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Pharma industry well positioned for growth

— FILE PHOTO

VITAL ROLE: A technician working at a finished dosage facility of a leading pharmaceutical company.

The Indian pharmaceutical industry is well positioned for sustainable growth and expansion and is expected to grow at a cumulative annual growth rate (CAGR) of 16 per cent over 2007-11 according to a KPMG-Confederation of Indian Industry (CII) study entitled `Indian Pharma Inc. – A continuing success story.’

The industry has grown at a CAGR of 13 per cent during 2002-07 and over the last couple of years, the industry has grown at about 1.5-1.6 times the growth of the economy. The rise in disposable income has a positive impact on healthcare spend and in 2005, 6.2 per cent of disposable income was spent on healthcare compared to 2.8 per cent in 1995.

On the international front, Indian generic drug makers are playing an important role in the global consolidation process and are augmenting their market presence across regulated as well as semi regulated markets through organic and inorganic initiatives.

According to John Morris, Head, Global Pharmaceutical Practice, KPMG, “the Indian pharmaceutical industry is at a critical juncture given its inherent strengths and its ability to be a dominant player in the global pharmaceutical industry. It has become a strategic imperative for global pharma companies to make India an integral part of their manufacturing value chain to maintain lean cost structures and combat intense competition in the global generics industry.”

The report says that the contract research and manufacturing service (CRAMS) is becoming one of the most promising opportunities for the Indian pharma industry and India remains one of the most preferred outsourcing destinations. The report suggests the following growth drivers for CRAMS.

Contract Manufacturing — The global manufacturing outsourcing opportunity is estimated at $20 billion and is expected to reach $31 billion by 2010.

Contract Research — It offers significant opportunity to the Indian pharma industry which is becoming a global R&D hot-spot for innovator pharma companies. The global contract research opportunity was pegged at $14 billion in 2006 and is expected to reach $24 billion by 2010. Declining R&D productivity, coupled with an increasing number of products going off patent is expected to drive the growth of the contract research segment.

Clinical Research — At present, a majority of clinical trials conducted in India are for Phase II and Phase III. The government is in the process of considering the recommendation of the Drug Technical Advisory Board (DTAB) to allow Phase I clinical trials for the drugs discovered abroad. If this happens, then it will enable the Indian CRAMS industry to provide a wide range of drug discovery services.

Government support — on the regulatory front, the government is also trying to promote the growth of this industry by providing a tax exemption on all services carried out by the contract research and clinical trials industry. In the product patent regime, many Indian pharma companies have embarked on R&D activities to achieve a sustainable long term advantage. These are now adopting innovative funding models to advance their R&D activities. R&D investment today account for 7-9 per cnet of sales for leading pharma companies.

Various joint ventures have been formed between Indian and multinational pharma players to strengthen manufacturing capabilities, technology sharing and leveraging on the partner’s experience in product filings, regulatory compliance and the like.

In the recent past, Indian pharma companies have been scaling up in the non-traditional business segments such as drug discovery and development, contract reseach and manufacturing and the like. and are focusing on building their competencies. However, generics continue to remain the mainstay of the industry. Globally, the generics industry is expected to grow at a CAGR of 11 per cent between 2006 and 2010 and touch $94 billion by 2010. India has a 10 per cent share in this market.

Hitesh Gajaria, Head, Pharmaceuticals, KPMG India said, ``the Indian pharmaceutical industry is now well positioned for sustainable growth. The domestic market also has strong underlying growth drivers such as increased spends on healthcare, increasing penetration of health insurance and changing disease profile which should sustain the double digit growth witnessed over the last few years. If the government and the industry act together to drive reforms that strengthen knowledge and compliance, enabling companies to follow different collaborative business models, India will be well-positioned to emerge as one of the main pharmaceutical growth markets of the world.”

RAMNATH SUBBU

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