Indian pharmaceutical industry- Pillar of India’s growth

As India completes 75 years of Independence, the country’s pharmaceutical industry can look back with pride on its journey thus far. After independence, for more than 2 decades, India relied heavily on imports. The sector has grown exponentially to produce close to 85% of the domestic needs. Over the last two decades particularly, the pharmaceutical industry has grown from strength to strength, turning into a major exporter of generic medicines and vaccines. It is one of the top five sectors contributing to foreign exchange earnings and provides employment to over 2.7 million people thus playing a major role in the Indian economy. The size of the industry is USD 50 bn (2020-21) and contributes a net annual trade surplus of USD 17 bn.

Adding years to life

The industry has contributed immensely in increasing life expectancy, improved cures for many diseases, increased access to affordable medicines, and overall, a better life for patients. One such example is that of HIV.

Seeking treatment had become unviable for many, particularly in Africa in the 1990s onwards as the treatment were steep. In 2001, Indian company, Cipla, offered HIV triple therapy in less than $1 per day compared to over $12,000 per patient per year prevailing in most countries (Rs 27,000 per yr in India). It made international headlines because the patented equivalent costed 7.7 to 11.55 lakhs per patient. Today around 1 million patients in the world are on Indian company’s Antiretrovirals, and with regular therapy they can live for years and lead a near normal life.

The combination of low-cost production backed by skilled manpower and a well-established manufacturing base means India is now poised for an even bigger role in global drug security and will continue to be one of the top pharmaceutical markets in the world, both in terms of volume and value.

Indian Pharma: A reliable supplier of quality, affordable medicines

The Indian pharma industry provides over 60% of the global vaccine demand, 40% of generic demand in the US, 25% of all medicine in the UK, and exports around $24 billion worth of medicines to the world. It has the largest number of US-FDA approved pharmaceutical plants. Over the years, Indian pharma’s growth has been driven mainly by the export of more than 60,000 generic brands across 60 therapeutic categories to around 200 countries. Today, the industry is estimated at around USD 50 bn, with an equal contribution in both domestic market and export.

• The Indian Patents Act, 1970 which provided for process patent and prohibited patenting of end-product that enabled manufacturers to develop alternative processes for proprietary products already in existence. Another important feature of the Act was that it provided for a shorter term for patent protection. This was the boost the industry needed to flourish.
• Later in the decade, the Drug Policy, 1978 and the Price Control Order, 1979 laid the foundation for the National Drug Authority to maximize the production of bulk drugs and provide leadership to PSUs. These initiatives further reduced dependence on imports and encouraged the growth of the local industry. The drug policy compelled both global and Indian companies to produce newer bulk drugs with an intention of marketing formulations from basic starting materials that were either available locally or produced utilizing the local materials.
• While domestic policies spurred the pharma industry, the Hatch-Waxman Act, 1984, in the U.S. paved the way for the proliferation of generic medicines and came as a shot in the arm for generic drug makers in India. The economic reforms of 1991 integrated the Indian pharma industry with the global economy by ending the licensing regime and allowing domestic players to operate freely which led to their growth. The Indian entrepreneurs/business families adapted to new economic policy of 1991 to not only survive but compete against the MNCs, a good number of new entrepreneurs seized the opportunities and grew from small-scale to a big company.
• By the mid-1990s, the World Trade Organization (WTO) and its agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) came into force triggering fundamental changes in India’s patent law that seeks to balance pharmaceutical innovation and affordability of access to medicines in the public interest.

With changing global economic scenario, the percentage of API imports from China has spiked from ~1% in 1991 to ~70% in 2019 and in the recent past the actual market price of some of the APIs which are imported from China has gone up steep especially since COVID 19 pandemic and other geopolitical uncertainties. The industry showed its resilience during the biggest humanitarian crisis and supplied medicines to the world, thereby becoming a reliable and dependable partner to patients in need across the world.

In the last two years, the Government of India has undertaken several positive steps in the direction of providing the pharmaceutical industry with much-needed growth. The government promulgated the Production Linked Incentive (PLI) 1.0 Scheme for the promotion of domestic manufacturing of Key Starting Materials (KSMs)/ Active Pharmaceutical Ingredients (APIs). PLI 2.0 Scheme is aimed to create global champions and strengthen the competitive position of the industry. In addition, the government has announced schemes and measures to upgrade the quality standards of micro, small and medium companies (MSMEs). The draft R&D policy was released and further details are likely to be announced. The regulatory reforms and funding will be critical drivers to spur innovation. This will be fundamental to move up the value chain of the pharma industry. The policy environment coupled with strong Indian entrepreneurship will open the potential going forward.

Way forward

From being an import-dependent sector to now being a self-reliant and one of the largest exporters of medicines, the Indian Pharmaceutical sector has established itself as a strategic and knowledge-based industry. As we complete 75 years of Independence, the industry now has an ambitious vision for 100 years of Independence. It aspires to grow to USD 120 – 130 bn by 2030 and USD 400 – 450 bn by 2047. It aims to be Number 1 in terms of Volume (current rank of 3), be among the top 10 in value (current rank 14) by 2030 and be recognized among the top 5 in value by 2047. The thrust on innovation, quality and global reach becomes fundamental to actualise this vision. This vision along with concerted efforts among stakeholders – Indian pharma companies, government and regulatory agencies, can unleash the huge potential of this knowledge-driven industry for the next 25 years.