In a nutshell, India’s pharmaceuticals industry is currently the global leader in manufacturing low-cost vaccines. It is also advancing in the API segment and currently accounts for 20% of the generic medicines supply worldwide. Also, in the last 9 years, this industry has been expanding at 9.43% CAGR.
Indian pharmaceutical consulting firm – Tecnova
Foreign Investment Prospects of India’s Pharmaceuticals Industry
By 2030, India’s pharmaceutical industry is predicted to reach USD 130 billion. This country is one of the largest pharmaceutical exporters with markets in more than 200 countries. India also caters to 60% of the global vaccine demand and 70% of Measles, BCG, and DPT vaccines for the World Health Organization (WHO).
Additionally, after the launch of the Ayushman Bharat National Health Protection Scheme, there has been a significant increase in domestic demand for pharmaceutical products. Hence, there is ample scope in this industry for foreign companies to set up their pharmaceutical ventures. Keep reading this blog to know more about the prospects of India’s pharma industry
Current State of India’s Pharmaceuticals Industry
As per reports, India’s pharmaceuticals industry is currently valued at USD 50 billion, among which, more than USD 25 billion comes from exports. Over the last few years, this sector has been rapidly expanding and is estimated to reach 13% of the global pharma market in the upcoming years.
The Indian pharma industry currently consists of the following segments:
- OTC medicines
- Generic drugs
- Vaccines
- Bulk drugs
- Contract research and manufacturing
- Biologics
- Biosimilars and more.
Globally, this country is one of the largest suppliers of low-cost vaccines and is the biggest exporter of generic medicines, accounting for almost 20% of the global supply.
Now, a great driving factor behind the growth of India’s pharmaceutical industry is the government’s initiatives and policies. Some of the notable ones are as follows:
- PLI Scheme for DIs, KSMs and APIs (PLI 1.0)
The Indian Government launched this production-linked incentive scheme to boost domestic production of 41 selected bulk drugs. As per data on 31st January 2023, around USD 243 million have been made for the manufacture of 35 such drugs.
- Production-Linked Incentive (PLI) Scheme for Pharmaceuticals d (PLI 2.0)
Under this scheme, the government invests in domestic pharmaceutical companies to boost their production. According to data on 31st January 2023, the authorities have invested approximately USD 433 million on 55 applicants including 20 MSMEs.
Factors Attracting Foreign Investment
The pharmaceutical industry in India offers several competitive advantages, making it an attractive venue for foreign investment. Some of them are as follows:
- Availability of a Skilled Workforce and R&D Facilities
India has a large pool of chemists, scientists, and technicians who are adept at handling complex pharmaceutical manufacturing processes. Furthermore, there are numerous R&D facilities like the National Chemical Laboratory (NCL), Indian Institute of Chemical Technology (IICT), etc. which can help bring out innovations in the years to come.
- Low Manufacturing Costs
Due to the abundance of skilled labor and raw materials, India’s pharmaceutical industry has one of the lowest manufacturing costs in the world. Additionally, there is a wide variety of pharmaceutical contract manufacturers, ranging from small-scale to large-scale operations. These companies can also manufacture customized products as per their client’s needs.
Thus, for foreign firms planning to outsource their manufacturing operations, India can be a viable choice. However, finding the right supplier is also essential. In this regard, partnering with the top pharmaceutical consulting firms in India can be helpful.
- Regulatory Compliances and High Product Standards
In India, the pharma sector is a highly regulated industry. The Central Medicines Standard Control Organization (CDSCO) monitors all the pharma manufacturers to ensure that their products are at par with international standards.
As a result, several pharmaceutical contract manufacturers in the country have certifications from international agencies like GMP (WHO), GMP (EU), and FDA (USA). The high quality and low prices in the Indian pharmaceutical industry make it the “pharmacy of the world”.
- Trademark Laws
The presence of trademark registration in India allows foreign pharma companies to protect their brand name for the drug in the market. Thus, there is no chance of developing counterfeits for their products, keeping their invention and profitability intact.
Recent Trends and Investments
As per government rules, in the greenfield pharmaceuticals segment, foreign firms are allowed up to 100% Foreign Direct Investment (FDI) under the automatic route. Furthermore, in the brownfield segment, up to 100% FDI is available.
However, 74% is permitted under the automatic route. After that, foreign companies need to invest via the government approval route.
Now, as per latest data, in FY 2022-23, the Indian pharma industry had an FDI inflow worth USD 2 billion. In comparison to FY 2018-19, foreign investments have increased at 67% CAGR. Also, this country’s biosimilar market has been expanding at a rapid pace.
By 2025, this segment is estimated to reach a valuation of USD 12 billion, exhibiting a 12% CAGR, accounting for around 20% of India’s pharmaceutical industry.
Challenges and Risks for Foreign Investors
Apart from learning the benefits of investing in the Indian pharma sector, foreign firms must also know the challenges of establishing a business in this market. Some of them are as follows:
- Lack of Patent Protection
As per India’s patent laws, companies can file patents for inventions that are new and unobvious for 20 years. However, patents in India’s pharma industry can only be issued for the procedures employed by companies to make substances that fall under the category of medicines, drugs, or food. Companies cannot file patents for the end products.
- Inadequate Regulation and Enforcement
All drug regulation activities in India come under the Drugs and Cosmetics Act, of 1940. It is outdated and is not suitable for dealing with the challenges and complexities of today’s pharmaceutical market.
For instance, it does not include aspects like good manufacturing practices, bioequivalence studies, and clinical trials. Furthermore, the responsibility for enforcing this Act lies with several state and central authorities. They have overlapping responsibilities and jurisdictions, leading to improper implementation of rules and regulations.
- Quality Control Issues
Foreign companies should also be aware of the poor quality and safety standards present in some Indian pharmaceutical companies. Their products can often lead to serious public health issues like chronic diseases, organ damage, drug resistance, and even death.
Thus, when choosing manufacturers in this industry, foreign firms should check whether those companies adhere to the safety and quality standards.
- Supply Chain Disruptions
The inability to identify events like pandemics, logistics breakdowns, overstocking, and on-time full delivery failures are situations that no company can avoid. However, they can severely disrupt a company’s supply chain, leading to several operational and financial losses.
Hence, foreign companies operating in India’s pharmaceuticals industry must opt for effective supply chain management practices to counter such situations.
- Political and Economic Risks
There can also be several political issues that might have economic consequences for pharma companies. Frequently changing compliance requirements, disruptions in sectorial investment, delays in gaining permissions for projects, etc. can be some examples.
To counter such problems, partnering with the top pharmaceutical consulting firms in India like Tecnova can be a smart move. They offer services like company incorporation and regulatory compliances, vendor development, mergers and acquisitions, etc. which can help foreign firms enter and expand in this market with ease.
Additionally, they help devise strategies for various market conditions, enabling companies to successfully run their business.
Future Prospects and Investment Opportunities
In recent years, the major global players are actively moving away from China to source Active Pharmaceutical Ingredients (APIs). In this regard, India can be an ideal choice. There are around 500 API manufacturers in the country, accounting for 8% of the global API industry. Coming to the therapeutic drugs segment, these API manufacturers are responsible for producing drugs across 60 categories for 60,000 generic brands. Apart from this, world-class affordable HIV treatment facilities available in this country can be another factor that can make India a global pharma manufacturing hub.
Conclusion
In a nutshell, India’s pharmaceuticals industry is currently the global leader in manufacturing low-cost vaccines. It is also advancing in the API segment and currently accounts for 20% of the generic medicines supply worldwide.
Also, in the last 9 years, this industry has been expanding at 9.43% CAGR. Thus, foreign companies can leverage this market’s strong growth potential in the years to come. However, to successfully establish a business in this country, knowledge of the local market, along with its strengths, weaknesses, opportunities, and risks is essential.
In this case, hiring the top pharmaceutical consulting firms in India like Tecnova can be an ideal choice. This organization offers all the necessary services that can help foreign companies understand and adhere to compliances, find reliable manufacturers, manage their supply chain, and more.
Explore the Indian pharma industry today and take your business to new heights !
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