Pharma Sector

Introduction

India is world’s largest provider of generic medicines, the country’s generic drugs account for 20 percent of global generic drug exports (in terms of volumes). Indian drugs are exported to more than 200 countries in the world, with the US as the key market. India accounts for 20% of global exports in generics. India’s Pharmaceutical sector is among the fastest growing sector in India.

The Pharmaceutical Industry is growing its demand and growing rapidly thus players in the market are looking for invest more and more in Research & Development to meet the requirements of rapidly growing demand of affordable medication.

STRUCTURE OF PHARMA SECTOR IN INDIA

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Macro-Economic Overview

As per Sector Report of February, 2019 on IBEF Website following are the macroeconomics factors affects the industry: -  

• Leading pharma producer – Indian pharmaceutical industry supplies over 50 percent of global demand for various vaccines,40 percent of generic demand in the US and 25 percent of all medicine in UK.
• India accounts for 20 percent of global exports in generics.
• Indian pharmaceutical sector is expected to grow at a CAGR of 15 percent in the near future and medical device market expected to grow $50 billion by 2025. India is the second largest contributor of global biotech and pharmaceutical workforce. The pharmaceutical sector was valued at US $ 33 billion in 2017.
• India’s cost of production is significantly lower than that of the US and almost half of that of Europe. It gives a competitive edge to India over others.
• Under Budget 2019-18, allocation to the Ministry of Health and Family Welfare increased by 13.1 per cent to Rs61,398 crore (US$ 8.98 billion).
• In this sector, 100 per cent FDI is allowed under automatic route
• Pharma Vision 2020’ aimed at making India a global leader in end-to-end drug manufacturing.
• The Ayurveda sector in India is expected to reach US$ 4.4 billion by 2018 end and grow at 16 percent CAGR till 2025.
• Investment (as % of sales) in research & development by Indian pharma companies * increased from5.3 percent in FY 12 to 8.5 percent in FY18.
• Six leading pharmaceutical companies have formed an alliance ‘LAZOR’ to share their best practices, so as to improve efficiency and reduce operating costs
• Multinational companies are collaborating with Indian pharma firms to develop new drugs
• Patient pool expected to increase over 20 per cent in the next 10 years, mainly due to rise in population

Growth Opportunities of the Sector

• Supply side Drivers: -

• Cost advantage – Due to their competence in generic drugs, growth in this market offers a great opportunity for Indian firms
• Skilled Manpower
• India a Major Manufacturing hub for generics
• India accounts for 22 % of overall USFDS approved Plants
• Increasing Penetration of chemist

• Demand Side Drivers: -

• Increase in fatal Disease
• Accessibility of drugs to greatly improve
• Increasing Penetration of health insurance
• Growing numbers of stress-related disease due to change in lifestyle
• Better diagnostic facilities

• Policy Support: -

• National Health Policy 2015, which focuses on increasing public expenditure on healthcare segment
• Reduction approval time for new facilities
• Plans to set up new pharmaceutical education and research institutes
• Exemption to drugs manufacturing through indigenous R&D from price control under NPPP-2012

• Clinical trials market: -

• National India is among the leaders in the clinical trial market
• Due to a genetically diverse population and availability of skilled doctors, India has the potential to attract huge investments to its clinical trial market
• Number of clinical trials in India increased by 400 per cent to 97 in 2017, compared with 13 trials approved in 2013.

Sales

• A small pharma company gets into a licensing agreement with a Larger Pharma company to produce, sell etc a DRUG formulation that this Small Pharma company has developed.
• The Company enters into certain dossier (documents containing detailed information) sales, licensing and supply arrangements with various parties. Income from licensing arrangements is generally recognised over the term of the contract
• Revenue from services rendered, which primarily relate to contract research, is recognised in the statement of profit and loss as the underlying services are performed
• Other operating income include Sale of spent chemicals , Sale of scrap and miscellaneous expense.

(In Rs. Millions)

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