The presentation talks about how Macroeconomic factors can affect the pharma industry

1. EFFECT OF MACRO ECONOMIC FACTORS
ON PHARMACEUTICAL INDUSTRY
A PRESENTATION BY
MANIKANT JAISWAL

2. GROSS DOMESTIC PRODUCT (GDP)
 POSITIVE IMPACT: Increase in GDP leads to firms hiring
more and more workers and can afford increased
salaries . This leads to an increase in per capita income
which leads to increased spending by consumers. This
ensures that people can afford high quality healthcare
medicines/ services, giving a boost to pharma industry.
 NEGATIVE IMPACT: Decrease in GDP
 The additional funds would be required to strengthen
the primary healthcare infrastructure.
 Current expenditure 1.15 per cent of its GDP on
healthcare.
 Target to increase it to 2.5 per cent by 2025.

3. TRADE WAR
 US-China trade war , Indian exports grew by 11% to $19.2billion in
2018-2019 in North America and Europe.
 Increase in tariffs between US and China.
 China export increased by 2% in 2018-2019.
 China imports ingredients mostly from India.
 Earn foreign exchange.
 Boost economic activities.

4. GOVERNMENT INITIATIVES
 Government led initiatives such as JAN AUSHADI, Pharma Vision 2020
 Six pharmaceutical parks to be set up in Uttar Pradesh- investment commitments more than 5000-6000 cr.
 National Health Protection scheme-largest government funded health care program which will expect to
benefit 100million poor people
 Electronic platform to control the misuse due to availability of drugs and medicines
 Drug Controller General announced to start single window facility to provide consents, approvals & other
information. This move is aimed to give a push to MAKE IN INDIA initiative

5. GOVERNMENT REGULATIONS
 Pharmaceuticals manufacturers have to deal
with the issue of licensing which cause
substantial revenue loss.
 Licensing fees range from 5% to 25%
 Also recently government prices caps on 52
drugs. Post the price cap the revenue has
fallen by nearly 40%.

6. INVESTMENTS & RECENT DEVELOPMENTS
 Amendments in existing FDI policy in
the pharmaceutical sector – upto
100% allowed through automatic
route.
 Cumulative FDI inflows worth US
$15.98 billion attracted according to
data released by DIPP.
 These will impact the pharma industry
positively and will enhance the
efficiency of this sector.

7. INVESTMENTS & RECENT DEVELOPMENTS
 Between July- sept 2018, Indian
pharma sector saw 39 PE investment
deals worth US $217 million
 Investment( as % of sales) in research
and development by Indian pharma
companies increased from 5.3% in
FY12 to 8.5% FY18.
 46 M&A deals worth US$1.47 billion.

8. RATE OF UNEMPLOYMENT
 The rate of unemployment in
economy has a major impact
on any industry operating in
market.
 It directly impacts the GDP of
nation and per capita income
of individuals.
 This affects the pharma
industry majorly.

9. INFLATION
 Lack of funds and buying power resulting from soaring
inflation and high cost of borrowing are likely to cause
hurdle in the growth of the Indian pharmaceutical sector
Is it the medicines? Is it the insurance
scheme? Is it data error?

10. TAXES
Impact Of GST
There are two things that have changed which are the
manufacturing price of many raw materials for API and
product moved from 5% vat Bracket to 12% GST bracket
and a lot of medicines salts/compounds have moved
from 5% to 12% GST bracket.

11. MONETARY
POLICY
FISCAL
POLICY
• Monetary policy is the macroeconomic policy laid down by the
central bank to achieve macroeconomic objectives like inflation
consumption and growth.
• Key monetary policy instruments are open market operations, CRR,
SLR, Repo and reverse repo rate.
• Fiscal policy is the macroeconomic policy which deals with the
taxation and expenditure decisions of the government.
• Some of the major instruments of fiscal policy are as follows: Budget,
Taxation, Public Expenditure, public revenue, Public Debt, and Fiscal
Deficit in the economy.

13. • Intellectual property rights such as patents provide pharma companies exclusive rights to make drugs and prevent
others to manufacture, sell, and make these drugs for A period of 20 years.
• A progressive policies regarding the IPR have an positive impact on the pharmaceutical industry.

14. RESEARCH & DEVELOPMENT/ INNOVATION
 The R&D efficiencies of major research-based
pharmaceutical companies were in the range of USD
3.2–32.3 billion (2006–2014). [Journal of Translation
Medicine, 2016]
 The total worldwide R&D spend of pharmaceutical
and biotechnology companies increased from USD
108 billion (2006) to USD 141 billion (2015) whereas
Top five Indian pharma companies together spent
over Rs. 8000 crore on R&D spend in FY17.
[Bloomberg]
 Medicine spending in India is projected to grow 9-12
per cent over the next five years, leading India to
become one of the top 10 countries in terms of
medicine spending.

15. EXCHANGE RATE
 Rupee depreciation against the Dollar will result in
cash inflows for pharmaceutical companies that
derive a significant part of their revenues from the
US.
 Firms, which undertook forward contracts of
hedging their sales revenues so as to insulate
themselves from currency fluctuations, will not
benefit much from Rupee depreciation.
 Profitability of companies is also affected by loans
they owe in foreign currency. Higher Dollar
conversion rate invariably results in higher interest
and loan repayments.

16. Thank You!