04 April 2018

Sourcing in India: Focus on Pharmaceutical Sector

The Indian Pharmaceutical industry is the 3rd largest in the world in terms of volume and ranks 13th in terms of value at ~ € 25 billion in 2017

OVERVIEW

The Indian Pharmaceutical industry is the 3rd largest in the world in terms of volume and ranks 13th in terms of value at ~ € 25 billion in 2017. The huge difference in volume and value ranking is largely due to India’s focus on generics business. The Indian pharma industry, which is expected to grow over 15% per annum between 2015 and 2020, will outperform the global pharma industry, which is set to grow at an annual rate of 5% between the same period.

EXPORTS

India is a major exporter of generic drugs and exports account for over 50% of the sales. In 2016 -2017 India exported around €13.5 billion. 


Export market for Indian Pharma sector 

Source: IBEF

However, exports which used to be a high margin is facing pressures as prices have fallen with  rising competition from countries like China, and due to Channel Consolidation/distributors buying jointly in the US. (Channel consolidation refers to wholesale and retail suppliers teaming up to procure generic medicines, bringing down prices)

PHARMA MANUFACTURING

India apart being a low cost manufacturing, has good capabilities in pharma chemistry. In fact in the first quarter of 2017, of the 171 ANDAs (Abbreviated New Drug Application) approved by US FDA 55 were from India. Indian companies are continuously having 30-35% of the ANDAs filed in the US. India has the highest number of US FDA-approved plants outside the US, with the total at 572 in 2017. India also has 2,633 FDA-approved drug products. 

 Source: USFDA

Some other highlights of Indian pharma manufacturing are: 

  • Fragmented market with more than 1,000 players
  • Accounts for over 10% of the global pharmaceutical production 
  • Produces over 60,000 generic brands across 60 therapeutic categories. 
  • Manufactures more than 500 different APIs 
  • The Indian Pharmaceuticals Industry earns around 70% of its revenues from sale of generic drugs. 

COST ADVANTAGE INDIA 

India’s cost of production is approximately 33% lower than that of the US. Labour costs are 50–55% cheaper than in Western countries. The cost of setting up a GMP (Good Manufacturing Practices) production plant in India is 40% lower than in Western countries.

Relative cost advantage of various expenses

                                       

With these advantage the CRAMS (contract research and manufacturing services) in pharma sector is expected to grow a faster pace. 

FDI (FOREIGN DIRECT INVESTMENT) IN INDIAN PHARMA SECTOR

The pharma sector attracted cumulative FDI inflows worth €12 billion between April 2000 and March 2017. India’s consolidated FDI Policy allows 100% FDI through automatic route in Greenfield pharmaceuticals and for Brownfield 74% FDI is allowed through automatic route.

Recent investments

Source: Department of Industrial Policy and Promotion

PHARMA MANUFACTURING CLUSTER HUBS 

 

Source: Department of Industrial Policy and Promotion, Government of India

FOCUS ON BIOSIMILARS* IN INDIAN PHARMA INDUSTRY 

Worldwide the biologics market is growing rapidly, especially compared with the small-molecule chemical market whose revenues actually decreased in 2012. The future for many pharmaceutical firms is in biologics. Indian companies are also focusing on BioSimilars, in fact as per analysis by Decision Resources Group’s in September 2017 more than 40 biosimilars are in clinical development in India, a similar number to those in development in the European Economic Area (EEA), and far more than in development in the USA. They also stated that for companies based in major markets, partnering with Indian pharmaceutical businesses may be mutually effective. They gave the example of Apotex (via its European marketing arm, Accord Healthcare) partnership with Intas of India. This partnership meant that Apotex gained access to Intas’s biosimilars, which have been developed in a cost-effective manner, and that Intas expanded its ability to commercialize its products in Western markets
Realising the huge long-term business potential for biopharma, some of them have invested in cross border deals like:

  • Aurobindo Pharma has acquired four biosimilar products from Swiss firm TL Biopharmaceutical.
  • Piramal Enterprises acquired a portfolio of spasticity and pain management drugs from UK-based speciality biopharma company Mallinckrodt Pharmaceuticals, in an all-cash deal for € 138 million.

SWOT ANALYSIS OF THE INDIAN PHARMA SECTOR