Indian Drug Market Drivers That Motivate Expansion

With its booming population and an increased per capita healthcare expenditure at a CAGR of 10.3% from $43.1 US dollars in 2008 to $57.9 US dollars in 2015, India is expected to rise by $88.7 US dollars by 2020 in terms of global healthcare expenditure, according to FICCI, 2018. The major drug market drivers that are expected to motivate expansion are mounting incomes, greater awareness of personal health and hygiene, and better access to high-quality healthcare facilities.

The major allergic diseases prevalent in India include asthma, anaphylaxis, food and insect allergy, rhinitis, drug, eczema and urticaria, and angioedema. Averagely, 20-30% of the total Indian population suffers from either of these diseases. The majority of the research on allergy drug development is associated with the R&D expenditure capabilities of the pharmaceutical companies, as well as the adoption of new-age technologies.

The Growth of the Indian Drug Market:

The growth of the Indian drug market is driven by motivating and challenging market drivers that help expand global opportunities specific to India. The exponential phase of the growing trend in the Indian pharmaceutical industry is characterized by the following drug market drivers:

  • Government policies                   
  • International policies
  • Public relation                             
  • Allergy prevalence
  • Economic and financial stability
  • Research and development expenditure
  • Availability of resources

1. Government Policy – The Primary Drug Market Driver:

The Government of India forms and implicates policies for the development and innovation of drugs in India. These policies are implemented to help the development of the drug market and also increase the export of drugs. According to an investigative report by the Indian Express, (2017), the main focus of the government while forming policies for regulating the drug market includes:

  • The standardized process made it easy for the manufacturers
  • Quality control to avoid duplication of the ingredients
  • Convergence of the regulatory practices

The collaboration of all these agencies makes the process of drug development faster and also helps in avoiding resource wastage by the repetition of the research in two places at the same time (WHO, 2017).

International policies also act as a market driver:

The policy formation by the international authorities largely impacts the allergy drug manufacturers of India. India is also one of the ten largest generic drug exporters according to a report in 2018. Therefore, the pharmaceutical companies in India need to strictly follow the rules and regulations set by international organizations like:

  • USFDA (US food and drug administration),
  • World Health Organization (WHO), and
  • EMA (European Medicine Agency).

Diligence to these guidelines of international organizations allows for achieving maximum export of allergic drugs concerning sales volume and finances (CII, 2012).

These policies mainly determine the safety and efficacy of exported drugs. However, the policies turn out a bit challenging for the Indian drug manufacturers while following the regulations, costs of manufacturing, costs of applications, packaging of the drugs, and quality control (Business Today, 2017).  Additionally, the advantageous point of international policies includes a larger scope of drug export, increased revenue, and larger geographic market coverage.

Research and development expenditure as a market driver:

Yet another important market driver in the context of the Indian pharmaceutical sector is R&D expenditure by the government and FDIs; increased government expenditures and FDI increases the overall capabilities of research and development. Reports indicated that in FY2011-12, 5.8% of total income was spent on R&D by Indian pharmaceutical industries, which increased to 9% in the year 2016-17. In addition, Banerji & Suri, (2017) also reported that 12.39% of the total patents granted comprise drugs for human necessities. R&D expenditures by the leading Indian pharmaceutical companies have gone up significantly by 28.8% in 2014-15 and expect to rise by 30-35% in 2020. This increase results in greater revenue generation and improves international exports (Liu et al., 2017). Thus, R&D expenditure acts as one of the most important market drivers for the Indian drug market.

Public relations as a market driver:

Public relations are an important aspect of the increase in the market size for drugs in India. The main causes of allergic reactions in India consist of the household environment, genetic factors, tobacco smoke, dust, exposure to polluting fuels, etc.

Therefore an awareness of the factors that lead to increasing allergic disease development is very necessary. Public relations are also important for educating people about the treatment options and preventive measures for various types of allergic reactions. Public relation by the pharmaceutical industry allows the general public to gain knowledge on the importance of drugs and medications for allergies.

Conclusion:

Economic and financial stability is a significant market driver for the Indian drug market. More economic support provided to the pharmaceutical industries for drug production will lead to the efficient control of the allergy prevailing in the country. The healthcare sector in India will grow at a CAGR of 15% and touch US$ 158.2 billion in 2020 from US$ 78.6 billion in 2012 (IBEF, 2014).

The market drivers that act as major motivations for the drug market are disease prevalence and public relations. On the other hand, the research and development, economic stability, and government role mainly act as a challenge for the allergy drug market. In India, very little attention is given to the research and development of new drugs, therefore, resulting in a huge communication gap between the government and private institutes that control drug formation.

However, the challenges occur due to a lack of major funds for research and development as well as a lack of major allergy drug discovery in India. The least attention is given by pharmaceutical firms to the development of allergy drugs. However, these factors can be turned into motivation by giving more attention to R&D and innovation along with diligence for human necessities.

The Changing Dynamics of the Indian Pharmaceutical Industry

The Indian pharmaceutical industry has emerged as the third-largest country in the world in terms of volume with a turnover of about $22 billion US dollars in 2009. Moreover, as estimated in 2011, the Indian pharmaceutical industry includes more than 20,000 licensed companies that employ 500,000 people on an average. Throughout the decade-long list of successes, the Indian pharmaceutical industry has taken huge leaps in terms of its futuristic approach involving novel drug delivery systems, mobile-based applications, precision drug delivery, and patient-specific drug delivery, which is optimization-oriented according to the need. Furthermore, the industry secured the top position among the science-based industries through a range of capabilities in production and technology.

Exports From The Indian Pharmaceutical Industry:

Being the largest exporter in the pharmaceutical industry among all the developing countries, India’s pharmaceutical market is driven by the price, quality, and safety of the products. The Indian market has been recorded to grow from $7.24 billion US dollars in 2007 to $9.35 US billion dollars in 2009. The largest imports of the Indian pharmaceutical market have been recorded from the USA, Europe, Japan, and Australia, showcasing an annual growth rate of 12.8% in the Indian market exports, during 2003-2005.

Dynamics of the Indian Pharmaceutical Industry:

Before the introduction of the patents act of 1970, multinational companies dominated the Indian market. However, soon after, Indian companies started entering the market, nurturing expertise in pharmaceutical production at relatively lower costs. In light of the new laws being framed, Drug Price Control Order (DPCO) 2013 is a game-changer which has brought around 640 drugs into the ambit of price control under scheduled drugs and formulations, which some consider a bane to the MNCs as the margins are fixed according to the market players dealing with a similar product leading to lower profits. India, being a semi-regulated market, is focusing on empowering new laws that will mandate the manufacturers to follow GMP, and GLP, as given in schedule M and ICH. Furthermore, the development of the National List of Essential Medicines (NLEM) by the National Pharmaceutical Pricing Authority (NPPA), which is similar to the WHO list, is also gaining a lot of appreciation across the country and worldwide. Additionally, documents such as guidance to the industry are worth mentioning as the recommendations provided in them are a useful requirement for getting to know newer technology that FDA is focusing on.

The Indian pharmaceutical industry has exhibited a higher growth rate through the improved range, technology, and quality of products being manufactured. Additionally, the demand drivers for the changing dynamics in the Indian pharmaceutical industry also include the growing and aging global population. This favorable change in demographics, socio-economy, and urbanization led to the rapid transition, driven by the active participation of pharmaceutical chemicals. Also, many MNCs have captured the Indian market through acquisitions and launching new products. 

The Indian pharmaceutical industry is rather complex due to the presence of multiple players in the organized as well as the organized sectors. The growth of CRAMS, along with CFA, is evidence of the paradigm shift of the MNCs towards marketing the product rather than full-scale manufacturing, enduring higher profits than their counterparts. Another advantage is the growth of continuous manufacturing lines undergoing a transition from traditional batch processing such as the GEA Continuous Tableting Line in compliance with Good Automated Manufacturing Practices (GAMP) has cut down labor to a maximum extent and decreased the time and improved methodological efficiency.

Although Indian exports consisting of a myriad of products ranging from vaccines to medical devices has spiraled simultaneously, on the contrary, imports just remain confined to certain essential API such as vitamins and antibiotics. As we are moving towards an era of innovation and novelty, the rise in the number of startups is catapulting growth in the healthcare sector such as the insurance field. Another key development is in the field of low-cost research and development by foreign companies taking benefit of 100% Foreign Direct Investment (FDI) in greenfield and 74% in brownfield pharma, thereby boosting mergers and acquisitions along with private equity investments.

Lastly, another reason for these changing dynamics is the enormous transformation of the mindset of pharma-community adhering to values and strong rules, which abolished the release of counterfeit and Non-Standard Quality (NSQ) drugs that were a menace during the early times of implementation of policy. On the other hand, intellectual property management is making differences between the good and excellent, as marketing in terms of trademarks, copyright, and patents are the driving force in today’s economic scenario.

Future of the Indian Pharmaceutical Industry:

The growth of the pharmaceutical industry in India is hindered by various challenges. However, the major obstacle has been government intervention in the form of hasher price controls and taxes, mandating overall pressure on the market. The government has laid down stricter rules governing the development and production of medicines.

However, despite all the shortcomings, the future of the Indian pharmaceutical industry is believed to be driven by profits and operational excellence. The manufacturers will be competing in terms of ground and increase in complexity, additional controls, and market disruptions in the global supply. The industry needs to generate efficiency to drive the market by achieving cost efficiency. The future trend will be driven by companies specializing in differentiated products which will require reinventing the operative model and pursuing a systematic investment strategy.