1. Narsee monjee institute of management studies (SPTM)
"The Indian Pharmaceutical
Industry: Crystal ball gazing
into the year 2020 AD".
By Vipul patil
Pharm.analysis(MBA)ROLL NO.20
2012
Minor assignment (pharmaceutical marketing)

2. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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India is one of the fastest growing pharma markets in the world and has
grown at a CAGR of 20 % over the last five years. The introduction of the product patents
regime in India has put the industry on a new growth trajectory. Indian pharma is making
big strides in the global industry. No global economy can either either as a competitive
sourcing base for its global supply chain requirements or as a destination to capitalise on
the rapidly growing domestic demand for drugs. Whether it is the potential in terms of
capturing increasing generic market opportunity in the international markets, seizing a
substantial share of the global outsourcing pie or building strong R&D pipelines, Indian
pharma has already made its presence felt all the way and is increasingly spanning across
the entire pharma value chain. Strengthening intellectual property laws and regulatory
reforms are encouraging multi-nationals to take increased interest in this market and
significantly increase scale of investments
.
Sector Structure/ Market Size
The US$ 12 billion valued pharmaceutical industry in India is expected to grow at an annual
compound annual growth rate (CAGR) of 10-11 per cent. The industry spends around 18
per cent of its revenue on research and development (R&D).
India is one of the most significant emerging markets for the global pharmaceutical
industry. Moreover, India is expected to join the league of top 10 global pharmaceuticals
markets in terms of sales by 2020 with the total value reaching US$ 50 billion, according to
a report by PricewaterhouseCoopers (PwC).
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3. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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The domestic pharma market is expected to grow at a CAGR of 15 to 20 percent to reach a
value anywhere between USD 50 and 74 billion by 2020, says a PwC report titled ‘India
PharmaInc: Enhancing Value through Alliances & Partnerships’.
Exports
India’s exports of drugs, pharmaceutical & fine chemicals stood at US$ 9.26 billion during
April 2010–Feb 2011, up 16.15 per cent as compared to US$ 7.97 billion in the same period
during the previous year. India’s exports has recorded a growth rate of over 20.07 per cent,
during the period of the two financial years in the study, the exports to rest of the world has
grown by 9 per cent, according to DGCIS data from Pharmexcil Research.
India and Russia signed a memorandum of understanding (MoU) last year. Another will be
signed in December 2011, as per MrDevendraChaudhry, Joint Secretary, Department of
Pharmaceuticals. Indian pharma companies export drugs worth US$ 600 million to Russia
every year. Pharma sector accounts for the largest Indian export to Russia.
Growth
The drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth US$
4.89 billion between April 2000 and August 2011, according to the latest data published by
Department of Industrial Policy and Promotion (DIPP).
Indian pharmaceutical market is predicted to grow to US$ 55 billion by 2020 from US$ 12.6
billion in 2009, according to a report by McKinsey.
On back of a high middle-class population base, improvements in medical infrastructure and
the establishment of intellectual property rights, the Indian pharma industry is estimated to
grow manifold.
Generics
Generics will continue to dominate the market while patent-protected products are likely to
constitute 10 per cent of the pie till 2015, according to McKinsey report ‘India Pharma 2015
- Unlocking the potential of Indian Pharmaceuticals market’. Moreover, as per a press
release by research firm RNCOS, the report titled ‘Booming Generics Drug Market in India'.
The report further projects the Indian generic drug market to grow at a CAGR of around 17
per cent between 2010-11 and 2012-13.
First, population growth at around 1.3 per cent every year and a steady rise in disease
prevalence will increase the patient pool by nearly 20 per cent by 2020.
Second, the affordability of drugs will rise due to sustained growth in incomes and increases
in insurance coverage. Moreover, rising incomes will drive 73 million households into the
middle and upper income segments by 2020.
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4. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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Third, the largest impact will be seen through government sponsored programmers that are
largely focused on the ‘below poverty line’ (BPL) segment5, and are expected to provide
coverage to nearly 380 million people by 2020.
Fourth,accessibility to drugs will expand due to growth in medical infrastructure, new
business models for Tier-II towns and rural areas, launches of patented products, and
greater government spending on healthcare.
Why India???
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is
commonly used. Professional services are easily available.
Cost-effective chemical synthesis: Its track record of development, particularly in the area
of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It
provides a wide variety of bulk drugs and exports sophisticated bulk drugs
Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal
Framework and Strong Financial Markets: There is already an established international
industry and business community.
Information & Technology: It has a good network of world-class educational institutions and
established strengths in Information Technology.
Globalization: The country is committed to a free market economy and globalization. Above
all, it has a 70 million middle class market, which is continuously growing.
Consolidation: For the first time in many years, the international pharmaceutical industry is
finding great opportunities in India. The process of consolidation, which has become a
generalized phenomenon in the world pharmaceutical industry, has started taking place in
India.
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5. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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India in 2020—envisioned state
The envisioned future state will have the following benchmarks:
Ensuring access to affordable medicines by anyone and everyone in need
Achieve the laudable objective of medicines for All through the three levers of
accessibility, affordability and awareness
Bridging of urban rural health divide with increase in number of beds, primary health
care facilities and number of doctors
Contribution to nation building through improved health for all
Increased emphasis on 'wellness' as a proactive system to reduce dependence on
medicines.
The shift in income demographics: How per capita pharmaceuticals spend
will increase:
1. The INDIAN population is currently in a period of intense change, radically affecting
the healthcare industry.
2. This shift can be broken down into three overarching trends—an ageing population,
changing lifestyles and the emergence of several countries in the global market.
3. People are living longer. Age drastically increases the number of patients with
multiple diseases, which in turn changes the need for medicines.
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6. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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The expansion of medical infrastructure: the approach to translating
growth in medical infrastructure into demand for drugs.
1. Medical infrastructure will experience dramatic growth over the next decade, with
over USD 200 billion being invested in creating and upgrading medical infrastructure.
As a result, over 160,000 beds will be added every year across different segments of
hospitals. This infrastructure creation will need to be supported by the creation of
‘soft’ capacity in terms of doctors and other healthcare professionals.
State health expenditures be raised to 7% by 2015 and to 8% of State budgets
thereafter. Indeed the target could be stepped up progressively to 10% by 2020. it also
suggests that Central funding should constitute 25% of total public expenditure in health
against the present 15%.
Determinants of accessibility
Availability, i.e, whether a satisfactory product has been developedBasic research
Discovery
Development
Distribution system effectiveness and efficiency
Knowledge and 'health-seeking' behaviour of 'consumers'
Ensuring quality, rational selection, appropriate prescription and use
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7. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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Affordability, including economic factors, including cost, pricing, procurement and
financing
Accessibility of medicines
Millions of poor people in India struggle to get the medicines they need, which can have
devastating consequences for the individual and their family, as well as hinder economic
and social development.
The human and economic costs of illness to patients, their families, and the nation can be
tremendous. Helping get the right medicine for the right patient at the right time increases
the chance that a patient will live a longer, healthier, and a more productive life. It can
further help reduce or slow the escalation of healthcare costs. Making sure that patients and
healthcare professionals understand how and when to use medicines is a critical part of
improving the quality of healthcare and keeping costs in check.
Pharma companies, by definition, have their core values centred on providing medicines to
cure unmet needs and ensuring access to them. This is a basic tenet of the industry. Novel
cures for unmet diseases are a natural consequence of this value, wherein the mass
availability of these drugs against the entire gamut of drug innovation represents an
industry-wide dilemma.
The WHO recommendation for spending in health is five percent of the national Gross
Domestic Product (GDP). This aspect gains cognizance in the wake of the widening gap
between the privileged, and the not so privileged, and underprivileged class in India, in
terms of access to quality healthcare, both in terms of medical and human resources. The
problem that we face is not so much related to the unavailability of medicine and human
resources, however their proper accessibility and distribution. Notably, the health sector in
India is plagued more by the distribution lacunae than the production bottlenecks.
Affordability
The main argument against drug price controls is the negative impact that they would have
on innovation. Biotech and pharma firms are competing to be pioneers in launching new and
valuable drugs to the market and thus receive the potential prize of sizable economic
profits. The company expects to use cash flows from current and future profits to support
future rounds of research and development (R&D), with the intention of discovering,
developing, and marketing newer and therapeutically more important drugs in future.
Price controls are likely to have a negative impact on development of new drugs for two
reasons. First, regulations on drug prices reduce expected revenues and thereby make R&D
investment less attractive from the firm's (and investor's) perspective. Second, suppression
of drug prices will also reduce the firm's cash flows, which are an important source of
funding pharmaceutical R&D. Moreover, capital markets will not provide funds necessary to
support future R&D if government forces rates of return below opportunity cost of capital.
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8. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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Increase in burden of disease: the increasing cases of lifestyle
diseases and how this will impact pharmaceuticals demand.
1. According to the study, in the current decade, the spread of diabetes will drive the
growth of new therapies in India's pharmaceutical market and by 2020, the disease
will assume greater proportions by rising six times.
2. Diabetes presently affects around 50 million Indians, killing about 4 million annually
and as per official statistics.
3. Treatment for chronic diseases like asthma, cancer, diabetes, heart ailments, and
osteoporosis and kidney ailments will likely to constitute more than half of India's
pharma market by the end of the decade.
4. The expert team has identified three major disease viz. tuberculosis, HIV and water-
borne diseases and methods to combat these diseases
CASE 1: a patient with arthritis treats pain without harming a delicate digestive system, for
example? More individualized and combination treatment options are particularly critical for
this population, and pharm companies must increase the speed of innovation to match
these changing needs.
CASE 2: As obesity rises across the globe, so does the prevalence of diabetes and other
health complications.
Increase in penetration of health Insurance:
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9. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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1. By 2020, nearly 650 million people will have health insurance cover, while private
insurance coverage will grow by nearly 15 percent annually till 2020. The Indian
healthcare industry is estimated to be worth $275.6 billion.
2. India’s healthcare insurance industry is currently very small and limited, but is
expected to grow at a CAGR of 15% till 2015.
3. Around 80% of India’s healthcare expenditure is the propensity of Indians to spend
on healthcare, particularly in lower and middle income groups which comprise
around 95% of population.
4. By 2020, nearly 650 million people will have health insurance cover, while private
insurance coverage will grow by nearly 15 percent annually till 2020. The Indian
healthcare industry is estimated to be worth $275.6 billion.
5. India’s healthcare insurance industry is currently very small and limited, but is
expected to grow at a CAGR of 15% till 2015.
6. Around 80% of India’s healthcare expenditure is the propensity of Indians to spend
on healthcare, particularly in lower and middle income groups which comprise
around 95% of population
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10. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD:
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INDIAN PHARMA IN 2020
‘Pharma returning to prominence on back of competitive strength’
The Indian pharmaceutical industry has weathered many a cross current on the basis of
strong fundamentals. Today, investors once lured to other sectors, are returning to the
pharma industry on the basis of its competitive strengths.
Changing Indian pharma's contribution to global health
Get a clear vision of the Indian pharma industry in 2020 depends on the industry's
20/20 eyesight in thepresent.
God is in the details: Stitching loose ends for realizing the vision
India and China continue to fascinate the world—the two ancient civilisations are today
the world's fastest growing economies and predicted to dominate global economy over
the next few decades.
Imperatives for the Indian pharmaceutical industry in a changing world
The Indian pharmaceutical industry can look forward to the New Year, as well as to the
years to come, with great expectations.
'It is important to create the right environment for building entrepreneurship'
India, today is emerging as a market of great opportunity for the global pharmaceutical
industry. The pharma industry has evolved dynamically with India joining the WTO and
the implementation of product patents.
'Indian pharma is undergoing a radical makeover'
The roots of the pharmaceutical industry were laid centuries back. It had basic
applications of curing diseases and treating wounds.
'Innovation-driven semi-blockbusters will emerge'
The pharmaceutical industry is a prisoner of past success. While the business
environment has changed dramatically in the past five years, the business model that
served the industry well in the past has not kept pace.
‘India to be amongst top three generic makers in the world’
By 2020, global integration of most sectors in the world economy would be much more
pronounced, and the pharma industry will not be an exception.
‘India will emerge as a dominant force on the global arena’
REFERENCES:
1. Indian pharma 2020 Mckinseyreport,propelling access and acceptance,realising true
potential.
2. PricewaterhouseCoopers (PwC). REPORT.
3. Pharmexcil Research.
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