Pharmaceuticals: Sector beholding immense opportunities for investors

Vaccine.

India is a prominent and rapidly growing presence in global pharmaceuticals.

It is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, and also supplies 62% of global demand for vaccines. India ranks 3rd worldwide for production by volume and 10th by value. India is the only country with largest number of US-FDA compliant Pharma plants (more than 262 including APIs) outside of USA. India has nearly 1400 WHO-GMP approved Pharma Plants, 253 European Directorate of Quality Medicines (EDQM) approved plants with modern state of the art Technology.

India is the source of 60,000 generic brands across 60 therapeutic categories and manufactures more than 500 different Active Pharmaceutical Ingredients (APIs). The API industry is ranked third largest in the world contributing 57% of APIs to prequalified list of the WHO.

The country is home to more than 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities. The domestic pharmaceuticals market turnover reached $20.03 bn in 2019, up 9.3% from 2018, growing as penetration of health insurance and pharmacies rise.

As world economies restart their engines in a bid to regain lost ground due to the Covid-19 pandemic, India too shows signs of economic buoyancy and promise. India’s Make in India initiative holds a key to the global economic revival, something that should interest Australian government ministries, corporate sector, entrepreneurs, institutions seeking R&D collaborations and Australia Inc in general, among others. India assumes greater importance as several major world economies including American, Japanese, German, British and South Korean look to move out and diversify their businesses from China. India has jumped to 63rd rank in the World Bank’s Ease of Development 2020 report, and has also been ranked as the 9th largest recipient of Foreign Direct Investment destination in 2019 by the World Investment Report 2020 of the United Nations Conference on Trade and Development (UNCTAD).

Over the following weeks WATCH THIS SPACE of India News for emerging opportunities across 30 sectors in India, starting with pharmaceuticals, biotechnology and health in this edition.

The pharmaceutical industry was valued at $36 bn (2018-2019).

Generic drugs, with 71% market share, form the largest segment of the Pharmaceutical industry in India. This is set to grow as exports of generics to the US rise, as branded drugs worth US$ 55 billion will become off-patent during 2017-2019. In the domestic market by revenue, Anti-Infectives (13.6%), Cardiac (12.4%) and Gastrointestinal (11.5%) had the biggest market share.

  • From 2018-19, India’s pharmaceuticals exports were worth $19.3 bn with a growth of 10.72% year on year
  • India holds 12% of all global manufacturing sites catering to US market
  • The cost of manufacturing in India is approximately 33% lower than that of the US
  • 100% Foreign Direct Investment (FDI) is allowed under the automatic route for greenfield pharma
  • 100% FDI is allowed in brownfield pharma; wherein 74% is allowed under the automatic route and thereafter through government approval route

Biotechnology: Leading the charge in vaccine development

India is among the top 12 destinations for biotechnology in the world, with approximately 3% share in the global Biotechnology industry. India is also the leader in the global supply of DPT, BCG and measles vaccines.

The Biotechnology industry in India comprises of 2700+ Biotech start-ups and it expects to grow up to 10,000 by the year 2024. There are more than 2500+ Biotech companies in India.

India has the highest number of US FDA approved plants (665) outside of the US as well as 44% of global abbreviated new drug applications (ANDA) and over 1400 manufacturing plants compliant with WHO.

  • By 2025, the Indian Biotechnology industry is expected to reach $150 bn
  • By 2025, the contribution of the Indian biotechnology industry in the global biotechnology market is expected to grow to 19% from 3% in 2017
  • 100% FDI is allowed under the automatic route for greenfield pharma.
  • 100% FDI is allowed under the government route for brownfield pharma in upto 74% FDI is under automatic route and beyond 74% is under the government approval route.
  • FDI up to 100% is allowed under the automatic route for the manufacturing of medical devices

Health: Towards a healthier India

Healthcare industry in India comprises of hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The industry is growing at a tremendous pace owing to its strengthening coverage, services and increasing expenditure by public as well as private players.

Growing incidence of lifestyle diseases, rising demand for affordable healthcare delivery systems due to the increasing healthcare costs, technological advancements, the emergence of telemedicine, rapid health insurance penetration and government initiatives like e-health together with tax benefits and incentives are driving healthcare market in India.

  • By 2020, India is expected to rank amongst the top 3 healthcare markets in terms of incremental growth
  • By 2020, the healthcare information technology market is expected to grow 1.5 times from current $1 bn
  • By 2022, the diagnostics market is expected to grow at a CAGR of 20.4% to reach $32 bn from $5 bn in 2012
  • During 2015-20, the in-patient market is expected to grow at a CAGR of 13%
  • By 2020, the Indian telemedicine market is expected to grow at a Compound Annual Growth Rate (CAGR) of 20% to reach $32 mn from $15 mn
  • 100% FDI is allowed under the automatic route for greenfield projects. For investments in brownfield projects, up to 100% FDI is permitted under the government route

Medical Devices: Leading innovation for improved health

The medical devices industry in India consists of large multinationals as well as small and medium enterprises (SMEs) growing at an unprecedented scale.

The current market size of the medical devices industry in India is estimated to be $11 bn.

India’s medical devices industry is poised for significant growth in the next five years:

  • The market size is expected to reach $50 bn by 2025
  • 100% FDI is allowed under the automatic route for both brownfield and greenfield setups. Strong FDI inflows reflect the confidence of global players in the Indian market
  • Since April 2000, $2.1 bn in FDI
  • Of this, $600 mn was received in the last 5 years
  • Singapore, United States, Europe, and Japan are key investors
  • Equipment & Instruments, Consumables and Implants have attracted most FDI

Imports: $6.2 bn, Exports: $2.1 bn (2018-19) India’s expected export of medical devices will reach ~ $10 bn by 2025. Overall import dependency of 75 – 80% in India.

The Government of India has taken several steps to ensure the growth of a vibrant ecosystem of medical devices manufacturing in India over the past 5 years:

  • Recognized Medical Devices as a sunrise sector under Make in India campaign, 2014
  • The Medical Devices Rule of 2017
  • Adopted risk-based classification based on GHT guidelines: Classes A, B, C, D
  • Perpetual licences for manufacturers
  • The Medical Devices Amendment Rules of 2020 bring all medical devices in India under regulation as drugs
  • A Productions Linked Incentives Scheme for Medical Devices, 2020
  • Incentive @ 5% of incremental sales over the base year 2019-20 will be provided on the segments of medical devices identified

Cancer care/Radiotherapy medical devices

  • Radiology & Imaging medical devices (both ionizing & non-ionizing radiation products) and Nuclear Imaging Devices
  • Anaesthetics & Cardio-Respiratory medical devices including Catheters of Cardiorespiratory Category & Renal Care Medical Devices
  • AII Implants including implantable electronic devices like Cochlear Implants and Pacemakers.

Funding for Medical Devices Parks in the country, 2020

  • Financing Common Infrastructure Facilities in 4 Medical Device Parks with financial implications of Rs. 400 crores.
  • A maximum grant-in-aid of Rs.100 crore per park will be provided to the States
  • Expected to reduce the manufacturing cost of medical devices in the country

Make in India