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An Overview of the Pharma Industry in India

23 November 2021

India is a significant player in the global medicines industry. In addition, the country holds a large number of scientists and engineers that can propel the sector forward to even greater heights.

In the manufacturing of generic medicines around the world, India takes the first place. The Indian pharmaceutical business supplies 50% of global demand for a variety of vaccines, 40% of generic demand in the United States, and 25% of all medication in the United Kingdom. As of April this year, the moving annual turnover was Rs.1.52 trillion, up from Rs.1.43 trillion in April 2020. The domestic pharmaceutical industry’s yearly revenue was Rs.1.3 trillion in April 2019.

The Pharmaceutical Industry’s Evolution

Over the last few decades, the Indian pharmaceutical industry has experienced rapid expansion, which may be divided into four stages. We can consider the time before 1970 as the first stage of the pharma industry. At that time, the Indian market was dominated by foreign companies. The second stage covers 1970 to 1990 when several domestic companies began operations. 1990 to 2010 is the third stage, where liberalization led Indian components to launch operations in foreign countries.

The introduction of the patent bill was one of the first advancements in the pharma industry. The patent bill was proposed for the first time in 1970. The bill allowed the Indian pharmaceutical sector to become less reliant on intellectual property laws in the United States.

SWOT Analysis for Indian Pharma Industry

Every sector has its own set of strengths and weaknesses. Using SWOT analysis, we can identify certain factors of strength and weakness of any subject. SWOT analysis is simple but useful to analyze any sector. Let’s analyze the pharma industry in India based on the four classifications of SWOT analysis:

  • Strength
  • Weakness
  • Opportunities
  • Threats

Strength

Compared to other nations, the cost of manufacturing pharmaceutical goods in India is much lower and more effective. India’s industrial sector is robust. India now has a highly-skilled workforce as a result of technological advancements. By communication development, India’s marketing and distribution system are likewise on the higher side. The sector is additionally strengthened by its diversified ecosystem.

Weakness

Despite the liberalization of the FDI restrictions, there is still a lack of investment in research and development, which must be addressed by industry and government. The absence of collaboration between industry and academicians is a major flaw. When compared to other household expenses, health-care costs are insignificant. The manufacturing of low-cost, low-quality medications poses a challenge to the pharmaceutical business.

Opportunities

Despite the industry’s flaws, it is anticipated to develop rapidly because of greater export possibilities. It is also anticipated that the export of generic medicines to developed markets would also rise. There is a lot of potential for India to become a hub for international clinical trials. India is also anticipated to play a major role in global pharmaceutical research & development (R&D).

Threats

One of the greatest challenges to the domestic industry is the product patent policy. To combat this danger, the sector must step up its R&D efforts. The Government of India’s Drug Price Control Order put excessive pressure on product pricing, affecting pharmaceutical companies’ profitability. Small businesses face a danger from the new MRP-based excise duty structure.

The Role of U.S. FDA

The United States accounts for more than a quarter of Indian pharmaceutical exports. The Food and Drug Administration in the United States is in charge of maintaining public health in the country. Around 30% of the generic medication supplied to the United States comes from India. As a result, every medicine sold in the United States is subject to FDA monitoring and site visits by Indian businesses.

Pharmaceutical Industry Performance Over the Years

The BSE Healthcare Index has risen at a CAGR of 12% per year over the previous ten years, while Nifty Pharma has returned approximately 10.94% per year. During the same period, Nifty has returned 12.28% per year, while Sensex has returned 12.72 % per year. With the spread of the coronavirus, the pharmaceutical industry and mutual funds that invest in it have done better than their counterparts recently.

Research & Development

Companies in India have begun to adjust their product development methods to the modern environment. The companies broke into the worldwide market by exploring generic alternatives to proprietary medications and then filing lawsuits to challenge the patent. The new patent policy hasn’t changed this strategy, and it appears to be growing in the future. Those who can afford it, on the other hand, have set their eyes on an even loftier goal: the discovery of new molecules. Despite the large initial investment, companies are attracted by the promise of high-profit margins and, therefore, a credible competitor in the worldwide market. Local businesses have gradually increased their R&D spending or established collaborations to take advantage of these prospects.

Key Takeaways

  1.   According to government sources, India’s medical expenditures would increase by at least 9% to 12% in the next five years, making it one of the 10 largest nations in terms of medical spending.
  2.   Compared to other nations, the cost of manufacturing pharmaceutical goods in India is lower and more effective.
  3. 3. The BSE Healthcare Index has risen at a CAGR of 12% per year over the previous ten years, while the Nifty Pharma has returned approximately 10.94% per year.

FAQs on Indian Pharma Industry

What are the challenges faced by the pharma industry?
New diseases, curbing costs, medical infrastructure, and foreign regulations are some of the challenges being faced by the pharma industry.

What are the growth drivers for this industry?
The R&D industry, US FDA compliance, low-cost production, and a huge workforce are some of the growth drivers for the pharma industry.

What are the Nifty Pharma returns in the past 9 years?
The Nifty Pharma returns are at 10.94% CAGR.

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