The Indian pharmaceutical industry is expected to be among the top 3 pharma markets by 2020 on back of incremental growth, says an Indian Brand Equity Foundation (IBEF) report.
The industry, currently valued at near USD 26 billion, is expected to reach USD 55 billion in the next four years. From 2005-16, the industry has seen a growth of 17.90 percent CAGR. The market size has expanded to USD 36.7 billion in 2016 from USD 6 billion in 2005. India is the largest provider of generic drugs and has 20 percent global exports in terms of volume.
In recent times, the pharmaceutical sector had taken a beating over the stricter regulatory actions from the United States Food & Drug Association (USFDA) and a subdued global economy. Consolidation has set into the sector.
The report says that total healthcare spending is expected to increase at a compounded annual growth rate of 12.70 percent to USD 133 billion during the 2010-2016 period.
Domestic pharma industry is expected to outperform the global growth in next 4-5 years. While pharma sector will grow at 15 percent every year, global market is expected to grow at 5 percent per annum.
Pharmaceutical sales, too, are expected to rise on back of increase in research and development (R&D) spend of companies, which is approximated 8-11 percent of turnover.
“Economic prosperity would improve affordability for generic drugs in the market and improve per capita sales of pharmaceuticals in India,” it says.
US FDA approvals have doubled for Indian companies to 201 in FY15-16 as against 109 seen in FY2014-15. Exports too are expected to improve and will touch USD 16.89 billion in 2016, believes the Pharmaceuticals Exports Promotion Council.
Indian companies are also getting into newer markets to expand business. For example, pharma major Lupin is entering markets like Russia and Latin America.
The Government of India too is concentrating on making the country a global leader in the space with its ‘Pharma Vision 2020’. They are working to reduce approval time and remove red tapism for the industry to boost investments.
What will work for India?
The report states that cost efficiency and competency are the pharma sector’s main advantages over other countries. “India’s cost of production is nearly 60 percent lower than that of the US and almost half of that of Europe,” it says.
Adding to this is cheap labour available in the country. Labour cost is almost 50-55 percent lower than western countries and cost of setting up a plant too is lower by about 40 percent. “Cost efficiency continues to create opportunities for Indian companies in emerging markets and Africa,” the report says.
The other benefit India has is skilled workforce and competent technical expertise in comparison to its peers. India has the second largest number of USFDA approved manufacturing plant outside the US and has 2,633 FDA approved drugs, the report mentions.
While growth opportunities for the sector are expected to rise, growing competition and entrance of new players will be a major challenge for pharmaceutical companies. The bigger players with strong financial hold too will be a concern.
Also, tightening of norms by regulatory bodies will be a challenege as the companies will have to improve and remain at the top-of-their-game.