The pharmaceutical industry was highly fragmented in the past. However, the industry has undergone a positive change and now witnesses numerous consolidations. According to a report by Equity Master, a leading independent equity research company, the Indian pharmaceutical industry accounts for 10% of the global industry in terms of volume, and is hence, the third largest market in the world as far as the volume is concerned. It is no doubt that India enjoys an important position in the pharmaceutical industry globally.
Indian pharmaceutical market share
Currently, the Indian pharmaceutical market is the thirteenth largest in the world in terms of value, accounting for 2.4% of the global pharma industry. It is expected that the industry will expand further at a Compound Annual Growth Rate (CAGR) of 15% to 20% by 2020. Mr. Arun Singh, who was the Indian Ambassador to the United States from 2015 to 2016, is of the opinion that the Indian pharmaceutical market will further grow to US $55 billion by the year 2020. He added that such an increase in absolute size will make the Indian market the sixth largest pharmaceutical industry in the world.
Status of the domestic pharmaceutical companies
Indian pharmaceutical companies have steadily beaten their international counterparts for many years, largely due to superior penetration, brand recall, and marketing. Some of the Indian companies are partly owned by foreign multinationals and generate huge volumes of sale outside the country.
As far as exports are concerned, Indian pharmaceutical companies export drugs to more than 200 countries globally. India is the largest exporter of generic medicines, accounting for 20% of global exports in terms of volume. It is likely that this number will increase in the coming years. Dr. Reddy’s, one of the best generics business in India, contributes largely to the Indian pharmaceutical industry. The company ensures that quality medicines are made available to the patients all over the country. It also focuses on disease awareness as well as convenient diagnosis.
Future prospects
The pharmaceutical sector in India faces numerous issues, such as increased regulatory scrutiny and increased research and development expenses. The consolidation of the supply chain in the US market is another concern that affects the pharmaceutical industry. Despite all these ongoing challenges, the industry shows no signs of slowing down. The long-term growth prospects remain positive. Pharmaceutical companies are continuing to penetrate into new markets. New companies are establishing their base. The Indian pharmaceutical market has indeed become a major global market and will continue to grow in the near future.
Initiatives by the Indian government to reform the pharmaceutical industry
The Government of India has taken initiatives to boost this sector which will in turn positively affect the equity market. It plans to set up a US $640 million venture capital fund to strengthen the pharmaceutical infrastructure and encourage drug discovery. Besides, numerous Memorandum of Understandings (MoUs) have been signed with Health Canada, Food and Drug Administration (FDA or USFDA), and World Health Organization (WHO) to help Indian companies benefit from their expertise. The government has also allowed 100% Foreign Direct Investment (FDI) and is further relaxing FDI norms in this sector. All these changes are expected to boost the Indian pharmaceutical industry.