Pharmaceuticals and Life Sciences Global pharma looks to India: Prospects for growth Table of contents Introduction 03 Background 04 A fast growing economy An expanding pharmaceutical market Government-provided healthcare improving, but private healthcare dominates Domestic market overview 09 Background Consolidation underway, despite challenges Contract manufacturing Vaccines Over the counter market holds significant potential Reaching the untapped rural market Growing Research & Development 15 Overview Clinical trials Biotech and biosimilars on track for growth Other growth areas 20 Bioinformatics Stem cell research Medical devices Global Pharma’s evolving business models and options in India 23 Background Export-oriented business (Contract Research and Manufacturing Services) Licensing Franchising Joint ventures Wholly-owned subsidiaries Practical concerns 27 Infrastructure Tax environment Counterfeiting Intellectual property Conclusion 30 Related reading: Pharma 2020 31 References 32 Acronyms 38 Introduction The pharmaceutical industry’s main promise, either as places with untapped Indian companies have also started markets are under serious pressure. demand for effective drugs or as entering into the realm of R&D; some of North America, Europe and Japan jointly suitable areas for conducting research the leading local producers have now account for 82% of audited and and development (R&D) and/or clinical started conducting original research. unaudited drug sales; total sales trials. In this paper we shall examine the India has the world’s second biggest reached US$773 billion in 2008, opportunities available in India. pool of English speakers and a strong according to IMS Health. Annual growth system of higher education, so it should in the European Union (EU) has slowed India’s population is growing rapidly, as be well-positioned to serve as a source to 5.8%, and sales are increasing at an is its economy – creating a large middle for research talent. A new patent regime even more sluggish rate in Japan (2.1%) class with the resources to afford provides better protection of intellectual and North America (1.4%).1 Impending Western medicines. Further, India’s property rights, although some issues policy changes, promoting the use of epidemiological profile is changing, so remain. Clinical trials can also be generics in these key markets are demand is likely to increase for drugs conducted here much more cost- expected to further dent the top- and for cardio-vascular problems, disorders effectively than in many developed bottom-line of global pharma majors. of the central nervous system and other nations, and some local companies are The industry is bracing itself for some chronic diseases. Together these factors beginning to develop the required fundamental changes in the mean that India represents a promising expertise. All of these factors add up to marketplace and is looking at newer potential market for global a strong case for partnering with Indian ways to drive growth. pharmaceutical manufacturers. companies around R&D, including clinical testing. Further, higher R&D costs, a relatively More than that, India has a growing dry pipeline for new drugs, increasing pharmaceutical industry of its own. It is Further, healthcare has become one of pressure from payers and providers for likely to become a competitor of global the key priorities of the Indian reduced healthcare costs and a host of pharma in some key areas, and a Government and it has launched new other factors are putting pressure on the potential partner in others. India has policies and programmes to boost global pharmaceutical companies. considerable manufacturing expertise; local access and affordability to Pharma companies are looking for new Indian companies are among the world quality healthcare. ways to boost drug discovery potential, leaders in the production of generics reduce time to market and squeeze and vaccines. As both of these areas Global players in the pharma industry costs along the whole value chain. become more important, Indian cannot afford to ignore India. The producers are likely to take a large role country, many predict, will be the most How can industry leaders best face on the world stage – and potentially populous in the world by 2050. India will these challenges? Analysis by partner with global pharma companies make its mark as a growing market, PricewaterhouseCoopers (PwC) shows to market their wares outside of India. potential competitor or partner in that several regions offer considerable manufacturing and R&D, and as a location for clinical trials. Global pharma looks to India: Prospects for growth 3 Background A fast growing economy Figure 1: India is forecast to grow by at least 5% a year for the next 41 years The Indian economy is worth about US$1,243 billion and rapidly getting bigger.2 Real GDP growth reached 9% in the year to March 2008.3 The rate of increase has since slowed down due to the global financial crisis; in the year to March 2009, growth eased to 6.7%.4 Even so, most forecasters believe that India will continue to show robust growth over the long-term; a survey of professional forecasters performed for the Reserve Bank of India (RBI) anticipates growth improving to 6% in the year ending March 2010,5 and expects robust growth of 7.8% p.a for Source: BRICs and Beyond, Goldman Sachs, November 2007. the next ten years.6 Previous forecasts such as those of Goldman Sachs suggest that India will be the only emerging economy to maintain such an Figure 2: India is shifting from agriculture to services outstanding pace over the longer term, i.e. to 2050 (see Figure 1).7 Two factors underlie this favourable outlook: India’s demographic profile and a robust services sector. India’s population is currently just over 1.1 billion and projected to rise to 1.6 billion by 2050 – a 45.5% increase that will see it outstrip China as the world’s most populous state.8 India has also utilised its strengths in IT to become a major offshore business services provider, in marked contrast with most of Asia, which has relied on manufacturing for its recent growth. As a result, services Source: Reserve Bank of India Annual Reports. now account for 64.5% of India’s GDP (see Figure 2).9 While a strong services sector heralds well for continued economic prosperity, it also suggests why India looks to be important for research and development as well as drug manufacture; the country’s experience delivering on outsourcing opportunities in other knowledge-critical areas such as IT should serve it well in its bid to offer such services in pharma, biotech and related areas. 4 PricewaterhouseCoopers An expanding pharmaceuticals drugs by virtue of the Drugs Price market Control Order (DPCO), supervised by the National Pharmaceutical Pricing India’s pharmaceuticals industry looks Authority (NPPA). The 347 price- The bottom line: set for a solid long-term growth. It controlled drugs included in 1979 were already ranks fourteenth in the global reduced to 143 in 1987.16 At present, 74 Increased buying league table, with sales of almost bulk drugs are covered under the US$19 billion in March 2009.10 However, DPCO.17 The Government’s draft power and PwC estimates that it will rise to pharmaceutical policy in 2006 sought to approximately US$50 billion by 2020 – expand the scope of essential drugs epidemiological a 163% in the space of eleven years.11 and evoked a sharp reaction from the Indeed, in our report, Pharma 2020: industry. They argued that it would changes should The vision, we anticipate that India will adversely affect R&D activities in India, spur dramatic be one of the industry’s top 10 markets as companies would stay away from by 2020. investing in new drugs. To date, no growth in sales further action on the proposed policy This growth will be driven by the changes have been taken and it volumes, but India expanding economy and increasing per currently looks unlikely that the DPCO capita GDP. In 2008, India’s middle will be expanded. remains a price- class constituted 13% of the population, according to the National The Indian Government’s Department of sensitive market. Council of Applied Economic Pharmaceuticals has also initiated Research.12 While this remains a fairly operations for a peoples’ medicines small proportion of the total population, shop, called ‘Jan Aushadhi,’ in various it represents a substantial increase from locations. These shops sell generic a mere 3% in 1995.13 If the economy medicines at much cheaper rates continues to grow faster than those of than the price of corresponding the developed world and the literacy branded medicines.18 rate keeps rising, around a third of the population (34%) is expected to join the Some multinational pharma companies middle class in the near future.14 While are already taking measures to reach a these consumers still earn substantially larger patient population by reducing less than their US or European drug prices and increasing affordability. counterparts, they are rapidly acquiring One example: Merck & Co. has the buying power necessary to afford launched differential pricing through modern healthcare, particularly if Januvia, its anti-diabetic drug, which is purchasing power parity is considered. priced at approximately US$1 per dose One source estimates that at least 60 in India – a fifth of its price in the US.19 million Indians – a market as big as the Indian companies like Biocon have also UK – can already afford to buy Western followed a similar pricing strategy. medicines.15 Aggressive pricing Biocon has launched its monoclonal strategies will be necessary, however, to antibody BIOMAb EGFR at one-fourth make in-roads into India’s price- of its price in the global markets.20 sensitive market. It’s also likely that India will require India’s federal Government currently different types of drugs in the future.