India’s pharmaceutical industry supplies more than 50% of the global demand for vaccines, 40% of the generic demand for the United States, and 25% of all medicines for the United Kingdom. It contributes to the second-largest share of the biotech and pharmaceutical workforce worldwide.
In India, the domestic pharmaceutical market had reached 1.4 lakh crore INR or 20.03 billion USD in 2019 with 9.8% year on year from 1.29 lakh crore INR or 18.12 billion USD in 2018. In May 2020, pharmaceutical sales surged 9% year-on-year to 10,342 crore INR or 1.47 billion USD (1).
India exports its drugs to more than 200 countries globally, with the US being the chief market. India is the largest provider of generic drugs globally, with 20% of the global export volume. It is most likely that it would expand even further in the upcoming years. According to a Bloomberg report, drugmakers witness a surge of growth in their API, Active Pharmaceutical Ingredients business in the first quarter of 2020 compared to the same period in the last year (2).
Indian pharma segment exports, including intermediates, bulk medicines, biologicals, drug formulations, Ayush and herbal products, and surgical reached 16.28 billion in the financial year 2020. Its exported pharmaceuticals were worth over 11.80 billion USD in September 2020.
Indian medical device industry has also been growing at 15.2% annually and is expected to reach from 8.16 billion USD in 2020 to 25 billion USD in 2025.
In the first two months of FY 2021, affordable medicine under the PMBJKs, Pradhan Mantri Bhartiya Janaushdhi Kendra’s (3) achieved an impressive sale 100.40 crore INR or 14.24 million USD.
The Indian government’s Department of Pharmaceuticals aims (4) to make India a major hub for end-to-end drug discovery with its ‘Pharma Vision 2020.’ The industry has received cumulative FDI, Foreign Direct Investment worth 16.54 billion USD between April 2000 and June 2020. Under Union budget 2020-21, the Ministry of Health and Family Welfare received 65,021 crore INR or 9.30 billion USD. Simultaneously, Ayushman Bharat Pradhan Mantri Jan Arogya Yojna received 6,429 crore INR or 919 million USD.
In 2019, the cabinet also approved the Extant PPP, Pharmaceutical Purchase Policy, with the same terms and conditions while adding another product, AHD, Alcoholic Hand Disinfectant, to the existing list of 103 drugs till the final strategic disinvestment of pharma CPSUs.
It is worth highlighting that the Indian government expenditure on healthcare has increased to 3.24 lakh crore INR or 45.96 billion USD in the financial year 2020 with 18% CAGR from the fiscal year 2016. According to the Economic Survey 2019-20, the Indian government expenditure, as a percentage of GDP, rose to 1.6% in 2020 compared to 1.2% in 2015 for health. Moreover, FDI has grown to 74% in existing pharmaceutical firms and 100% in new projects.
India also plans to set up an approximately 1 lakh crore INR or 1.3 billion USD fund to boost organizations to manufacture pharmaceutical ingredients locally by 2023.
According to a report by IRCA (5), the Indian pharmaceutical industry’s revenue growth would be 7 to 9% in the fiscal year 2021 despite the muted growth in the first quarter of FY 2021, considering the inelastic drugs demand and production resumption pre-COVID levels by Q3 FY 2021.
There are expectations that the upcoming fiscal year’s revenue growth would be slightly better at 8 to 11%. However, lower cases of acute diseases, OPDs, and elective surgeries may continue to impact growth. It would also depend on the pandemic’s course, added the report.
It is worth highlighting that India imports about 60% of its APIs and KSM (Key Starting Materials) from China (6). While the suppliers were initially hit because of the pandemic, it has been resuming gradually since March 2020 and is near the normalcy levels.
After the first few weeks of the lockdown, there has also been a significant reduction in the production disruption because of workforce and materials mobility restrictions. As of now, the production has reached 90 to 95% pre-COVID levels. There are also improvements in profitability because of fewer overheads, mainly travel, marketing, and selling expenses.
According to the report, the trend may reverse once the pandemic situation starts resolving, and the margins in 2022 may remain in line with the pre-COVID levels.
ICRA also added that leading pharma companies’ credit metrics would remain stable in their future growth prospects in regulated markets with strong balance sheets.
“Lead pharma companies’ credit metrics are expected to remain stable, given future growth prospects in regulated markets and relatively strong balance sheets. The capital structure and coverage marks are expected to remain solid despite pressure on profitability and a marginal rise in debt levels given inorganic investments. The key sensitivity to ICRA’s view remains the productivity of research and development expenses, increasing competition in the US generics space and operational risk related to an increased level of due diligence by regulatory agencies.”
– Gaurav Jain, Vice President, and Co-head, IRCA (7).
The capital structure and coverage indicators would also remain strong despite the pressure on profitability and a marginal surge in debt with inorganic investments (8). Overall, the pharma revenue and margins are likely to remain healthy in the next financial year.
The potential pharma players attribute the conventional marketing model, which lacks the conciseness of the target audience. It is leading to a diverse target landscape, which gives little ROI. Medical representatives also follow an approach targeting physicians based on heuristics and intuitions and face opportunity loss.
There is also a massive shortage of predictive analysis to understand customer behavior to streamline OTC product marketing, especially in FMGC and non-prescription drugs (9).
As the pharma sector has been slow in adopting digital transformation, there is no reliable tool to assess the marketing efforts’ ROI. Hence the sector is met with the challenge of transitioning from a time-consuming and intuitive process for market research and sales to a data-driven model to get more sales.
Data-driven action plan for product marketing is quite the buzzword among marketers enthusiastic about maximizing value and ROI. Investing in data collections makes real-time results and enables a sales entity to find a key customer segment, understand expectations, and deliver a curated message with a significant potential of quantifiable result translation (10).
A pharma company can harness it by directing marketing platforms metrics and understanding the generic objectives and challenges of a data-driven marketing model, setting goals, and data collection at every touchpoint.
Pharma companies can use the valuable insights gained from it to build better strategies and smarter decisions. In the meantime, assessing ROI can help justify marketing spend, measure campaign success, allocate marketing budget, and establish baselines (11). These are some of the vital elements for a successful hyperlocal model.
At the end of the day, it all boils down to leveraging technology to scale across the country rapidly and ensuring that the right product is available at distribution points for consumers. It is only logical for pharma companies to embrace digital transformation to offer better healthcare service to people in light of the NDHM.
Pharma Vision 2020
Pharma Vision 2020 is the Indian government’s commitment to make the country a global leader in end-to-end drug discovery and development with the production of low-cost generic drugs. It aimed to drastically grow the Indian pharmaceutical sector in the decade to meet the increasing demands brought by – the aging population, surge in chronic illness, lifestyle changes and increased income.
Throughout the decade, the pharma industry witnessed continuous growth. However, it is now fraught with challenges and opportunities. The generic drug product remains the country’s bread and butter as it supplies affordable generic drugs to millions of people worldwide. It is home to over 250 US FDA, Food and Drug Administration, and UK MHRA, Medicine and Healthcare Products Regulatory Agency approve facilities.
While generic remains the primary driver in India’s pharma growth, there is a dire requirement for innovation. If the Indian pharma sector aims to expedite India towards economic development, it must produce a lot more value than it does at present.
There is a need for a slow shift towards growing an innovative biopharmaceutical sector. It is worth noting that India’s relatively liberal regulation also makes it a promising destination for therapeutic R&D and stem cell research.
India’s well-established foundation in IT and Computer Sciences could also help the pharma sector to emerge as a leader in reshaping pharmaceutical innovation and large-scale production.
As digital devices are integrating with our lives, there is also a fundamental shift in the patient-physician relationship. Patients are now more informed about their diseases and treatment options compared to five years ago. It signifies how an average Indian patient’s profile changes and how there is a need to adapt to the new age patient’s demands.
Big Data in bio-pharma would also play a significant role in the transition to innovation for patient-centricity. Analytics could also heavily drive innovation and value to optimize and improve the efficacy of clinical trials.
It is a pressing matter to have more inclusive clinical trials since lack of diversity and inclusions leads to a false population representation. Notably, Big Data can effectively help find niche patient populations and significantly reduce costs and hasten trials (12).
Recently, Kiran Mazumdar Shaw, the Chairperson of Biocon (13), stated that ‘vaccine diplomacy could be a game-changer of India’s foreign policy.’ The country already has the name of pharmacy in the world. Indian drug makers also account for 60% of vaccine supplied to UNICEF’s global immunization programs. The multinational race for a coronavirus vaccine might save not only lives but also prevent conflicts.
During the coronavirus pandemic’s peak in Europe, Spain and Italy accused Germany of denying ventilators during their times of need. Several countries also accused the US of diverting supplies. Eventually, over these past few months, the world’s focus shifted to controlling the pandemic via vaccine development and ensuring its global availability at the earliest.
India can commit its critical resources to propel vaccine development. While going for vaccine diplomacy, India might also acquire immunity to war.
Dependence on China
India’s dependence on China for APIs import has become a vital threat to its healthcare supply chain. The over-dependence on China poses threats to the country’s healthy security as some of these APIs are critical in reducing our infectious disease burden.
More than 63% of Indian pharmaceutical imports are API and intermediates, and almost 60 to 70% of them come from China. These are crucial chemical compounds or raw materials needed to manufacture medicines and formulations.
It is a bitter pill to swallow that India relies on imports of its several critical APIs. In the early 1990s, India was entirely self-sufficient in formulating and producing APIs. However, it was considered viable in the past two decades to import APIs from China because of its low-profit margins.
The Indian government aims to achieve Pharma Vision 2020 now seem week considering the over-dependence on China for intermediates and bulk drugs. If we also look at China’s unstable political relationship, the risk of being dependent on China is not something India should take now more than ever. It requires our Pharma Industry to be self-sufficient.
Indian Union Cabinet approved an investment package worth 1.3 billion USD to boost its pharma and API production and dependence in response to the COVID-19 crisis and the increased emphasis on ‘Vocal for Local’ and ‘Make in India.’ It is a major step for India towards becoming a self-sufficient healthcare ecosystem (14).
While the Indian pharmaceutical sector has witnessed impressive growth over the decade, it has fallen short in fulfilling Pharma Vision 2020. It still lacks true innovation that focuses on end-to-end drug delivery and development infrastructure.
There is no denying that India has its academic system in place and has commendable talent, but it still doesn’t have enough incentives to enter the R&D space. The IPA, Indian Pharmaceutical Alliance (15), which submitted its Vision 2030 in July 2019, plans to make the country an innovation leader by creating a robust innovation pipeline.
It has also urged the Indian government to set up a large fund to boost technological innovation in pharma, healthcare, and biotech startups. However, considering the high risks associated with the present domestic and global economic situation, India’s growth towards biopharma innovation leader is most likely to be gradual.
Pharma Industry’s Initiatives
Recently, there has been an erosion of generic drug prices in the US and Europe. In response, generic drug manufacturers are exiting drug portfolios, where there are unsustainable margins (16).
At present, the top pharmaceutical firms are concentrating on developing differentiated complex generics, including biosimilars. The converge shift is mainly because complex generics are more complicated to develop, have less competition, and have higher margins than generics.
Moreover, Indian pharma firms aim to become the first-to-file and first-to-market complex generics and generics to get a competitive advantage.
Indian pharma sector is also making investments to build their specialty drug pipelines. While they are more expensive to develop than generic, there is limited competition, meaning more margins. IQIA forecasts that by 2023, the developed market would see a surge in the specialty drug market share by 50%, depicting the industry’s market attractiveness.
The transformation towards complex generics and specialty drugs has made it necessary for organizations the increase their research and development investment. According to Deloitte analysis (17), there is a corresponding reduction in the R&D investment to sales ratio.
The volatility experienced in the past decade’s growth encouraged the Indian pharmaceutical sector to optimize its cost structure. It has now also started to focus on improving its R&D productivity, reducing its expenses, building supply chain agility, being more efficient in raw material procurements and capacity utilization.
At present, Indian pharmaceutical firms are betting on inorganic growth via mergers and acquisitions, collaborations, joint ventures, partnerships, and in-licensing to build high value and high margin asset pipelines. As global pharma organizations are looking to reshape their portfolios’ divestments, Indian firms are looking to build their specialty medicines and complex generics pipeline.
In history, compliance lapses are a pain-point for the Indian pharma industry. The past several years observed increased compliance challenges and regulatory scrutiny to meet the current cGMP, Good Manufacturing Practice guidelines. Indian pharmaceutical firms have started to look into the quality and compliance issues by India-specific interventions deployment with the best global practices.
The pharmaceutical industry in India is on the cusp of a remarkable transformation – technological, financial, demographic, and regulatory.
The Indian government drives optimism for its pharmaceutical sector via its several initiatives. The private Indian pharma companies also seem to be ready to play their part in accelerating the country’s economic growth.
There is no doubt that the industry can deliver robust impetus for the country’s economy when it needs to hear good news on the economic front. It is grown in confidence and firmly moving towards an accelerated growth part.
The question would now rest around the full extent of its potential. We believe that robust players, intent, investments, and actions would underpin future growth and enable the Indian pharmaceutical industry to disrupt the global top tier.