India: Good Endings, Good Beginnings!

Sep 01, 2011

'Paradigm shift:' the two words that best describe what the Indian pharmaceutical industry has experienced in the last 40-plus years. Numerous developments have drastically altered the healthcare and pharmaceutical environment in the world's seventh-largest and second-most populous country. Within an industry that traditionally moves at a slow pace, the rapidly changing playing field has required both Indian pharmaceutical companies, as well as multinational corporations (MNCs), to adjust their strategies accordingly. Provided that India's $12 billion market will keep growing at the same rate, its total domestic market size is set to reach between $49 billion and $74 billion by 2020, according to a recent PricewaterhouseCoopers (PwC) estimate. With a consistently higher growth rate than most other countries, India is expected to soon earn a place in the world's top 10 largest pharma markets.

India GDP Growth rate % (PPP)
While the country's astounding GDP growth has recently enabled Finance Minister Pranab Mukherjee to lay out an increase of 20% in health allocations in 2011-2012, India's public expenditure on healthcare as a proportion of GDP still stands at a worrying low of around 1%. Policymakers are aware of the issue, but a country the size of India has many challenges to tackle. How, then, to step away from a model where 80% of health expenditures are out-of-pocket payments? "The role of the insurance providers is obviously the answer to many issues India faces today," says Sujay Shetty, pharma and life sciences leader at PwC India. "This is the single most important thing that should happen in India, and is bound to lift up the broader markets, as well as certain specialist therapies which would otherwise be unaffordable."

Tapan Ray, Director General of OPPI
Government has already taken a number of measures to ensure affordable medicine in the country, and 74 drugs and formulations have been under price control by the National Pharmaceutical Pricing Authority since 1995. These downward price pressures explain the high penetration of bioequivalent versions of innovator drugs (branded generics occupy roughly 90% of the market according to industry experts), as well as the fact that a market massive in volume has remained low in value. Whether differential pricing is the solution to enhance uptake depends to a great extent on the therapeutic portfolio and strategic course companies embark upon.

A 1970 law that recognized patents on processes, rather than products, meant the start of a booming domestic generic industry in India. However, having joined the World Trade Organization (WTO) in 1995, Indian policymakers were obliged to harmonize local legislation with the global-standard Trade Related Intellectual Property Rights (TRIPS) agreement, resulting in the adoption of product patent law from 2005 onwards. "The previous paradigm was one of replication, where Indian manufacturers were replicating and marketing products at a fraction of their international price," recalls Tapan Ray, director general of the Organization of Pharmaceutical Producers of India (OPPI), India's premier association of the largest research-based international pharmaceutical companies in India. While it has been a practice that gave India a pool of some of the most brilliant process chemists in the world, Ray believes that further progress within the country's economy and pharma industry will be driven, to a large degree, by innovation.

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