India Pharma – An investment paradise ahead?

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In recent times, I have had the opportunity to meet and visit some people from pharmaceutical sector. Over tea and discussions, we all had a long conversation over intricate details of pharma sector. Let’s have a look on some details of the pharma industry.

From a net importer of drugs in the 1950s, today -

India is the 8thlargest pharma market in value terms globally. It is the 4thlargest contributor to Indian exports and top ranks as the fastest growing export contributor amongst the top 10 export categories over the last five years.

As per IBEF report, Indian pharmaceutical sector accounts for about 3.1 – 3.6 percent of the global pharmaceutical industry in value terms. India contributes the second largest share of pharmaceutical and biotech workforce in the world.

Indian drugs are exported to more than 200 countries in the world, with the US as the key market. Indian pharma companies have more than 20 percent of market share in USA. The largest numbers of FDA approved plants outside the US are from India. The number of abbreviated new drug application (ANDA) approvals for Indian firms is already at 129 this year — a 45 per cent jump from 89 in the January-July period of last year.

India exported pharmaceutical items worth US$ 16.64 billion in FY17 and US$ 5.15 billion during April – August 2017. Generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally.

According to the Department of Industrial Policy and Promotion (DIPP), the drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 14.71 billion between April 2000 and March 2017.

Where does the problem lie?

The major bottleneck for the pharma industry lies in importing Active Pharmaceutical Ingredient (API). India imported Active Pharmaceutical Ingredients (APIs) worth INR 13,853.20 crore from China in 2015-16, or 65.29 per cent of the total API imports. The major reason behind this import is economic consideration. The Chinese APIs are almost cheaper by 4 times than those produced in India.

Multiple negative actions have been taken by the USFDA against products and facilities of Indian pharma companies in the recent times. Increasing regulatory hurdles, pressure on margins, stiff competition etc. is hurting the Indian pharma industry.

Industry sources reveal that sub optimal infrastructure, inefficient compliance management system, lack of internal controls, data security and quality, skilled resources are the major hurdles present upfront. Lack of proper education and training for personnel is an issue with most manufacturers and attrition level in the industry is almost at 40 percent.

Government Initiatives

The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus.

It has unveiled 'Pharma Vision 2020' aimed at making India a global leader in pharmaceuticals.

In an attempt to revive the active pharmaceutical ingredient (API) and bulk drug market in India, the govt. has withdrawn exemption in customs duties on the import of APIs. It also plans to set up mega drug parks to give a boost to domestic production. Approval time for new facilities has been reduced to boost investments.

The implementation of the Goods and Services Tax (GST) will be a game-changer for the sector as it will lead to tax-neutral inter-state transactions between two dealers, helping reduce the cost significantly.

The government introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines.

Going Forward

The Indian pharmaceutical market is USD 27.57 billion currently, and is expected to reach USD 55 billion by 2020. The attributable reasons are – increased consumer spending and awareness, growing urban population, rise in healthcare insurance are a few to name.

Growth in domestic sales will be linked to companies which will be able to offer medicines for diseases that are on the rise, such as such as cardiovascular, diabetes, cancer etc.

The industry has generated employment for 2.5 million people — a 50 per cent increase in the last five years. The sector is expected to generate 58,000 additional job opportunities by the year 2025. Increasing digitization and advances in life sciences will help open up new avenues ahead.

A report states that, many of the major pharma company plants are modern and can sustain for the next 10 years, but given the current scenario, it is a natural conclusion that the future is less predictable and disruptions are increasing in number.

The govt. needs to push for a proactive approach towards building better quality compliance and become a facilitator of funds and platforms to help pharma sector gear up and be future combat ready. It is a cautious road ahead, but the destination is worth going the distance.