Dynamics of the Indian Pharmaceutical industry

By Divya Narang and Saptarshi Basu Roy Choudhury on December 1, 2018
Image by Pressfoto from Freepic

The Indian pharmaceutical industry has emerged as the third largest country in the world in terms of volume with a turnover amounting to US $ 21.04 billion in 2009. In addition to this, the industry includes more than 20,000 licensed companies that employs 500,000 people (Industry, 2011). Furthermore, Indian pharmaceutical industry secured the top position among the science based industries through a range of capabilities in production and technology. In terms of market segmentation, leading 250 pharmaceutical companies have controlled 70 % of the market (PwC, 2012).

Exports from the Indian Pharmaceutical industry

The Indian pharmaceutical industry has acquired the position of largest exporter among the developing countries. The export market is driven by price, quality and safety of the products. The Indian exports in the pharmaceutical industry have grown from US$ 7.24 billion in 2007 to US $ 9.35 billion in 2009 (Price Waterhouse Coopers PwC, 2010). These exports are destined to various countries across the world including USA, Europe, Japan and Australia. The exports of pharmaceuticals have shown immense growth displaying a compound annual growth rate of 17.8% during the period 2003-04. In terms of composition of exports, share of basic drugs was 43%, fine chemicals and intermediates captured 55% of share and 2% of herbals were exported from India (McKinsey, 2014). In terms of imports, China has accounted for India’s 66 % pharmaceutical imports (Price Waterhouse Coopers PwC, 2010).

Growth drivers of the Indian pharmaceutical industry

Prior to the introduction of patents act of 1970, multinational companies dominated the Indian market. But, soon after the patents act, Indian companies started to enter the market and delivered expertise in the production of drugs at a very low cost (FICCI, 2018). The industry has displayed a high rate of growth through improved technology, range and the quality of products manufactured. In addition to this, demand drivers include the growing and ageing global population. The rise in the infectious diseases has demanded greater access to healthcare services. Furthermore, affordable health care services have offered new opportunities for growth of the industry (Tewathia, 2014).

The change in the favorable demographics, socio economic changes, urbanisation has led to rapid transition. The demand is  driven by active participation of pharmaceutical chemicals. Furthermore, many multinational companies have captured the Indian market through acquisitions and launch of new products. Lastly, many multinational companies have also followed a differential price strategy to strengthen their presence in India through availability and affordability of products (McKinsey, 2014).

Future of the Indian Pharmaceutical industry

However, the growth in the pharmaceutical industry is hindered by some challenges. The business of pharmaceuticals due to rise in the drug discovery cost. In addition to this, the government intervention in the form of hasher price controls and taxes has created a pressure on the market. The government has laid down tight rules governing the development and production of medicines. Furthermore, over the past few years, the annual output of pharma industry has flat lined.

The future of the pharmaceutical industry will be driven by profitability and operational excellence. The manufactures will be competing in terms of ground and increase in complexity, additional controls and market disruptions in the global supply. The industry needs to generate efficiency to drive the market by achieving cost efficiency. The future trend will be driven by companies specialising in differentiated products which will require reinventing the operative model  and pursuing a systematic investment strategy.


Divya Narang