COUNTRY FOCUS: INDIA
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Pharma: India’s treasure trove

Charles Horth

2007, 60th Anniversary of India’s independence from British rule, which took place amid mass migration and civil war. In post-war years, the GB pound was worth 13-14 rupees vs. 80 rupees currently. 2007 is also the centenary of the founding of one of India’s most prized businesses, Alembic, which now generates $131.7 million annually (2006).

With GDP growth increasing 9% annually, India could become one of the world’s top 5 economies by 2025. Pharmaceuticals stands alongside textiles as India’s leading industries. 250 of 20,000 pharma laboratories account for 84% of the market with the leader taking a 19% slice. India has awarded its pharmaceutical industry intellectual status to enhance investment in R&D. India’s pharma sales account for 8% of global sales with India the fifth largest producer of bulk medicines. It ranks high among the developing economies, in terms of quality and range of medicines produced. Almost every type of medicine is now made indigenously. On a global pharma map, India is positioned as the fourth largest in volume terms, valued at over $6 billion, growing annually by 9% and predicted to reach $25 billion in 2010. Given this revival, it’s astonishing that India’s wealth remained in obscurity for so long.

Until India abolished product patent protection in pharmaceuticals in 1970, boosting this industry’s remarkable growth, the market was dominated by foreign multinationals. In 1995, the World Trade Organization (WTO) introduced significant changes for international economic relations between countries, which India signed up from 2001 with transitional arrangements until January 2005. India introduced product patent protection in pharmaceuticals in order to comply with the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the WTO. India also plays an important role as a source of low-cost, quality drugs. In 2005, 9 of the top 10 pharma players were Indian owned (Table 1). The global industry is dominated by a small number of multinationals, which have been able to exercise patent rights, effectively blocking India and other developing countries, from achieving their potential of industrial growth. The jury is still out as to whether the benefits claimed for developing countries under TRIPS have materialised.

TABLE 1

In the meantime, India’s strength in developing processes to produce high quality active ingredients (APIs) in bulk, combined with its growing market for machinery and equipment, gives it a competitive edge in the production of affordable medicines, particularly generics, as pharmaceutical patents gradually lose their protection around the world. Combined annual sales of medicines worth $80 billion will lose patent protection before 2012. This sector offers the most exciting growth opportunity in a world market worth over $55 billion in 2005 and growing 10% annually. The biggest opportunity today is Japan, a generics market worth at least $6 billion. There are further opportunities in France and Spain as, like Japan, the market share taken by generic medicines is quite low.

Competition from generics could cause a collapse in prices, but even a 90% drop, would still leave them worth at least $8 billion. India is well equipped to rise to the challenge of a competitive business climate. India’s pharma makers are noted for high quality products – not just cheap products. If costs are brought down, it is because of process improvements without sacrificing quality. Indeed, India has 75 FDA approved manufacturing sites compared with Italy’s 55 and China’s 27.

India’s biopharmaceutical market has also shown a consistent growth trend since 2004, with marketing licences being granted for over 25 recombinant therapeutic proteins and vaccine sales worth $386.3 million. The diagnostics market currently stands at $138.2 million. India’s lifescience industry is poised for dramatic growth. Important trends include:

  • 28 products under price control, compared with 74 previously;
  • 95% of medicines available in India and on WHO List of Essential Drugs are available at current prices, as foreign patents expire;
  • Over 250 manufacturing units are recognised and certified by international agencies;
  • Indian Big Pharma has moved into M&A activities overseas.

India’s flourishing lifescience industry could face a bumpy ride in the next few years with patents litigation initiated by overseas companies, and a depreciating dollar on foreign exchanges eating into the profits of exporting companies while the smaller pharma companies could find it difficult to compete against overseas companies entering India’s market.

However, if the history of India’s pharmaceutical industry is a guide to the future investment in technology to take advantage of India’s skills in innovative research and development will secure the nation’s future health and wealth creation moving forward.

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