Global pharmaceutical companies need to take an even closer look at India
12 Apr 2010 09:14
The huge potential of the Indian pharmaceuticals market is impossible for foreign companies to ignore, given that it will be one of the top 10 sales markets by 2020, according to a report by PricewaterhouseCoopers (PwC), Global pharma looks to India: Prospects for growth.
India's population is growing rapidly, as is its economy - creating a large middle-class able to afford western medicines, PwC finds. India's epidemiological profile is also changing and the population is ageing, so demand is likely to increase for drugs for cardio-vascular problems, disorders of the central nervous system and other chronic diseases such as diabetes which are increasing at an alarming rate.
The total market is expected to rise to a value of approximately US$50 billion by 2020 according to PricewaterhouseCoopers.
Simon Friend, global pharmaceutical and life sciences leader at PricewaterhouseCoopers, commented:
"Global players in the pharmaceutical industry cannot afford to ignore India. The pharmaceutical industry's main markets are under serious pressure. India could be the most populous country in the world by 2050 and is now making its mark as a growing market, potential competitor or partner in manufacturing and R&D, and as a location for clinical trials."
The report highlights that India now has a growing and increasingly sophisticated pharmaceutical industry of its own. Indeed it is likely to become a competitor of global pharma in some key areas, and a potential partner in others. It has considerable contract manufacturing expertise; Indian companies are among the world leaders in the production of generics and vaccines. India now produces more than 20% of the world's generics. Around $70 billion worth of drugs are expected to go off patent in the US over the next three years, and PwC thinks that India is capable of manufacturing a substantial share of the product to support the resulting generics opportunities. In manufacturing big pharmacompanies are striking closer relationships with Indian generics to service global markets under marketing alliances such as GSK-DRL and Pfizer - Aurobindo.
PwC estimates that India's 10 largest drug firms spent $480 million on R&D in 2008. Some of the leading local producers have now started conducting original research, but despite Indian pharma companies' growing expertise in later stages of the R&D process, many of the drug candidates initially formulated in India are likely to be further developed by Western drug makers, because few Indian companies can currently afford the high costs and failure rates associated with pushing a drug right through the pipeline. Several Indian firms have already entered into research partnerships with multinationals; DRL and Torrent have joined forces with Novartis, for example, while Ranbaxy has formed alliances with GSK and Schwarz Pharmaceuticals.
India has the world's second biggest pool of English speakers and a strong higher education system, so it should be well-positioned to serve as a source for research talent, turning out roughly 115,000 scientists with Masters degrees and 12,000 with PhDs every year. India's developing biotech industry and cost advantages should drive significant growth in local development of biosimilars for the global market. India also now ranks third in the world in terms of stem cell research.
The Indian Government has made the provision of healthcare one of its key priorities. It has launched a new policy to build more hospitals, boost local access to healthcare and improve the quality of medical training, and promised to increase public expenditure on healthcare to 2-3% of GDP by 2010, up from a current low of 1%.
PwC notes a number of methods for foreign companies to explore opportunities in India.
- Outsourcing. Recently there has been a move from outsourcing lower value and manufacturing activities to more research-based capabilities.
- Licensing is being used to establish a common platform in order to gain rapid in-market acceptance and create a complete therapy range.
- Franchising. US-based Medicine Shoppe International. For instance, has entered the market as Medicine Shoppe India and plans to expand to 1,000 stores by the end of 2010.
- Joint ventures with domestic partners bring local expertise and a local network and require government approval. Pharmaceuticals are deemed a high priority area so approvals can be quick.
- Some multinational companies such as Pfizer and Novartis are taking advantage of the potential in India through partially or wholly owned subsidiaries.
PwC also notes that as with any kind of new market opportunity there are additional factors to consider:
Inadequate energy and transport infrastructure has historically posed challenging for companies operating in India but the situation is definitely improving as the government deems it an investment need.
India offers some attractive tax benefits for pharma companies such as R&D credits and income tax exemptions in special economic zones (SEZs). Reductions in customs duties should also help global manufacturers compete in the price sensitive Indian market. India will introduce Goods and Services Tax (GST) in April 2011, which will have transformational implication for supply chain in domestic market.
Counterfeit drugs have been a serious issue in India but recent research suggests the prevalence of spurious drugs to have fallen to 0.046% of all medicines sold to consumers. Even so companies should remain alert to possible counterfeiting issues. Whilst intellectual property protection has improved substantially, some holes remain. Compliance will always be an issue and as the market expands regulatory compliance will require attention with robust programmes, vigilance and improved policing to ensure that patients and India's reputation are protected.
Although urbanisation continues, around 70% of India's population still resides in rural areas. PwC notes that this untapped potential is now the next volume driver for the industry but foreign companies looking to access rural markets face many hurdles such as communication, transport, marketing and a high penetration of spurious drugs so they will need to forge alliances and partnerships with local players.
Sharat Bansal, pharmaceutical and life sciences leader at PricewaterhouseCoopers in India, concluded:
"India has long been a formidable player in pharmaceutical manufacturing, but its socioeconomic strengths provide even greater grounds for optimism. Companies that will be most successful in doing business in India will be those that are most adept at managing and mixing a range of contractual relationships and partnership strategies to create networks of collaboration and discovery. India has huge potential and is at a stage that it can help the industry address some of the issues that it finds itself dealing with in more developed markets."
Notes to Editors:
Copies of Global pharma looks to India: Prospects for growth can be downloaded at www.pwc.com/pharma