Funding prospects and overview of the Pharmaceutical Industry in India

The Indian Pharmaceutical Industry Accounts for 2.4% of the Global Pharmaceutical Industry by value, and 10% by volume. Further, India accounts for 20% of the global exports in the Pharmaceutical Industry, with a Total Business of USD 16.89 Billion, which is expected to reach USD 40.00 Billion by 2020.

Boosted by lower cost R&D and Production, India is able to produce high quality medicines at lower prices. It is for this very reason that the Pharmaceutical Industry attracted 4% of the total FDIs in India. As per estimations, India is believed to see investments to the tune of USD 200 Billion on medical infrastructure in the next 10 years.

With favourable policies of the Government in place and focus on “Pharma Vision 2020”, the Indian Pharmaceutical Industry is expected to reach USD 250.00 Billion by 2020.

REASONS FOR INDIA’S EMERGENCE AS ONE OF THE WORLD LEADERS:

India’s astronomical rise in this Industry can be attributed to the following:

·        Efficient production at lower cost, which is estimated to be 50-60% lower than USA and Europe.

·    Labour costs are 50-55% cheaper in India, as compared to USA and Europe. India has a skilled workforce, as well as a high managerial and technical competence, as compared to other Asian Countries.

·      Fast growing per capita sales of Pharmaceutical products offers opportunities for the existing market players.

·       Due to low cost of treatment, India is emerging as a leading destination for “Medical Tourism”.

·  Increase in the size of middle class households, coupled with the improvements in medical infrastructure and an increased penetration of health insurance in the country.

·     In 2013, New Drug Pricing Control Order issued by Directorate of Food & Drugs envisioned to reduce Drug prices by 80%, leading to a greater access to quality healthcare.

·         National Health Policy 2015 was drafted with the vision of increasing expenditure in Healthcare.

·       The existing Socio-Political situation has led to economic prosperity, improving drug affordability. “Pharma Vision 2020” is aimed at making India a global leader in end-to-end Drug Manufacture. Reduced approval time required for setting up new facilities and permission for 100% FDI have led to increased investments in the Industry.

STRUCTURE OF THE INDUSTRY IN INDIA:

The Structure of Pharmaceutical Industries in India is as detailed below:

·      Active Pharmaceutical Ingredients (APIs) / Bulk Drugs à Branded and Generics.

India is the world’s 3^rd largest global generic API (Active Pharmaceutical Ingredients) merchant market, with a 7.2% Market share. India manufactures more than 500 different APIs.

·      Contract Research And Manufacturing Services (CRAMS) à Fragmented Market with more than 1,000 players.

This segment is expected to reach a total worth of USD 18 Billion by 2018.

·        Formulations à Chronic and Acute.

India is the largest exporter of formulations, in terms of volume, with 14.00% market share, and 12^th largest in terms of export value. The current worth of the market in India is USD 11.2 Billion.

·        Biosimilars à Estimated to be worth USD 1.4 Billion, and expected to grow at a rate of 30%.

The Central Government has allocated USD 70 Million, through various schemes and subsidies for local players, to develop Biosimilars.

CURRENT INDUSTRY SITUATION:

Generic Drugs, with a market share of 70%, form the largest segment of the Indian Pharmaceutical Sector. OTC medicines and Patented Drugs constitute 21% and 9% respectively, of the total Market revenue of USD 20 Billion.

Indian Pharmaceutical Companies spend 8-11% of their Total Turnover on R&D, which is likely to increase, with the introduction of product patents.

The favourable points for the industry are:

·   Collusions within the Top Market Players are uncommon and there is a healthy rivalry, driving innovations and cost efficiency in the Industry.

·       The bargaining power of customers is high.

·       The bargaining power of suppliers of raw material is medium.

·       Threat of substitute products is low.

·       Strict guidelines and regulations restrict the entry of new players in the market.

The Indian Pharmaceutical Industry is dominated by 4 major players, accounting for 20% of the market share.

1.      Dr. Reddy’s – Largest market player, with sales of USD 2.36 Billion in FY 2016.

2.      Lupin – 2^nd Largest market player, with sales of USD 2.09 Billion in FY 2016.

3.      Cipla – 3^rd Largest market player, with sales of USD 2.089 Billion in FY 2016.

4.      Aurobindo – 4^th Largest market player, with sales of USD 1.17 Billion in FY 2016.

Other Key Market Participants:

·   Sun Pharma – One of the fastest growing companies in this segment, having the highest expenditure on Research & Development in FY 2016.

·  Serum Institute of India Ltd – The world’s largest vaccine manufacturer by number of doses produced and sold globally.

·    Biocon – India’s largest Biotech Company, focussed on delivering affordable innovations, reducing therapeutic costs of chronic diseases.

·      Glenmark – Leading player in discovery of new molecules – NBEs (New Biological Entities) and NCEs (New Chemical Entities)

ROLE OF MSMEs:

Although, the entry into the market is very difficult, there is a huge scope for MSMEs and Start-ups, providing innovative solutions, with regards to:

1.       Manufacturing of raw materials required in manufacturing of Pharmaceutical Industries.

2.       Import and Indigenous procurement of raw materials.

3.   Development of software and applications for efficient manufacturing, management, R&D and general healthcare.

4.     Manufacturing new BBEs, BCEs and other key components, which can be used as substitutes for high cost alternatives, especially towards treatment of chronic diseases.

APPLICABLE SCHEMES AND SUBSIDIES FOR MSMEs:

Financing related – Stand-Up India, MUDRA, CGTMSE and Interest Subvention Schemes for Exporters of raw material.

Others - Marketing Assistance and Technology Upgradation, Marketing Promotion Schemes, Marketing Assistance Schemes, and Zero Defect Zero Effect.

GOVERNMENT’S INITIATIVES:

The Government of India unveiled 'Pharma Vision 2020', aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments. Further, 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.

Mr Ananth Kumar, Union Minister of Chemicals and Petrochemicals, has announced the setting up of chemical hubs across the country, early environment clearances in existing clusters, adequate infrastructure, and establishment of a Central Institute of Chemical Engineering and Technology.

Some of the major initiatives taken by the government to promote the pharmaceutical sector in India 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 incentivise bulk drug manufacturers, including both state-run and private companies, to encourage the ‘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 AHEAD:

The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025, driven by increasing consumer spending, rapid urbanisation, and raising healthcare insurance, among others.

Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as cardiovascular, anti-diabetes, anti-depressants, and anti-cancers that are on the rise.

The Indian government has taken many steps to reduce the costs and bring down the healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs, and preventive vaccines also augurs well for the pharmaceutical companies.

Thank you for reading.

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This write-up has been collated from various publicly available materials and secondary data, and MSMEmitra.com does not have any copyrights over the content, or guarantee its accuracy.