Since ancient times, the Indian Pharmaceutical industry has playeda crucial role in keeping India healthy and wealthy. The industry is highly regulated consisting of large as well as small and medium enterprises, including Public sector, MNCs and Private players. The organized sector accounted for just 5% of the industry with around 300 players, while remaining 95% represents the unorganized sector. There are thousands of products in pharmaceuticals; these products are in the forms of tablets, capsules, drops, liquids, injectable and dry powders, syrups and ointments, broadly, divided into prescribed(Ethical) drugs and Over-the-counter (OTC) drugs.
Significant changes have taken place in the Indian pharma industry in post liberalization phase. Industrial licensing for the manufacture of all drugs and pharmaceuticals has been abolished with some exceptions; technology imports have been uncontrolled with automatic approval for foreign technology agreements in the case of almost all drugs. Foreign investment has been also liberalized; it had been allowed initially up to 51 percent, then it was raised to 74 percent in March 2000 and to 100 per cent in December 2001.
Currently the domestic Pharmaceutical market in India is valued at US$14.30 billion growing at a healthy double digit CAGR of 13% since 2005- 06. It registered satisfactory double-digit growth of 10% in FY 2010-11 vs. 8% in 2009-10 YOY. The major growth, contributing factors are strong Indian demographics with robust YOY economic growth, growing Indian middle class with the rise in disposable income, sound technical capability, an increased percentage of disposable income being spent on healthcare and increased penetration of health insurance, supporting government initiatives, low cost outsourcing opportunities, rising medical tourism and medical infrastructure, increased M&A activities by Indian private companies.
According to recent research by IKON Marketing Consultants, the current decade is going to change the prescription in the Indian Pharmaceutical industry as Indian population is experiencing a shift in disease profiles. Due to issues related to public hygiene and sanitation India is going to remain victim of acute disease. However, with the increase in the affluence and adoption of western lifestyle the disease profile is gradually shifting towards the chronic diseases segment. Acute therapy segment dominates the market with a share of over 75% of the total market value during 2009-10. The chronic segment has registered a growth of 21% versus 16% in the acute segment. The share of chronic segment expected to grow much faster than the acute segment mainly due to ailments in chronic segment ensures regular consumption of medicines for the longer period.
Evaluating the market potential IKON's research estimates that during the current decade the Indian pharmaceutical Industry is going to grow healthy and by 2020 it can be of US $ 43 billion i.e. triple the current size growing at a CAGR of 12%. The major growth driving factors in current decade will be largest domestic demand, increased spending on drugs, penetration of health insurance, booming Indian healthcare industry, shifting pattern of diseases, new emerging sector opportunities, rise of tire 2,3 and rural areas, global future market segments, rise of diseases as an epidemic in India such as diabetes, glaucoma, etc. Also the global Pharma market is expected to grow at 7% to 8% CAGR over the next five years, reaching an anticipated US$ 1.7 trillion in 2020 where India is going to rank among top 10 global players by 2015 and will rank 5th by 2020.
Currently, Indian consumer is spending nearly 1% of his total income on drugs and pharmaceuticals. According to IKON's estimates, the spending is not going to alter significantly in the current decade. However value wise, with the rise in the per capita income, the spending is going to be triple (approx US $33) of the current spending by 2020. Also by 2020 nearly 650 million people will enjoy health insurance coverage. Private insurance coverage will grow by nearly 15% annually till 2020. However the largest impact will be seen through government sponsored programs that largely focus on the 'below poverty line' (BPL) segment and are expected to provide coverage to nearly 380 million people by 2020.
By 2020, the Indian healthcare industry is estimated to be worth US$ 275.6 billion. Currently, 8 per cent of India's GDP is spent on healthcare. India needs to spend at least US$ 80 billion more in the next five years to meet targets.
In the current decade, the spread of diabetes and CVDs will drive the growth of new therapies in India's pharmaceutical market. Diabetes presently affects around 50 million Indians, killing about 4 million annually, as per official statistics. Treatment for chronic diseases such as asthma, cancer, diabetes, heart ailments, and osteoporosis and kidney problems will likely constitute more than half of India's pharma market by 2020. According to estimates, CVDs and diabetes will surge the most, rising to six times by 2020.
Five new opportunities will capture 45%of the market by 2020, growing from the $3-billion industry today to $14-18 billion in 2020. These are patented products, consumer healthcare, biologics, vaccines and public health. In addition, emerging sectors such as bio pharmaceuticals, bio generics, bio similar, and pharma packaging are going to contribute significantly.
Metros and Tier-1 markets, which have been growing at 14-15 per cent in the last five years, will drive growth in the industry. They account for 60% of the Indian pharmaceuticals market today and look set to continue growing to a market size of $33 billion by 2020.This will be the result of rapid urbanization and the expansion of medical infrastructure. Rural markets, on the other hand, will constitute 25 per cent by 2020, up from 20 per cent currently, while Tier-2 markets will decline from the present share of 20 per cent to 15 per cent.