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Indian pharmaceutical industry, which has grown at 1.5 to 1.6 times the growth
of the economy over the past couple of years, is well positioned for sustainable
growth and expansion. The industry has grown at a CAGR of 13 per cent from
200-2007 and is expected to grow at a CAGR of 16 per cent over 2007-2011,
according to a Pharma Inc- a Continuing Success Story".
The rise in disposable income has a positive impact on healthcare spend. In
2005, 6.2 per cent of disposable income was spent on healthcare as compared to
2.8 per cent in 1995. This augurs well for the pharma industry, as the strong
economic momentum is likely to continue with the Indian economy expected to grow
by 8-9 per cent in the next few years.
On the international front, Indian generic drug makers are playing an important
role in the global consolidation process and are augmenting their market
presence across regulated as well as semi regulated markets through their
organic as well as inorganic initiatives. In spite of increasing competitive
intensity on account of continued pricing pressure, several significant
opportunities are being leveraged by Indian generic players.
Contract Research and Manufacturing Services (CRAMS), is becoming one of the
most promising opportunities for the Indian pharma industry. India with its
intrinsic competitive advantages, remains as one of the most preferred
outsourcing destinations and is now playing a vital role in manufacturing as
well as drug development value chain of various innovator pharma companies.
According to John Morris, Head, Global Pharmaceutical Practice, KPMG, "The
Indian pharmaceutical industry is at a critical juncture given its inherent
strengths and its ability to be dominant player in the global pharmaceutical
industry. It has become a strategic imperative for global pharma companies to
make India an integral part of their manufacturing value chain to maintain lean
cost structures and combat intense competition in the global generics industry".
MNC pharma companies are increasingly focusing on realigning their manufacturing
activities in order to concentrate on core activities such as R&D and brand
building - thereby reinforcing the potential for cost savings through contract
manufacturing. At the same time, existing global CRAMS players are facing
adverse business conditions, on account of increasing regulatory compliances on
environmental issue and competition from low cost countries.
According to the report, Pharma Multinationals are also increasingly using India
as a base for export not only to the immediate neighbouring markets, but also to
other markets around the world such as Japan, South Africa, Latin America and
Europe. Pharma multinationals are also expliting India's competencies in the
field of Information Technology and its strong and low cost IT skill sets; by
setting up centres for their global clinical data management functions in India.
On Contract Manufacturing, the report says that at present, the global
manufacturing outsourcing opportunity is estimated at US$ 20 billion and is
expected to reach US$31 billion by 2010. The global contract research
opportunity was pegged at US$14 billion in 2006 and is expected to reach US$24
billion by 2010. The contract research also offers significant opportunity to
the Indian pharma industry which is becoming a global R&D hot-spot for innovator
pharma companies. The global contract research opportunity was pegged at US$ 14
billion in 2006 and is expected to reach US$ 24 billion by 2010. Declining R&D
productivity, coupled with an increasing number of products going off patent is
expected to drive the growth of the contract research segment.
Regarding clinical research, the report says that at present, a majority of
clinical trials conducted in India are for phase II and phase III.
The government is in the process of considering the recommendation of the Drug
Technical Advisory Board (DTAB) to allow phase I clinical trials for the drugs
discovered abroad. If this happens, then it will enable the Indian CRAMS
industry to provide a wide range of drugs discovery services.
On the regulatory front, the government is also trying to promote the growth of
this industry by providing a tax exemption on all services carried out by the
contract research and clinical trials industry. This step is likely to
further boost clinical trial outsourcing to India.
Following the patent product regime, many Indian pharma companies have embarked
on Research and Development (R&D) to achieve sustainable long term advantage.
These companies are now adopting innovative funding models to advance their R&D
activities. Currently, as many as 10-12 companies have molecules under various
stages of development. R&D investments by Indian companies have also increased
significantly and now account for as much as 7-9 per cent of sales for leading
pharma companies.
New drug discovery is a costly and lengthy process. It takes any where between
(approximately) 10-12 years, for a new drug to reach the market from the
laboratory and costs approximately USD 800 million to 1.2 billion. The
government and other regulatory bodies can play a significant role in
determining the success of drug discovery research in India. One form of
government support would be the PPP models that can give the much needed impetus
to this segment.
(Ref: The Chronicle Pharmabiz dated November 8, 2007)
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