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The surge of pharma... There’s quantity; but we need quality research
 
The surge of pharma...
The Indian pharmaceutical market is the third largest market in the world in terms of volume. According to IMS, the size of the pharmaceutical market is expected to grow from US$ 14 billion in 2011 to anywhere between USD 55 - 70 billion in 2020.
 

The growth is expected to be driven by increased consumer spending in healthcare, urbanisation and healthcare insurance offset by impact of pricing policies on the introduction of the Drugs (Prices Control) Order, 2013.

There are close to 24,000 players (yes, 24,000) in the pharma market. The organised sector is comparatively pigmy with only 330 firms. Latest data suggests that Indian pharma exports totalled US $ 14.7 billion out of which 55 per cent was from exports to highly regulated markets.   A large portion of sales are to the generics market in the US, Europe and semi-regulated markets and custom manufacturing. Exports are expected to total US $ 25 billion by 2016. R&D in pharma sector is expected to grow at 20 per cent CAGR over the next five years. Table shows the export value and growth of drugs and pharmaceutical products.

The generics market has been growing at the rate of 24 per cent over the last four years.  India has been ranked the world’s largest exporter of generic drugs. India supplies 80 per cent of drugs used to treat AIDS and is the most important source of drugs for cardiovascular diseases and cancer. It is relatively more flexible in India to manufacture generic drugs, as it has limited patents in areas such as new drug formulations that do not significantly differ in properties related to efficacy. International companies cannot prevent manufacture of generic drugs that have minor changes in formulation. Another unique feature of generic drugs manufactured in India are the fixed dosage pills for AIDS. The patent law in India also supports public health which has made it possible to manufacture drugs at affordable prices.

 

Sluggish growth...

In FY13, Indian pharma companies witnessed sluggish growth  due to severe competition in acute medicine offset by slightly better performance in chronic medicine and benefit from rupee depreciation. Growth of MNC pharma companies was impacted by slower revenue growth, increased expenses and external factors like increased competition and drug launches by competitors before patent expiry. Generic companies in the US had mixed growth while European companies suffered from the aftermath of the governments trying to reduce healthcare burden.

The regulatory environment in the pharma sector is posing a challenge to Indian companies. The USFDA gave negative ratings to companies that do not have Good Manufacturing Practices (GMPs) which triggered drug recalls, import alerts and warning letters with occasional surprise checks.

The Drug Price Control Order, 2013 has ordered the reduction in prices of 348 essential drugs in India. The Order has fixed the ceiling price of drug formulations as well as a fixed maximum margin percentage at 16 per cent for retailers. This has impacted both revenues and margins of domestic and MNC Pharma companies in India.

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