FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
Introduction
The Indian pharmaceuticals market has characteristics that make it unique. First, branded generics dominate, making up for 70 to 80 per cent of the retail market. Second, local players have enjoyed a dominant position driven by formulation development capabilities and early investments. Third, price levels are low, driven by intense competition. While India ranks tenth globally in terms of value, it is ranked third in volumes. These characteristics present their own opportunities and challenges.
While the market has gained in confidence, it is also facing a period of flux. First, the broader healthcare sector is experiencing discontinuous development. Manifold rise in public healthcare spending, rising patient awareness, expanding insurance coverage across the income pyramid and the emergence of new hospital formats illustrates this flux. Second, in the past 3 to 4 years, industry structure in pharmaceuticals has changed with remarkable shifts in the leader board. Four of the top ten players, including the market leader, are new entrants. Finally, traditional sources of growth are making room for newer ones. For example, while new products will cease to drive growth, existing large brands would need to make up the gap. Rising income levels and enhanced medical infrastructure have underpinned the step-up in growth trajectories. This growth has been broad-based across therapy and geography segments. Several leading players are beginning to focus on new and emerging opportunities. The pace of innovation in business models has been unprecedented. The launch of branded generics businesses and significant expansion of market coverage by multinationals illustrates this point. As a result, the expectations from the India businesses have risen and aspirations have become bolder.
India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK.
India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers who have the potential to steer the industry ahead to an even higher level. Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.
Market Size
The pharmaceutical sector was valued at US$ 33 billion in 2017. The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach US$ 55 billion. India’s pharmaceutical exports stood at US$ 17.27 billion in FY18 and have reached US$ 19.14 billion in FY19. Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgicals.
Indian companies received 304 Abbreviated New Drug Application (ANDA) approvals from the US Food and Drug Administration (USFDA) in 2017. The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics market.
India's biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per cent a year and reach US$ 100 billion by 2025.
Investments and Recent Developments
The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for manufacturing of medical devices subject to certain conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 15.98 billion between April 2000 and March 2019, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Some of the recent developments/investments in the Indian pharmaceutical sector are as follows:
Government Initiatives
Some of the initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
Road Ahead
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.
Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.
The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programs, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.
* Low cost of production coupled with increasing expenditure on R&D has led to competitive pharma exports from India reaching US$17.15 billion in FY19
* High economic growth along with increasing penetration of health insurance to drive expenditure on healthcare and medicine in India
*Government Of India's "Pharma Vision 2020" aims to make India a global leader in end to end drug manufacturing
*Increasing private sector investments in R&D and acquisitions are driving the sector's growth. In FY18, Indian pharma companies invested 8.8% of the total sales in R&D.
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