Express Pharma

Trends in global and Indian pharma industry

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Uttam Jain, Director, Neon Laboratories, elaborates on how the pharma industry will register positive growth trends in the next couple of years

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Uttam Jain

The pharmaceutical industry worldwide has been escalating steadily despite certain adversities. The global pharma revenue is expected to touch $1226 billion by 2018, registering positive growth trends over the next couple of years. The Indian pharma industry is no exception and the market has grown at a CAGR of 17.46 per cent in 2015 to $30 billion from $6 billion in 2005 and is expected to grow at a CAGR of 15.92 per cent to $55 billion in 2020. With this speed India is expected to outperform the global pharma industry as the later may grow at an annual rate of five per cent over the next five years. Going by the incremental growth, India is expected to be among the top three pharma markets and by volume it would be sixth largest market globally by 2020. The decision by the Union Cabinet for the amendment of existing FDI policy in the pharma sector to allow FDI of upto 100 per cent with certain conditions will certainly provide more oxygen to the industry in terms of fresh investments towards R&D activities, manufacturing and biotechnology. The Department of Industrial Policy and Promotion has reported inflows of cumulative FDI worth $13.85 billion between April 2000 to March 2016.

‘Pharma Vision 2020’ by the Department of Pharmaceuticals, Government of India, will help the nation to get established as a prime location for R&D of drugs. As per the information available, the government has planned to set up a $640 million venture capital fund to improve pharma infrastructure and research. Factors like low cost clinical trials, skilled manpower, increased understanding and exercise of Intellectual Property Rights (IPR), already amended patent law, decision to review DPCO-related price controlling, favourable political support will speed up the growth of Indian pharma industry in times to come.

Contributing factors for the continued growth in pharma industry worldwide will include increase in chronic diseases across the globe, personalised medicines, approval and availability of bio-similar drugs in  the US, steady growth of emerging markets, clinical and technological advances, digitalisation, increased investments in R&D by pharma giants, positive approach of US FDA towards new approvals, increased demand of generic drugs and positive role play by different governments worldwide. Besides, the broad scale activities on merger and acquisition is expected to accelerate further for capitalising the opportunities in emerging markets and to diversify focus to newer segments with deeper penetration approach. Actually, the traditional concept of focussing and promoting selective molecules are losing its ground due to price rises, availability of branded generics, decreased productivity of R&D and loss of huge revenue due to expiry of patents. Moreover, the focus is getting shifted to prevention from treatment and discovering new molecules is appearing as a challenge to scientists and researchers.

By 2017, generics are expected to make stronger position in global scenario, accelerating from 27 per cent in 2012 ($261 billion) to 36 per cent ($421 billion). Demand for generics across the globe is on the rise due to reduced costs. As per reports available, 70 per cent of the pharma market volume is controlled by generics in the US, which is 84 per cent in UK, 84 per cent in Mexico and 60 per cent in Japan. Major pharma companies globally are facing the challenges to regain their market share and revenue in developed as well as emerging markets due to stupendous growth of generics. The largest segment of the Indian pharma sector is represented by generic drugs with 71 per cent market share in terms of revenues and accounts for 20 per cent of global exports in terms of volume, making the country largest exporter of generic medicines globally. A tough competition is expected among the top generic manufacturers in the forthcoming years to earn sizeable share of the existing and emerging markets, as much of the activities in terms of setting up manufacturing units, fresh investments, mergers and partnerships are continuing.

2017 can expect acceleration in speciality medicines which are used to treat chronic, rare and genetic diseases, not only in global markets but also in our country. As per the report of IMS Institute for Healthcare Informatics, speciality medicines are expected to account for 28 per cent of the total global medicine expenditures. Besides, the biopharmaceutical industry in India which ranks third as biotech destinations in the Asia – Pacific region has grown by 17 per cent  and is expected to grow at an average rate of 25 per cent in the following years. Biopharma  account for 64 per cent of the Indian biotech industry and is currently valued at $4 billion. Revenue from biopharma exports is expected to reach to a new height in 2017 as many Indian companies are investing heavily in this segment and as per Harsh Vardhan, Union Minister of Science & Technology, the industry can touch $100 billion by 2025. Positive moves by the Indian government for e.g. relaxing norms in  import and export of human biological samples, withdrawal of import license or export permits, planning to launch a venture capital fund of `1000 crore under the Department of Pharmaceuticals will motivate and boost the sector. Global giants have identified the enormous potential of Indian biotechnology sector and there is a noticeable surge in strategic alliances and investments since 2015, which is bound to grow henceforth.

The domestic pharma industry expects to benefit from the long awaited Goods and Services Tax (GST) in terms of simplified tax structures, supply chain efficiency and decrease in manufacturing cost. It will enable pharma manufactures to enjoy a level playing field. Besides, manufacturing houses can establish their warehouses at strategic locations as there will be no necessity to maintain warehouses at certain states (for CST factor) only. Post GST, there may be increases in prices as expected rate of GST will be higher than the prevalent tax of five per cent in most of the states. The impact may also be there on free schemes, physician samples and return of expired medicines, but as per the opinion of experts, the effects may get neutralised gradually because of other factors involved and there will be a win-win situation for the drug manufacturers and customers in the long run.

With an aim to avail the benefits of growing markets both globally and within the country, pharma companies need to devise and implement new strategies, generate innovative ideas, and exercise well thought marketing activities. Brighter days are ahead and the best is yet to come.

References:
a) Indian Pharmaceutical Industry: available at www.ibef.org
b) Pharmaceutical Industry in India: available at www.en.m.wikipedia.org
c) Global Lifesciences Outlook: available at www2.deloitte.com
d) Global Pharma Industry in 2016: available at www.thesmartcube.com
e) Biotechnology Industry in India: available at www.ibef.org
f) GST impact on Pharmaceuticals: available at www.dsij.in
g) The Economic Times: available at m.economictimes.com
h) Seven Pharma Trends for 2016: available at www.pharmafile.com
i) Strategies and Trends in Pharma. Industry, Pharma 2020 series: available at www.pwc.com

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