Here comes the time when the world is trying to reach out to the one with more pharma resources, than anything else. Speaking of which, India has already made its presence felt like no other country did.
With the growing investment and positive government regulations to tackle the Chinese upper hand in the pharmaceutical industry, a lot has been happening around the pharma world. So far the Indian pharma players are concerned, the growing African and Latin American markets, is one of the crucial factors that has already become the game changer. Let’s have a detailed outlook on the different problems and opportunities faced by the Indian pharmaceutical companies.
- Hurdles or Challenges Bogging Down the Indian Pharma Players
(i) US-China Overshadowing the World of API Manufacturing
Until recently, the world of manufacturing of the active pharma ingredients was primarily overshadowed by the super-power duo of US-China. As per some reports, the global API market worth stood at around $150 billion in the year 2016, of which a lion’s portion was from the US. Even India has been heavily dependent on China for the API imports.
(ii) European Trade Rules
One of the challenges faced by Indian pharmaceutical companies while exporting to the African and Latin American countries via European ports, is the confiscation of the goods on those ports due to IP regulations. Often the Indian exporters are being asked to prove the originality of the drugs being exported while being checked in transit by custom authorities of those particular ports.
(iii) China’s Tricky Aid To Developing Countries
As per some reports, many of the developing nations from the African, Eastern European and Asian markets are being given financial aid by China. In favour of which, China is putting a condition on these nations to buy medicines, and other goods and services from Chinese entities. This policy surely posed a challenge for the Indian exporters targeting these particular markets. Indian firms, on their part, need to increase their marketing strategies in these markets to gain a strong foothold.
(iv) Compliance issues and good manufacturing practices
If rumours are to be believed, the United States Food and Drug Administration has always intended to block the growth of various pharma companies. On the other hand, the approval of USFDA is important because the USA is not only the largest consumer of pharma products exported by India, but the opinion of the USFDA is considered to be the benchmark in the sector as well.
Hence, companies are trying to improve their standards, being as much stringent as possible.
(v) Highly fragmented industry
The Indian pharmaceutical sector is a highly fragmented one, and is overloaded with generic manufacturers. Now this becomes a serious cause of concern because the very reason that high fragmentation brings in instability, volatility and uncertainty.
Pharmaceutical companies can review their strategies to survive in a volatile environment. Some of the actions that can be taken by the Indian firms are a periodical review of the product portfolio, and building more and more customer centric products. The companies need to construct themselves in a way that eventually enables them with better operational ability and agility.
(vi) Low profits margins due to government drug pricing policies
The main issue raised by most of the pharma companies is that the profits which they earn are mere peanuts and this income is not sufficient enough. The companies see that the reforms of the Government for the essential medicines has caused them to lower the price of drugs.This has been done by the Government for the betterment of the public. So the Government has to think of a way to promote the pharma companies as well. Funding for the pharma companies might be a way to move forward.
(vii) Low input for Research and Development due to pricing norms
This issue directly affects the Research and Development (R&D) of the companies; simply because lower the profits of the companies, lower will be the investments. So the pharmaceutical manufacturers in India are not able to develop products the way they want, due to low income.
(viii) Stronger IP regulations
IP regulation has always been a bone in the throat for many companies. The solution to this answer might be provided by the IPR Think Tank formed by the Government to draft stronger national IP policies.
The 161st Report of the Parliamentary Standing Committee on Commerce got much appreciated by the US Chambers of Commerce in its 10th edition of the International Intellectual Property (IP) Index.
The US publication lauded the recommendations as a ‘welcome development’ and ‘a first major attempt at assessing the state of India’s IP policy regime’. It also highlighted the proposed Intellectual Property Rights (IPR) reforms in the report as being significant in substantially improving India’s national IP environment.
- Opportunities Empowering the Pharma Companies in India
(i) Increasing API Production and lowering imports
The rise of numerous API manufacturers in the country is simply a positive outcome of the market growth. The promotion of API via clusters and Production Linked Incentive (PLI) programs by the Government of India, has drastically changed the market dynamics.
(ii) Latin America: An Opportunity For Indian Pharmaceutical Logistics
As per some reports, Indian exports to Latin America in the year 2015, had touched $1063 million crossing $1 billion. In recent times the number has only grown in multiples for APIs, finished products, Generics, OTCs and Patented Drugs.
Brazil and Venezuela are some of the key markets for finished formulations while Mexico has a strong demand for bulk drugs. Latin America is also a growing market for ayurvedic products which happens to be a golden opportunity for the Indian ayurvedic medicine manufacturers to tap.
(iii) The Vast West African Market
Most of the Indian pharma exporters see a growth opportunity in the West African market.
Studies on this continent predict consistent growth in demand for prescription drugs, over the counter medicines and devices. The recent growth in the infrastructure of the African healthcare sector like the increase in number of hospital beds and healthcare professionals, along with the government regulation and price control of medicines, have paved the way for Indian pharmaceutical players to tap the growing business opportunity.
(iv) Biosimilars Bringing Opportunities for Indian Biotechnology Players
Biosimilars, which are cheaper versions of biologic drugs for diseases like diabetes, multiple sclerosis, cancer, and rheumatoid arthritis, have gained much attention off late.
As per the report of Associated Chambers of Commerce of India’s 2017, biosimilars represent a 30% compound annual growth rate. They are worth $2.2 billion out of the $32 billion total Indian pharma market and are estimated to reach $40 billion by the year 2030.
Two of the big overseas investments made by Indian pharmaceutical companies are:
- Biocon’s INR 200 crores investment in an insulin plant in Malaysia.
- Cipla is investing INR 600 crores in biosimilars in South Africa.
Having said all these, the one big problem in the growth of the biosimilars industry is the high cost of these medicines.
(v) Depreciating Rupee against US$
The one good and very important thing that evolved from the recent decline in the rupee against the USD is, Pharmaceutical exporters from India, getting benefitted from it. According to market predictions, the rupee will remain weak in the times to come as well.
Companies that are getting a major part of their revenue from the US have gained from the depreciating rupee in the last four years. Pharma companies in India are working to build their niche in the US market by improving their investment in research and development, thus strengthening their business there.
Be it India’s leadership in the global generic drug market, or its firm foothold in the US, or its ability to innovate cost-effectively, India is all set for a sustainable growth in the upcoming times.
The export opportunities to Latin America and Africa are significant and need to be exploited to the fullest. The biosimilars and herbal products markets also promise to bring in additional growth.