Outlook on Indian Pharmaceutical Industry
Yogesh Mudras
Managing Director
UBM India

Renowned as the pharmacy hub of the world, the Indian pharma economy has been lauded for its rapid growth in recent decades. This has cooled down in recent years due to the interplay of various PESTLE (political, economic, social technological, legal and environmental) factors. But the industry is again growing strongly. Compounded annual growth is 17.6%; Indian pharma is expected to be worth 55 billion USD by 2020.The Indian pharma industry owes its success to its bold, innovative approach and adaptability to the dynamic global market. Over the past five years, India has become the leading API and finished dose drug exporter to the Western markets.

India currently ranks fourth in the world among the highest generic pharmaceuticals producers and contributes 20 percent of global generic drug exports with Brazil, China, India, Mexico, and Russia being the other key players. Many multinational pharma behemoths appear to be taking advantage of the country's inexpensive labour through India-based subsidiaries. India also boasts lower research and development (or R & D) and manufacturing costs, given government initiatives that support the pharmaceutical sector, including fiscal incentives and streamlined development procedures. The cost of production has been a leading source of India's industry strength, as India is 60 percent cheaper than the US and 50 percent cheaper than Europe in terms of drug production costs.

Based on international research, the Indian pharma industry will grow fastest in Finished Dose (generic), followed by API (Generic), Biosimilars, Innovator/Patented, and finally CRO. Additionally, however, there are now predictions of greater utilisation of domestically sourced APIs for finished drug manufacture.

With regard to its exports, currently there are two business models targeting two different types of foreign market. The first comprises Western pharma economies, consisting mainly of the United States and Europe. In this market, India is a prime provider of complex generics, branded drugs/OTC, and biosimilars due to its cost-efficient and high quality products. Of course, lately, larger pharma companies are now looking beyond these two Western markets and expanding into Japan. This is a wise move as the Japanese generic use is forecasted to expand rapidly (after many years of largely on-patent drugs) yielding greater profit opportunities.

On the other hand, some of India's pharma companies are preferring to focus on developing countries as their export market; in particular, on highvolume , low margin products.

Besides, with the increasing government investments in healthcare, Indian companies are looking keenly at the domestic market for further expansion opportunities. A troubling increase of lifestyle diseases in India along with the other parts of the globe, is creating a gateway for new drug production prospects and chronic therapies for cardiovascular therapies, anti-diabetes, anti-depressants, and anti-cancers. The incentives for Indian pharma companies to focus on domestic opportunities then are obvious.

Biologics and large-molecule drugs are undoubtedly the single biggest development in the pharma industry over the last decade. India, famed for its solid dose capabilities, has been quick to react and is diversifying. Many Indian companies have identifed biologics as their major profit generator moving forward particularly with the cost advantages (and higher margins) that biosimilars sales will enable when exported in the US and Europe.

Biosimilars are more expensive to make and develop, given higher barriers for entry. However, as a result they deliver a higher margin. This is acting as a key driver in investment decisions. Many believe Indian-made biologics will be able to deliver cost benefits comparable with what has already been achieved for conventional generics. Furthermore, with patents for 12 biologics expected to expire by 2020, estimates suggest that the global biosimilars market could reach USD 25-35 billion by 2020. Indian companies have a readily-defined market to target and invest in over the next decade. Clearly, there are virtually guaranteed sales to be had.

Recently, the pharma industry is seeking to also regulate interchangeability between biosimilars. Thus, it is crucial that Indian biosimilars are closely comparable to Western products to drive growth and increase market share as the regulatory and patent positions become more defined over the next few years.

With the Generics market in India having evolved, it provides an ideal platform for pharma professionals to ramp up the ancillary section of the industry to keep abreast with innovations in the growing businesses of the global pharma sector:Increasingly, companies are looking at sub-sectors such as Analytical & Bio Tech, Lab equipments & Lab Chemicals, Pharma Machinery and Packaging with significant success.

Several challenges continue to surround India's pharma industry of course. While India is recognised for its affordable, highquality generics and as a global exporter of APIs, it has become more dependent on China's cheaper API sources. If the latter were to cut the supply, the effect on production could be dramatic as 70 percent of India's intermediary formulations are imported from China. (Source: CPhI Pharma Insights, India Market Report 2017 )

Even in terms of the biotech industry, India faces a gamut of challenges that include a time-consuming approval process, sub-optimal infrastructure, lack of funding avenues, little or no incentives and a shortage of highly skilled talent, among others.

Meanwhile, the US too has witnessed local companies cutting the prices of generic drugs owing to rising competition. Consequently, US the largest importer of Indian generics has started looking inwards at its own domestic market with big pharmacy chains buying 55 percent of generic drugs, and smaller firms ordering the rest.

Besides, the Indian pharma market has been unable to allay suspicions from developed markets over the compromise that affordable drugs might have in terms of data integrity. The dreaded Form 483 from the US FDA has reached well-reputed brands and includes a range of issues such as lack of proper investigation of market complaints, adverse drug experiences, a lack of written review procedure for stored data, ineffective testing of finished products, and a lack of certain processes to control contamination.

To combat the several challenges, the government is promoting a resurgence in the Indian API sector to maintain tighter control of the supply chain. It is providing incentives by offering more affordable land and facilities to build API parks. It hopes that this will reduce manufacturing costs by a third and boost competitiveness. It is also proactively encouraging Indian businesses to implement more quality control systems to meet regulatory standards, the Good Manufacturing Practice (GMP) being one such example.

As in other sectors, the Govt is zealously committed towards a complete overhauling of the system. There is a fairly widely held consensus that the government is leading the agenda and taking a more active role in improving the quality standards. The Central Drugs Standard Control Organization (CDSCO) is moving towards more comparable regulatory standards of the EMA and FDA. It has also set a 1st January (2018) certification deadline, which when met, should take Indian pharma one-step further in harmonizing with global standards. The recent partnership between the CDSCO, FDA and Indian businesses will no doubt help make approval processes for drugs and manufacturing facilities faster, more efficient and more robust.

Over the next few years, the government's Pharma Vision 2020 aims to make the nation a global leader in end-to-end drug manufacturing. More generally, the country is now rapidly emerging as a major contributor across the pharma supply chain from R & D through to generics. Emerging institutions with centers of excellence, capability development of existing institutions, institution-industry partnership programs, encouraging innate drug development competencies, are being undertaken. The government also plans to review the existing drug price control measures to make medicines more affordable, while also undertaking "re-engineering" of price regulator NPPA .

In general, the Government's initiatives like 'Start-Up India', 'Skill India' are being taken to the next level through policies that include seed and venture funding to support pharma companies and start ups.