India’s traditional capacity for manufacturing generics has allowed the Indian pharmaceuticals sector to become a formidable low-cost manufacturer and exporter of drugs and medicines around the world. Now a critical element of the Indian economy, contributing substantially to growth and employment the Indian pharmaceuticals industry offers opportunity for investors and operators alike. Pawan Bhatnagar, Asian Insiders partner in India investigates further.
India’s large population of over 1.4 billion people provides a vast domestic market for affordable medications, with an ongoing growth in demands for medicines, health and beauty products. According to a recent EY FICCI report, this domestic market, growing at 8-10% annually is expected to reach USD 57 billion by 2025 and 130 billion by 2030, while the global market for pharmaceutical products is expected to climb above USD 1 trillion by the end of this year.
The sector contributes around 1.4% to the general economy and is the world’s leading supplier of low-cost vaccines contributing between 40-90% of the world’s supply of WHO mandated vaccines. Further India is the leading supplier of generic medicines, manufacturing about 60,000 different types across 60 therapeutic categories, accounting for around 20% of global supply.
As advances in advanced biologics, gene and cell therapies offer the potential to change lives, India is now developing a policy framework that include intellectual property, government spending, technology commercialisation, scientific research and education as well as focusing on the ease of doing business with improved regulatory registration, tax and financial incentives. The Indian government is actively encouraging private sector, including foreign, direct investment into pharmaceutical R&D and production.
These include the recent Pharmaceutical Production Incentive Scheme (PPIS) intended to enhance India’s manufacturing capabilities by increasing investment in new facilities and research and contributing to product diversification to higher value products. Additionally, the Bulk Drug Policy has led to the establishment of Bulk Drug Parks, specialised industrial zones intended to stimulate the production of active pharmaceutical ingredients (APIs), core components of most manufactured medicinal drugs. The Bulk Drug Policy is intended to reduce India’s dependence on imported essential drug components.
Further the National Pharmaceutical Pricing Authority (NPPA), operational since 1997, controls the prices of drugs through the country, and to ensure ongoing availability and accessibility of medicines.
India’s domestic market is characterised by its large size, as noted, but also the increasing urbanisation of its population with attendant change in lifestyles and rises in incomes. With increased urbanisation comes also an aging population and a range of chronic diseases – diabetes, heart disease and so on. In recognition of these factors, the Indian government is increasing its spending in healthcare, 15% up in 2022-23 by opening more clinics and hospitals.
As well as a surging domestic market, India is also a major exporter of pharmaceutical products. Exporting to most countries in the world, in 2021-22 pharmaceutical exports reached USD 24.5 billion, a 10% increase on the previous year. Indian pharmaceuticals have a strong competitive advantage in the global market due to lower production costs, a large pool of skilled workers and with a strong pharmaceutical R&D sector. Further, the Indian government is strongly behind this with the Pharmaceutical Export Promotions Council (Pharmexcil), a promotional export agency as well as solid support from the Trade Promotion Council (TPCI). India also negotiates clauses specific to pharmaceuticals in their various FTA’s including with the US, EU and Japan.
Exports of Indian pharmaceuticals is certainly going to grow in coming years, driven by global factors such as aging populations, the rising prevalence of chronic diseases and increasing demand for affordable healthcare products, especially for generic drugs. Indian pharmaceutical companies are also in the forefront of developing biosimilars, more affordable than biological drugs, new therapeutics such as advanced biologics, cell therapies and gene therapies as well as innovative oncology treatments. Further, India is in a strong position to reach the worlds emerging larger pharmaceutical markets such as China, Brazil and Russia.
India is the third largest manufacturer of drugs by volume after the USA and China and has the largest number of the US’s FDA approved manufacturing sites outside of the US itself, allowing India to navigate the US’s stringent licencing laws governing pharmaceuticals. The Indian government has relaxed various policies regarding both greenfield and brownfield investments in Indian pharmaceuticals. From 2016, greenfield investments up to 100% no longer requires direct government approval while any investment over 74% in an existing plant or facility will require government authorisation.
Foreign investors will still need to contend with a domestic market that is price controlled and that still labours under various regulatory pressures. While there has been considerable investment in related job skills training and education, some workforce pressures remain, particularly in some regions. The Indian government has declared the pharmaceuticals sector open to all the normal forms of international partnership and the opportunity is available to foreign investors and multinational organisations accordingly.
Indian pharmaceuticals offers tremendous opportunity for international companies to successfully enter the market. Asian Insiders offers vast experience in this Indian business. For a no obligation call, please contact Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or Pawan Bhatnagar, India Partner: pawan.bhatnagar(at)asianinsiders.com