Indian Pharmaceutical Industry

Indian Pharmaceutical Industry by Sam Ghosh 24th February 2020

Why talk about this?
Why talk about this? Basics of Pharma Demand Side Current TrendsPolicy StructureSupply Side

Global Perspective Indian Perspective
● India is the largest provider of generic medicines globally.
○ 20% share of the global volume of generic drugs..
○ 40% of generic demand in the USA.
● 50-60% of the global supply of vaccines
● 3rd in the world in production volume and 13th by value.
○ 10% of world’s production volume
○ 1.5% of the world production value
● India’s cost of production is approximately 33% lower than that of the US.
Source: Invest India and IBEF

Global Perspective Indian Perspective
● Directly and indirectly employs 2.7 million people in high-skill areas such as R&D and manufacturing.
● $11 billion USD trade surplus every year.
● Attracted USD $16.3 billion FDI from April 2000 - Sep 2019 as per DIPP.
● India is the second largest contributor of global biotech and pharmaceutical workforce.
● Indian healthcare sector, one of the fastest growing sectors, is expected to cross US$ 372 billion by
2022.
Source: Indian Pharmaceutical Alliance and IBEF

Basics of Pharma Industry

Value Chain Components Concepts
Manufacturing of Medicine
Distribution to the
dispensing point
Dispensing to the end-user
Costs
● R&D cost
● Manufacturing cost
● Import duties and taxes
● Promotion and education
Value-additions
● Innovation
● Regulatory
documentation
● Quality control
Costs
● Medicine acquisition
● Handling and delivery
● Obsolescence cost
● Capital costs
Value-additions
● Ensuring continuous
medicine supply
● Waste management
● Order processing
Costs
● Medicine acquisition
● Medicine wastage
● Capital costs
Value-additions
● Medicine availability
● Pharmacist advice
● Patient convenience
● Related services
Source: Understanding the pharmaceutical value chain

API
Active Pharmaceutical
Ingredient
Excipient
Formulation :
The procedure for optimizing and compositing the mixture of components used in a
drug.

API - Active Pharmaceutical Ingredient:
As per WHO - “Any substance or combination of substances used in a finished pharmaceutical product (FPP),
intended to furnish pharmacological activity or to otherwise have direct effect in the diagnosis, cure, mitigation,
treatment or prevention of disease, or to have direct effect in restoring, correcting or modifying physiological
functions in human beings.”
Pharmaceutical Excipient:
American Pharmaceutical Review - “an excipient has no medicinal properties. Its standard purpose is to
streamline the manufacture of the drug product and ultimately facilitate physiological absorption of the drug.
Excipients might aid in lubricity, flowability, disintegration, taste and may confer some form of antimicrobial
function.”
Brand-name Version of drug:
A medicine containing an active ingredient which is protected by a patent for exclusive production and marketing
rights. In the patent period, no other company can sell similar medicine containing the same API.
Generic Version of a drug:
Drug Price Control Order, 2013 - “a formulation sold in pharmacopeial name or the name of the active
pharmaceutical ingredient contained in the formulation, without any brand name.”

Specialty Medication:
Magellan RX Management: “..high-cost oral or injectable medications used to treat complex chronic conditions.
These are highly complex medications, typically biology-based, that structurally mimic compounds found within
the body. High-touch patient care management is usually required to control side effects and ensure compliance.
Specialized handling and distribution are also necessary to ensure appropriate medication administration.”
Ex. Cancer, rheumatoid arthritis, hemophilia, H.I.V. psoriasis, inflammatory bowel disease and hepatitis C etc.

Demand Side

Global Domestic Export
Global pharma sales in 2023 is expected to exceed $1.5 trillion USD growing 3-6% CAGR as per IQVIA Institute.

Specialty Products:
● Expected to reach $475–$505 billion by 2023 in developed markets.
● Will constitute 50% of total medicine spending in the developed markets as per IQVIA Institute.

Indian Domestic market:
● Expected to grow 8-11% as per as per IQVIA Institute.
● Expected to increase global spending share from 1.7% to 2%

Segments:
(Indian Brand Equity Foundation)
Active Pharmaceutical Ingredients (API):
● Domestic API consumption expected to
reach US $18.8 billion by FY 2022.
● Currently, India imports 60% APIs from
other countries.
Formulations:
● The largest exporter of formulations in
terms of volume with 14% market share
and 12th in terms of export value.
● US $14.39 billion during FY 2019.
Contract Research & Manufacturing
Services (CRAMS):
● Fragmented market with more than 1,000
players.
● 48% CAGR between FY 15-18.
● Expected to grow over 25% between
2018-21.
Biosimilar:
● Government plans to allocate the US
$70 million for local players.
● The US $40 billion domestic market by
2030.
● Moving Annual Turnover as on August
2019 - US $214.3 million.

Export market:
● $19.13 billion in FY 2018-19 as per Pharmaceuticals Export Promotion Council of India.

● Drug formulations & Biologicals are the largest and fastest-growing pharma export category.

Supply Side

PlayersOverview
$38
$80 -$90
$120 - $130
CAGR 7- 8%
CAGR 11- 12%
● Indian Pharma Industry annual revenue can grow to USD $130 billion by 2030 as per the Indian
Pharmaceutical Alliance.

PlayersOverview
$38
Major Players:
● Sun Pharma
○ Gross Sales of USD $4.1 billion, EBITDA of USD $0.847 billion (FY 2018-19)
○ The largest pharmaceutical company from India.
○ Ranked 8th in the US
○ 43 Manufacturing sites, 2000 products.
● Cipla
○ Income from operations - Rs. 16,362 crore (~USD $2.34 billion) in FY 2018-19.
○ EBITDA Rs. 3,171 Crores (~USD $0.453 billion)
○ 46 manufacturing facilities, 1500 products.
● Lupin
○ Net sales Rs. 163.694 billion (~USD $2.32 billion) in FY 2018-19
○ EBITDA Rs. 32.46 billion (~USD $0.46 billion)
○ Branded and Generic formulations, Biotechnology products, APIs, and Specialty.
○ Therapy areas - Gynecology, Cardiovascular etc.
○ Manufacturing across India, Japan, USA, Mexico and Brazil.

Policy Structure

$38
Health PolicyPrice Control IP FDI Trade
National Pharmaceutical Pricing Policy (NPPP - 2012) :
● A regulatory framework for pricing of drugs so as to ensure availability- “essential medicines” at reasonable prices
even while providing sufficient opportunity for innovation and competition to support the growth of the industry.
● Key Principles:
○ Essentiality of Drugs
○ Control of Formulation prices only.
○ Market-Based Pricing
The Drugs (Prices Control) Order, 2013 :
● Under the Essential Commodities Act, 1955.
● Gives the Government power to direct any manufacturer of any active pharmaceutical ingredient or bulk drugs or
formulation to increase the production and the sell such API or bulk drug to other manufacturers of formulations and
to sell formulations to institutions, hospitals or any agency.
● Mentions formulas for calculating the ceiling prices of scheduled formulations (mentioned in the 1st schedule of the
order)
● Non-Scheduled Formulation:
○ Mandatory to display in indelible print, the maximum retail price of that formulation.
● Control of the sale prices of formulations.
● Price of all drugs in the 1st schedule are mentioned and controlled by the National Pharmaceutical Pricing Authority
(NPPA).

$38
Indian Patents Act, 1970:
● Began to allow product patents in 2005, along with for pharmaceutical products.
● This was done to comply by the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPs).
● Section 3(d) has been added to prevent “evergreening” of patents by limiting the grant of “secondary”
pharmaceutical patents - to support the Generic drug industry.

$38
Foreign Direct Investment (FDI):
● Up to 100% FDI is allowed through automatic route for greenfield investments and up to 74% for brownfield projects.
● Beyond 74% - Government approval route.
● Up to 100% FDI is also allowed for medical devices manufacturing.
● Attracted USD $16.3 billion FDI from April 2000 - Sep 2019 as per DIPP.

$38
Trade Policy:
● 10% Import Duty - As per Chapter 30 of the Customs Tariff Act, 1975
● Pharmaceuticals Export Promotion Council of India:
○ Authorised agency for promotion of pharmaceutical exports from India.
○ Export promotion of APIs, Finished Dosage Forms, Herbal/ Ayurveda, Unani ,and Homeopathy etc.

$38
National Health Policy 2017:
● Aims at attaining the highest possible level of health and well-being for all at all ages, through a preventive and
promotive health care orientation in all developmental policies, and universal access to good quality health care
services, without causing financial hardship.
● Some Goals
○ Attaining life expectancy at birth of 70 by 2025.
○ Establishing regular tracking of Disability Adjusted Life Years (DALY) Index as a measure of the burden of
disease and its trends by major categories by 2022.
○ Reduction of TRF to 2.1
○ Under five mortality to 23 by 2025 and MMR to 100 by 2020.

Current Trends

● Ayushman Bharat (PM-JAY) :
○ Vision - Universal health coverage.
○ World’s largest health insurance/ assurance scheme fully financed by the government.
○ Cover of Rs. 5 lakhs (~USD 7000) per family per year, for secondary and tertiary care hospitalization across
public and private empanelled hospitals in India.
○ More than 100 million families are eligible.
○ Expected to increase health insurance coverage in India from 34% to 50% as per IBEF.
● e-Pharmacy:
○ Online platforms where consumers can purchase medicines without visiting a physical store - although hybrid
models are also there where ordering is done online but pick up from physical stores.
○ As per Frost & Sullivan, e-Pharmacy market is expected to be USD $3.66 billion by 2022 growing at 63%
CAGR.
● R&D Investments as a percentage of sales increased from 5.3% to 8.5% for Indian Pharma companies as per IBEF.

Thank You

Indian Pharmaceutical Industry

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Indian Pharmaceutical Industry

Similar to Indian Pharmaceutical Industry (20)

More from Sam Ghosh

More from Sam Ghosh (20)

Recently uploaded

Recently uploaded (20)

Indian Pharmaceutical Industry