Sector Analysis Report on Pharmaceutical Industry in India

Introduction
The Indian pharma industry is 3rd largest in world in terms of volume and 13th largest in terms
of value, as per a pharmaceuticals sector analysis report by equity master. It is on a good
growth path and is likely to be in the top 10 global markets in value term by 2020,
according to the PwC CII report titled India Pharma Inc: Gearing up for the next level of
growth. The branded generics constituting nearly 70 to 80 per cent of the market dominates
the market. The top ten companies make up for more than a third of the market. As Indian
pharmaceutical market is highly fragmented, consolidation is one of the important feature of
the industry. Recent deals e.g. Wyeth and Pfizer merger, Sun pharma acquiring Ranbaxy,
Strides selling its injectable arm are the classic cases for our reference.
India currently holds a modest 12% share in terms of the global market, but it has been
growing at approximately 10% per year owing to the huge pool of engineers and scientists
who have the potential to take the pharma industry to high levels. The UN-backed Medicines
Patents Pool has signed six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero
Labs and Laurus Labs, allowing them to make generic anti-AIDS medicine Tenofovir
Alafenamide (TAF) for 112 developing countries.

Market Size
The Indian pharmaceutical industry is expected to grow at 20 per cent compound annual
growth rate (CAGR) over the next five years, as per India Ratings, a Fitch Group company.
The major pharmaceutical hubs in India are Mumbai, Hyderabad and Ahmedabad. Gujarat
showed the highest growth rate in the market at 22.4 per cent in November 2014, more than
the industry growth rate of 10.9 per cent, as per data from the market research firm AIOCD
Pharma softtech AWACS. The entire domestic market is worth US$ 12.6 billion and is
expected to be US$ 49 by 2020.
India's biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture,
bio-industry and bioinformatics also showed an average growth rate of 20 percent with
revenues of US$7 billion mark by the end of financial year 2015. Bio-pharma being the
biggest contributor generating over 60 percent of the total revenue with revenue generation of
12600 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.

Investments
The Union Cabinet have approved to amend the existing FDI policy in the pharma sector in
order to cover medical devices. This has allowed FDI up to 100% under the automatic route
for manufacturing of medical devices subject to specified conditions. The drugs and pharma
sector attracted cumulative foreign direct investment (FDI) inflows worth US$ 12,813.02
million between April 2000 and December 2014, according to data released by the
Department of Industrial Policy and Promotion (DIPP).
"Romania will collaborate with India for license acquisition to sale India's drugs in Europe,"
said Mr Mario Crute, Counselor in Ministry of health in Romania at GCCI. This would assist
the Indian pharmaceutical companies to carry out research and develop new drugs. Romania
will tie up with the Indian pharma companies for research and developing new drugs.

Government Initiatives
The Addendum 2015 of the Indian Pharmacopoeia (IP) 2014, would play a significant role in
improving the quality of medicines which in turn promote public health and accelerate the
growth and development of pharma sector. The Government has unveiled 'Pharma Vision
2020' aimed at making India a global leader in end-to-end drug manufacture. It has reduced
approval time for new facilities to boost investments. Further, the government has also put in
place mechanisms such as the Drug Price Control Order and the National Pharmaceutical
Pricing Authority to address the issue of affordability and availability of medicines.
The Indian government has established the Department of Biotechnology in 1986 under the
Ministry of Science and Technology. Indias science minister has launched a program which
provides tax incentives and grants for firms seeking to expand and establishes the
Biotechnology Parks Society of India and biotech start-ups to support ten biotech parks by
2010. The government has also taken steps to encourage FDI in biotech sector. An initiative
passed earlier this year allowed 100% FDI without compulsory licensing from government.

Financial Year 2013-14

The year was challenging on the domestic front. The companies faced strikes from the
wholesales on margin issues due to reduction in prices of overall drugs. The growth of the
MNC players was below the domestic pharma companies owing to the pricing policy. Only
couple of companies exhibited better growth amidst increasing competition, drug launches by
other companies before the patent expiry, through compulsory licensing and patent
infringements. Rupee depreciation was one important aspect which helped the industry
especially those companies who had not risked their receivables for uncertainty. The industry
continued to face challenges on the regulatory front. During the year as the rules have
become more stringent now along with the surprise checks done by the regulators.

Road Ahead
The size of Indian pharma market is expected to grow to US$ 85 billion by 2020. The
domestic market In India will be based on increasing consumer spending, rapid urbanization,
and raising healthcare insurance and so on. Going forward, better growth in domestic sales
will depend on the ability of companies to align their produce towards chronic therapies for
diseases such as such as anti-diabetes, cardiovascular, anti-cancers and anti-depressants
which are on the rise due to changes in life style pattern. The government has been focusing
on speedy introduction of generic drugs into the market to bring down healthcare expenses.
Moreover, the emphasis on rural health programs, LSDs and preventive vaccines will also
benefit Indian pharma companies.
References:
1. https://www.equitymaster.com/research-it/sector-info/pharma/Pharmaceuticals-SectorAnalysis-Report.asp
2. https://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India#Support_Indian_Gov
ernment
3. http://www.ibef.org/industry/indian-pharmaceuticals-industry-analysis-presentation

4. http://www.thehindu.com/news/cities/mumbai/pharma-sector-in-healthygrowth/article7019490.ece
5. http://www.pwc.in/press-releases/india-pharmaceutical-industry-is-on-a-good-growthpath.jhtml