India is forecast to be among the top three pharmaceutical markets – growing to US$85 billion – by 2020. The Indian pharmaceutical industry already accounts for about 2.4% of the global pharma industry by value and 10% by volume – as India is the world’s largest manufacturer of medical imitation products – and the industry has grown 15% a year each year for the last five years. This growth is expected to continue with the branded generics segment (70-80 % of the market) predicted to more than double in the next 5 years (USD 26.1 Billion by 2016 from USD 11.3 Billion in 2011). While Price Waterhouse Coopers predicts that India pharma exports will also more than double (reaching $26.3 billion by 2018 from $13 billion in 2013). Over USD 200 Billion is expected to be spent on medical infrastructure in the next decade.
Growth in domestic markets is due largely to demographic changes: the rapidly increasing population will expand India’s patient pool by over 20% in the next 10 years, while a growing middle class forecasts a rise of lifestyle diseases. While demand for pharmaceuticals grows, the country’s relatively low production costs and less restrictive patent regulations have developed strong local supply – but plenty of potential for investment. The industry is currently very fragmented with more than 330 companies in the organized sector – Five of them state-owned – and the top ten companies generate about 30% of industry sales. In addition, there are around 10,000 more small and medium licensed enterprises. The industry is concentrated in four states: Maharashtra, New Delhi, Andhra Pradesh and Tamil Nadu.
Government Policy for the sector is very encouraging for foreign investment. The sector attracted foreign direct investment (FDI) worth US$ 12,813 million 2000-2014, according to the Department of Industrial Policy and Promotion (DIPP), and 100% foreign direct investment (FDI) is allowed under the automatic route in this sector – including recombinant technology. The 2015 Addendum to the Indian Pharmacopoeia (IP) 2014 (published by the Indian Pharmacopoeia Commission (IPC)) will play a significant role in improving the quality of medicines which will in turn accelerate the growth of the sector, and the Government has unveiled ‘Pharma Vision 2020’ which aims to make India a global leader in end-to-end drug manufacture. To achieve this vision the plan provides support for world class infrastructure, internationally competitive scientific manpower for research and development (R&D) in pharma, venture funding for research in public and private sectors among other incentives. The government has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines.
The rapidly expanding demand and conducive policy environment are good reasons to start thinking about an investment in the Indian pharma sector.
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