Context

• The Indian pharma sector supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK.
• India is the largest provider of generic drugs globally.
• India is the largest contributor in UNESC with over 50-60% share.

Feats achieved by India’s Pharma Sector

• Surplus trade: The Pharma trade balance continues to be in India’s favour. 
• Worldwide production: India ranks 3rd worldwide for Pharmaceutical production by volume and 14th by value. The current market size is around USD 50 billion. 
• High competitiveness: Indian pharma companies enabled by their price competitiveness and good quality have made a global mark with 60% of the world’s vaccines and 20% of generic medicines coming from India.   
• Major destinations: India’s top 5 pharma export destinations are the USA, UK, South Africa, Russia and Nigeria.
• Regulatory compliance: Around 55 % of our pharma exports from India cater to highly regulated markets. For instance, the largest number of FDA approved plants outside the US is in India.

India’s Pharma Sector: A Backgrounder

• India enjoys an important position in the global pharmaceuticals sector.
• The country has a large pool of scientists and engineers with the potential to steer the industry ahead to greater heights.
• Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Its evolution

Over the last few decades, the Indian pharmaceutical industry has experienced rapid expansion, which may be divided into four stages:

1. Foreign domination: The time before 1970 is considered as the first stage of the pharma industry. At that time, the Indian market was dominated by foreign companies.
2. Rise of domestic companies: The second stage covers 1970 to 1990 when several domestic companies began operations.
3. LPG reforms: 1990 to 2010 is the third stage, where liberalization led Indian components to launch operations in foreign countries.
4. Patent assisted boom: The introduction of the patent bill was one of the first advancements in the pharma industry. It allowed the Indian pharmaceutical sector to become less reliant on intellectual property laws in the US.
5. Rise of OTC drugs: Over-the-counter drugs (bought without prescriptions) constitute the next biggest segment with 21% of the market segment.

Market Size

• According to the Indian Economic Survey 2021, the domestic market is expected to grow 3x in the next decade.
• India’s domestic pharmaceutical market is at US$ 42 billion in 2021 and likely to reach US$ 65 billion by 2024 and further expand to reach ~US$ 120-130 billion by 2030.
• India’s biotechnology industry comprises biopharmaceuticals, bio-services, bio-agriculture, bio-industry, and bioinformatics.

Who regulates Indian Pharma Sector?

• The Drugs and Cosmetics Act, 1940 was the central legislation that regulates India’s drug and cosmetic import, manufacture, distribution and sale.
• The Act clearly defines the spurious drugs, adulterated drugs and mis-branded drugs.
• This also established the Central Drugs Standard Control Organization (CDSCO).
• The Act establishes the regulatory control over the manufacture and sale of drugs.
• State Health department has to regulate the manufacturing, sales and distribution of drugs.
• Drug Inspectors will control the implementation at ground level.

What made India the world’s pharmacy?

• Low manufacturing costs: Compared to other nations, the cost of manufacturing pharmaceutical goods in India is much lower and more effective.
• Skilled workforce: India now has a highly-skilled workforce as a result of technological advancements.
• R&D: India’s pharma industrial sector is also robust. Most pharma labs has turned into incubators.
• Marketing benefits: With economic liberalization, India’s marketing and distribution system are likewise on the higher side. The sector is additionally strengthened by its diversified ecosystem.
• Focus on generics: The companies broke into the worldwide market by exploring generic alternatives to costly proprietary medications.

Various govt. policies

• FDI relaxation: The government has allowed 100% FDI in Greenfield pharmaceutical projects and 74% FDI in brownfield pharmaceutical projects.   
• PM Bhartiya Janaushadhi Pariyojana: The government had launched this scheme to supply low-cost pharma drugs to the economically weaker sections.
• Bulk Drug Parks: In March 2020, the centre approved the establishment of mega ‘Bulk Drug Parks’ to provide common facilities like solvent recovery, effluent treatment, distillation, etc.
• PLI scheme: The Cabinet also approved the ‘Production Linked Incentive Scheme’ for encouraging domestic manufacturing of drug intermediaries.
• SPI Scheme: In March 2022, under the Strengthening of Pharmaceutical Industry (SPI) Scheme, a total financial outlay of Rs. 500 crore (US$ 665.5 million) for the period FY 21-22 to FY 25-26 were announced.

Various challenges

• FDA mandate in US: The US accounts for more than a quarter of Indian pharmaceutical exports. Every medicine sold in the United States is subject to FDA monitoring and site visits by Indian businesses.
• Hostile competition: There is stiff competition from firms in countries like China, Israel and Japan. Hostile and negative lobbying by the big players who frequently accuse Indian firms of violating patent laws.
• Over-dependence on China: The industry is highly dependent on China for pharmaceutical raw materials. Indian drug-makers import around 70% of their total Active Pharmaceutical Ingredients (API) / bulk drug requirements from China.
• Hollowing out: India today is preferred low-cost producer and exporter of simpler off-patent formulations, the road taken is ‘hollowing out’ manufacturing in raw material: API.
• Plagiarism: Fake versions of high value and/or high volume brands of the pharma companies are adversely affecting their business performance. It can also create a health hazard.
• Domestic drug price control: The GoI’s Drug Price Control Order put excessive pressure on product pricing, affecting pharmaceutical companies’ profitability. Small businesses face a danger from the new MRP-based excise duty structure.
• Low spending on R&D: India’s current public expenditure on R&D consistently remains low, at less than 1% of gross domestic product (GDP).  
• Burden of new diseases: New diseases, curbing costs, medical infrastructure, and foreign regulations are some of the challenges being faced by the pharma industry.
• Regulatory lacunae: Many states have an inadequate number of drug inspectors – sometimes even as high as 53% vacancies like in Karnataka. The CDSCO itself suffers from insufficient personnel with 22% vacancies.

Major contribution of Pharma Sector: Medical Diplomacy

• Medical diplomacy is the state’s use of essential medicines’ trade and medical personnel’s dispatch to affected countries to improve its international relations.
• India’s vaccine diplomacy during the pandemic also reaped huge praises all across the world.
• India has been supplying essential drugs like hydroxychloroquine (HCQ) and paracetamol to different categories of countries ranging from USA, Russia, France and UK to African and Latin American countries like Zambia, Uganda, Niger, Kenya, Colombia and Uruguay.
• In the neighborhood, the drugs are being supplied to Afghanistan, Bangladesh, Bhutan, Nepal, Maldives, Mauritius, Myanmar and Sri Lanka.
• While some of these countries received the drugs on a commercial basis, others received it as grants from India.

Way forward

• Harnessing global value-chain: Besides the volume share, India now needs to capture value share as well.  
• R&D boost: India will need to make exponential investments in R&D, manufacturing and digital transformations to become a global pharmaceutical innovation hub.
• Incentivization: The government needs to urgently explore mechanisms to incentivize investment in R&D and evaluate various funding mechanisms that can help co-research.
• Focus on API: This is also an opportunity to bring a much larger proportion of manufacturing of APIs back into India, so that the country is not dependent on imports of critical inputs.
• Rational drug pricing: India needs to rationalize drug price control. Pharma companies must not be loaded with the cost public health.

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