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Who would have thought that a country that was meeting merely 5 % of its domestic demand in 1969, would transform itself in next 50 years to be one of the top medicine producers in the world. Yes, you heard it right! A country which had a history of lagging behind in vaccinating its people, is producing nearly 60% of the global demand for Covid-19 vaccine. Not only this, it became savior for many countries during lockdowns by providing them necessary medicines to fight the pandemic. This pandemic has opened the doors for Indian pharmaceutical industry as not only the world but also the Indian government realized that the pharma sector in India has tremendous capabilities but is underutilized. Proactively, the government of India introduced Production linked incentives of $2.04 billion for pharmaceuticals products and has planned to pump $1.3 billion by 2023 to boost production of pharmaceutical ingredients (API).
Table of contents
- Where does Indian Pharmaceutical Industry stand?
- India Domestic Pharma market is bound to grow at 9-12% every year
- Factors driving Indian domestic pharma market demand
- Why India can become pharmacy of the world?
Where does Indian Pharmaceutical Industry stand?
In terms of volume, India is the third largest producer of pharmaceutical products and in terms of value it ranks 14th in the world. The country has more than 3000 pharmaceutical companies and has more than 10500 manufacturing units. Indian generic medicines have such a deep penetration that 1 out of every 5 generic medicines consumed across the globe comes from India. Indian pharmaceutical Industry is valued around $ 41 billion in 2019 and is expected to grow at a CAGR of 8.2% and reach over $90 billion by 2030. However, the Indian government has plans to increase its medical industry revenue to $130 billion by 2030.
India Domestic Pharma market is bound to grow at 9-12% every year
One out every seven-person living on earth is an Indian. However, when it comes to healthcare expenditure, India doesn’t have a substantial share. India domestic pharma market turnover in 2019 was merely 20 billion, however, most of the demand was met by Indian pharmaceuticals manufacturers (nearly 85% of the domestic demand is met by Indian companies in 2019). To our surprise, if we have a look at these figures 50 years ago, i.e., in 1969, only 5% of the domestic demand was fulfilled by Indian pharma players. You might be wondering now, India has made a huge progress in last five decades, though we were talking that demand in Indian market is quite low and it is bound to increase multi-folds. Yes, you are right, India pharmaceutical companies have made tremendous progress in last five decades but the demand of healthcare products in India in the next decade is going to protrude enormously due to huge aging population, growing urban population and increase of health insurance penetration across the country.
Factors driving Indian domestic pharma market demand
In the next decade, we, at Datavagyanik, expect India’s patient pool to grow more than 25% due to aging population, rapid urbanization, life style changes etc.
A substantial percentage of Indians are aging in next few decades
About 67% of the Indian population are more than 18 years old. This means in a decade or two, a major portion of Indian population will be aging. Diseases caused due to poor air quality, inorganic food consumption, sedentary life style, poor food habits, etc. are bound to affect a major section of the Indian population. Even now the situation looks grim. For instance, in 2020, according to International diabetic federation, out of 463 million people who were suffering from diabetes across the globe, 77 million people were from India alone. Similar is the case with obesity. Nearly 135 million individuals are obese in India and this number is going to increase further due to sedentary lifestyle and growing urbanization.
Increasing health Insurance Coverage
More than 90% of Americans are insured while only 35% of the Indians are under health insurance cover. That to more than 70% of the Indian people who have health insurance coverage are funded by the Indian government. Ayushman Bharat National Health Protection Scheme launched in second half of 2018 aims to provide free access to healthcare to almost 500 million people who fall in low income category. More than 60 % of the healthcare expenditure in India is out-of-pocket expenses is bound to decrease due to growing awareness of benefits of health insurance. As the insurance cover in the country grows, the healthcare expenditure is likely to follow.
Growing Urban population in India
According to world bank, only 11.4% of Indians resided in Urban areas, the share increased to 34% in 2017. However, this is expected to increase further due to growing job opportunities in urban India. The share of urban population in china is around 60%, we can expect Indian urban population percentage to equal that of China in a few decades. Growing urbanization has often been related to life style diseases. For instance, majority of the obese population in India resides in urban areas. Obesity makes way for many health ailments such diabetes, coronary artery diseases, high blood pressure, etc. Urban population have typically high earning and spend more on healthcare. Thus, increasing urban population will drive growth in consumption of pharmaceuticals products in the next few decades.
Increase in income of lower middle class and low-income class population in India
A large percentage of Indian population are still deprived of modern healthcare facilities. This is mainly due to lack of healthcare infrastructure and inability to bear medical expenses. However, things are changing as India plans to spend $200 billion on healthcare infrastructure in the next decade and add 160,000 hospital beds every year. Further, According to Indian government, 73 million households are expected to enter into middle class category from low income class over the next 10 years. Robust medical infrastructure and growing income of Indian mass will act as a catalyst for consumption of medical products.
Why India can become pharmacy of the world?
Already, 1 out of every 4 pills that a person living in U.K. consumes, comes from India. Further, 40 % of the generic medicines present in USA market is from India. This might sound impressive to you but wait! India is ranked 3rd in term of volume, however, in terms of value it is ranked 14th. Oh! Lots of work to do to reach at top in terms of value. Yes, you are right but there lies the opportunity. India has expertise in producing low cost medicine. It typically produces medicines at only one-third of the cost of production in USA.
Do you know that medical bills are major causes of bankruptcies in USA and more than 60 % of the bankruptcies are caused due to medical issues? For any society to prosper, there should be health and food security. India provides one of the best healthcare facilities at lowest cost, and this is the prime reason for tremendous growth of medical tourism in India. Further, India is the only country in the world except USA that has more than 262 USFDA compliant pharma plants. USFDA complaint is gold standard in pharma manufacturing and is accepted all over the world. Further, due to rising tension between china and several other countries such USA, Japan, Australia, etc. can create a situation where many countries may prefer India over China. Moreover, the non-alignment policy of India gives an edge for Indian pharma companies to cater to every country across the globe. For instance, Dr. Reddy (an Indian Pharma giant) has significant market share in USA and has bagged the license of Russian Covid-19 vaccine Sputnik V.
With the rise of medical tourism, growing domestic demand, government incentives to boost pharmaceutical products production, competitive pricing, etc., India is poised to become the pharmacy of the world in a decade.