuing the generic opportunity.
The recognition of product patent has provided global companies with better IPR protection and as a result has opened up a new segment for the IPI in Contract Research and Manufacturing Services (CRAMS). IPI is well-positioned to take advantage of this opportunity with world class manufacturing facilities adhering to various regulatory standards, large pool of skilled manpower and cheaper cost of production. The investment in R&D is also on the rise as it has become important for Indian companies to start innovating new drugs in order to ensure long term sustainable growth and remain competitive at the global level. Indian companies have invested in New Chemical Entity (NCE) research and are scouting for global partners for pursuing collaborative research. The availability of large patient base, skilled manpower and lower costs of carrying out clinical trials has made India a favourable destination for R&D outsourcing. It believes that in the near to medium term horizon, the growth of IPI would be driven by exports to regulated markets and CRAMS. Companies having strong presence in these segments are likely to benefit more as compared other companies.
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