Pharmaceuticals

IBEF

Sector structure/Market size

India's pharmaceutical industry is now the third largest in the world in terms of volume and 14th in terms ofvalue. According to data published by the Department of Pharmaceuticals, Ministry of Chemicals andFertilizers, total turnover of India's pharmaceuticals industry between September 2008 and September 2009was US$ 21.04 billion. Of this the domestic market was worth US$ 12.3 billion.

According to a detailed research by Angel Broking in October 2009, by 2015, India is expected to rankamong the top 10 global pharmaceutical markets. The industry is typically growing at around 1.5-1.6 timesthe country's gross domestic product (GDP) growth.

Moreover, according to an Ernst & Young and industry body study released in September 2009, theincreasing population of the higher-income group in the country will, by 2015, open a potential US$ 8 billionmarket for multinational companies selling costly drugs. Besides, the report said the domestic pharmamarket is likely to touch US$ 20 billion by 2015, making India a lucrative destination for clinical trials forglobal giants.

Exports

Export of pharmaceutical products from India increased from US$ 6.23 billion in 2006-07 to US$ 7.74 billionin 2007-08 and to US$ 7.81 billion in 2008-09—a combined annual growth rate (CAGR) of 21.25 per cent,according to Minister of State for Commerce, Jyotiraditya M Scindia. Pharmaceutical exports from thecountry have recorded growth rates of 21.61 per cent, 14.37 per cent and 28.54 cent, respectively, in thethree consecutive years of 2006-07, 2007-08 and 2008-09.

Pharmaceutical exports during April-December 2009 were worth US$ 6.3 billion, according to theDepartment of Pharmaceuticals, Ministry of Chemicals and Fertilizers.

Growth

The domestic pharma market will outshine the global market, growing at a compounded annual rate of12-15 per cent as against a global average of 4-7 per cent during 2008-2013, according to a study bymarket research firm IMS, released in October 2009.

According to detailed research by Angel Broking in October 2009, socio-economic factors such as risingincome levels, increasing affordability, gradual penetration of health insurance and the rise in chronicdiseases would see the Indian formulation market touch US$ 13.7 billion by 2013, at a CAGR of 12.2 percent over the period from fiscal year 2008 to 2013.

According to the research, the domestic formulation industry had registered a CAGR of 14 per cent duringFY2003-08 from around US$ 3.9 billion to US$ 7.7 billion, outpacing the global pharma industry growth rateof 7 per cent.

According to a report published by RNCOS in April 2010, called 'Booming Pharma Sector in India', theindustry is projected to continue growing at a CAGR of around 13 per cent during FY 2011-FY 2013. Theformulations industry is expected to prosper parallel to the pharmaceutical industry. It is expected that thedomestic formulations market in India will grow at an annual rate of around 17 per cent in FY 2010, owing toincreasing middle class population and rapid urbanisation.

Pharmaceutical Retail

According to a report titled 'India Retail Research 2009' released in August 2009, pharmacy retail is growingat the rate of 20-25 per cent annually and the organised pharma retail market size has the potential to growto US$ 9 billion by the year 2011.

The size of India's pharmacy retail market is estimated at US$ 4.5 billion, which is dominated by 12-15 big

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players.

Medicine retail chain Guardian Lifecare plans to double the number of its stores to 400 over the next twoyears with an investment of US$ 21.7 million.

Diagnostics Outsourcing/Clinical Trials

According to the latest research published by RNCOS, titled 'Indian Diagnostic Market Analysis' in January2010, the Indian diagnostic services are projected to grow at a CAGR of more than 20 per cent during2010-2012.

Furthermore, according to Hari Bhatia, Co-Chairman & Managing Director, Jubilant Organosys, the contractresearch and manufacturing (CRAM) sector is growing at 15 per cent to 20 per cent.

Generics

Indian generic drug makers received half a dozen more approvals from the US Food and DrugAdministration (FDA) in 2009, over the previous year. Dr Reddy's Laboratories received the highest numberof tentative and final approvals in 2009 at 32, followed by Aurobindo at 26 and Wockhardt at 23.

According to Union Minister of State for Chemicals and Fertilisers, Mr Srikant Kumar Jena, India tops theworld in exporting generic medicines worth of US$ 11 billion and currently, the Indian pharmaceuticalindustry is one of the world's largest and most developed.

Moreover, the Department of Pharmaceuticals is working with the vision to make India one of the top fiveglobal pharmaceutical innovation hubs by 2020.

Research & Development

The search for innovative drug molecules and better technologies by pharmaceutical MNCs is expected tooffer a windfall for the smaller research-oriented Indian firms.

With their drug pipelines drying up and more blockbuster drugs going off-patent, MNCs are looking atalliances for drug co-development, buying or licensing out innovative molecules which can further bedeveloped into finished drugs.

Government Initiative

100 per cent FDI is allowed under the automatic route in the drugs and pharmaceuticals sector includingthose involving use of recombinant technology.

According to Mr Ashok Kumar, Pharmaceuticals Secretary, the government is planning to set up a US$430.5 million corpus fund for the pharma industry soon. The fund would be set up with the help of thegovernment and the industry and will be used for helping the pharma industry in R&D.

According to the Union Minister of State for Chemicals and Fertilisers, Mr Srikant Kumar Jena, theDepartment of Pharmaceuticals has prepared a “Pharma Vision 2020” for making India one of the leadingdestinations for end-to-end drug discovery and innovation and for that purpose provides requisite supportby way of world class infrastructure, internationally competitive scientific manpower for pharma R&D,venture fund for research in the public and private domain and such other measures.

Investment

The drugs and pharmaceuticals sector has attracted foreign direct investment (FDI) worth US$ 1.67billion between April 2000 and February 2010.The total plan outlay for the Department of Pharmaceutials for 2009-10 is US$ 36.5 million.

Road Ahead

According to a new report published by PricewaterhouseCoopers (PwC) in April 2010, India will join theleague of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total value reachingUSD 50 billion by then.

Exchange rate used:1 USD = 46.17 INR (as on February 2010)1 USD = 45.45 INR (as on March 2010)

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