The Rs 65,000 cr Indian pharmaceutical industry has
emerged as a key destination for global pharmaceutical players,
supported by a wide range of capabilities in reverse
engineering, availability of skilled scientific and engineering
personnel, and the capability to produce raw materials for a variety of drugs from
the basic stage. Being the largest industry amongst the developing nations, it
has made phenomenal progress in the past decade and grown consistently at
9.5% CAGR in the last five years. India is the world's fourth largest producer of
pharmaceuticals by volume, accounting for around 8% of global production, and
in value terms, production accounts for 1.8% of the world total. It also enjoys
significant cost arbitrage in the conduct of clinical trials compared to its
western counterparts. Domestic companies conduct these trials at less than
one-tenth of the US costs. A multinational company moving its R&D to India could
save as much as 30-50%. In the recent past, the industry has made
phenomenal progress by adopting a process-patent route instead of a product-patent
route. Domestic players continue to move to the center stage of global market, driven
by top-notch biotech and drug synthesis skills, vertically integrated
manufacturing assets, significant cost advantage and differentiated business models.
Reports indicate that the domestic pharma market has enormous
potential for growth against growing middle class and disposable income,
increasing access to medicines, more investment in healthcare infrastructure and
incidence of chronic diseases in the recent past. Amidst changing lifestyles,
the pattern of drug consumption in India is changing. With increasing awareness
of the preventive aspects of health and related campaigns by the government,
the consumption of vaccines has increased. Besides, the availability of
information about new therapies is also resulting
in increased consumption of the drugs. Moreover, corporatization of
hospitals and growing life expectancy are also indicators of higher consumption of
drugs. On the export front, Contract Research and Manufacturing Services
(CRAMS) have turned out to be the biggest opportunity for the domestic players, and
already they have proved themselves in manufacturing of generic drugs.
Increasing pressure on global pharmaceutical companies to evolve a
cost-effective business model has resulted in the need for outsourcing their operations
to low-cost destinations like India.
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