The Indian pharmaceuticals market has several unique characteristics that have contributed to its steady growth as well as recognition. Firstly, the country’s grip on the branded generics market is its biggest strength. India has the highest number of United States FDA-approved plants for generic drug manufacturing outside the north American country. Generic drugs are the pharmacologically equivalent versions of branded drugs and have the same dosage, intended use and other qualities as the original drug. In 2015, India earned over 21 billion U.S. dollars through biosimilars in the prescribed drug market.
Secondly, the industry has many local players who have created their niche through early investments and new formulation development capabilities. Six domestic firms, namely, Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus Labs have UN-backed Medicines Patent Pool to manufacture anti-AIDS medicine for over 112 countries in the developing markets. Healthy competition in the market and generic productions have ensured that the prices of drugs from Indian manufacturers are extremely low compared to global prices. Even though India ranks tenth globally in terms of pharma production value, it comes in third for production volumes.
In 2019, the country’s export value of drugs and pharmaceuticals amounted to over 1.3 trillion rupees. This impressive record has also lead to some major foreign investments in the sector along with several key M&A deals. The government has also been keen on backing the sector through various policy implementations. There are plans in place to regulate drug prices and approvals through the “Pharma Vision 2020” program along with the Drug Price Control Order initiated in 2013. Under this vision, there are several manufacturing plants being set-up across the country, generating employment and further impetus to the sector. This, combined with the Ayushman Bharat Yojana and an increased health expenditure, along with rising cooperative agreements with global pharma companies have given domestic companies a new boost.
However, the recent outbreak of the coronavirus (COVID-19) pandemic has exposed some weak links in the Indian pharma sector. One of the biggest setbacks was the country’s dependency on China for raw materials. Due to the global lockdown to curb the spread of the virus, supply chains to and from China were disrupted making it harder for Indian pharma companies to source essential drug molecules. As of March 2020, the Indian government put in place a “China-plus-one” policy to fill in supply gaps and bolster production of essential raw materials within India. Under this policy, 53 drug raw materials and APIs were identified to be produced on priority by investing over 1.3 billion U.S. dollars in domestic pharmaceutical companies and state-run manufacturers. New restrictions have also been ordered on the export of several drug formulations to ensure enough supplies for India.
At the same time, the coronavirus crisis has led to a surge in market caps of many Indian companies like Cipla, Dr. Reddy's, and Zydus Cadila. The race for a vaccine for COVID-19 is underway and how India tackles the crisis will determine the country’s standing as a potential pharma heavyweight in coming years.