BY NANTOO BANERJEE
Few manufacturing industries in India have done as consistently well as the drug industry over the last four decades. The Indian drug
industry is currently ranked the world's third largest in pharmaceutical production by volume. The production has been increasing rapidly
supported by rising domestic consumption and exports. The industry has been growing at a CAGR of 9.43 percent over the past nine
years. Generic drugs, over-the-counter (OTC) medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and
biologics are some of the major segments of the industry. India also has the most number of pharmaceutical manufacturing facilities that
are in compliance with the US Food and Drug Administration (USFDA).
In the 1970s, Indian drug manufacturers literally struggled for a toehold in the business in the face of overwhelming competition from
some 30-odd foreign controlled pharmaceutical manufacturers and importers. Mostly based in Bombay (now Mumbai), those foreign
drug firms had a vice-like grip over the country's small drug market. India's annual consumption of drugs and pharmaceuticals was less
than Rs.600 crore. However, thanks to a series of decisive actions by the government, led by the then Prime Minister Indira Gandhi, the
situation changed fast in favour of the domestic drug manufacturers since the mid-1970s. The industry has received support from the
successive governments at the centre. Last year, the country's pharmaceutical output was worth over $42 billion (approximately
Rs.1,92,000 crore).
The Hathi Committee report, investigations into the pricing juggleries by foreign pharma firms operating in the country by the Bureau
of Industrial Costs and Prices (BICP), the listing of ‘essential drugs' by the government and controlling their prices, formulation of the
foreign exchange regulations act (FERA) of 1973, and incentives to domestic investors in pharmaceuticals projects in the 1970s and
1980s changed the very profile of India's drug industry in the following decades. India's drug manufacturers responded positively to the
government policy. The country's pharmaceutical producers never looked back since then. Investments poured in. Lately, Hyderabad is
fast emerging as India's pharma industry hub. It accounts for 40 percent of the country's total bulk drug production and 50 percent of bulk
drug exports. Other major production centres include Vadodara, Ahmedabad, Ankleshwar, Vapi, Baddi, Sikkim, Kolkata and
Visakhapatnam. The manufacturing network encompasses some 10,500 production units operated by some 3,000-odd pharmaceutical
companies of all sizes — big, medium and small.
So strong is India's drug manufacturing network and its wide ranging production portfolio that global drug giants such as Pfizer, Bayer,
Merck, AstraZeneca, and GSK have gone in for joint ventures with some of the country's major pharmaceutical producers to take
advantage of the situation. These joint ventures target largely the domestic market and also export. Industry experts highlight the
country's unique blend of advanced drug making infrastructure, its status as an emerging market, and strong growth potential as
underlying reasons why there is interest in accessing this market as early as possible. Indians are consuming medicines like never
before. The country's drug consumption is projected to grow nine to 12 percent over the next five years or so. This will lead India to
become one of the world's top 10 nations in terms of medicine spending. The manufacturers are increasingly aligning their product
portfolio towards chronic therapies for diseases such as cardiovascular, anti-diabetes, antidepressants and cancers, which are on the
rise with the changing lifestyles and increasing stress.
Today, the country's drug industry is the world's largest provider of generic medicines by volume and world's seventh largest exporter
of medicines. In 2020, India exported drugs worth $24.6 billion, running almost neck and neck with the United States ($24.7 billion), the
world's largest drug producer and consumer. India's share of the global drugs export market was 6.1 percent. Ahead of India and the US
in the global drugs export market are five European countries. In 2020, Germany ranked No.1 with the export worth $60.8 billion,
representing 14.9 percent of the global drugs export, followed by Switzerland ($48.1 billion), Belgium ($31.1 billion), France ($28.4 billion)
and Italy ($27.2 billion). In 1973, India's total turnover in the area of bulk drug manufacturing was only worth Rs.75 crore and drug
formulations accounted for Rs. 370 crore. While the production in the organised sector was dominated by foreign drug manufacturers,
the industry's expenditure on research and development (R&D) was less than one percent of the turnover.
The Indian Economic Survey 2021 had projected a 300 percent growth of the domestic drug market in the next decade. The
market is likely to reach the US$ 65-billion mark by 2024 and further expand to reach US$ 120-130 billion by 2030. The country's
biotechnology industry comprises biopharmaceuticals, bio-services, bio-agriculture, bio-industry, and bioinformatics. The Indian
biotechnology industry was valued at US$70.2 billion in 2020 and is expected to reach US$150 billion by 2025. India's medical
devices market was worth US$10.36 billion in FY20. The market is expected to grow at a CAGR of 37 percent to reach US$50 billion
in 2025. As of August 2021, CARE Ratings expected India's pharmaceutical business to develop at an annual rate of 11 percent over
the next two years.
However, to become a truly reliable pharmacy of the world, India needs to substantially reduce its dependence on China for the
supply of active pharmaceutical ingredients (APIs). Official reports suggest that nearly 70 percent of all APIs and upwards of 90
percent of those APIs essential to produce critical mass-market antibiotics are imported from China. An export halt or slowdown from
China can temporarily upend India's entire pharmaceutical industry. Lately, India has released three production-linked incentive [PLI]
schemes to substantially reduce the country's dependence on Chinese export of pharmaceutical and medical devices. Since the
implementation of the scheme, funds worth $2 billion have been distributed to 55 different firms to help production of 35 of 53 APIs
upon which India has substantial import dependence. India also needs to take steps to control pollutant-heavy API refinement
processes. China's industrial drug parks that offered cheap municipal disposal solutions and higher risk-tolerance for polluting
industries readily took over the dirtier precursor industries as well.
A Nikkei report clearly indicates that China's near monopoly on precursors stems from a massive flight of Western
pharmaceutical providers to China in the early 2000's. While the Indian industry should act fast to expand production of APIs and
key starting materials (KSMs), the government should take a page out of Beijing's playbook to ensure that the manufacturers take
full care of pollutant chemicals and harmful residues generated in the process. The self-reliance on APIs will help India realise its
effort to become the pharmacy to the world producing cheap, high-quality drugs at every junction of the global value chain. This will
help expand both the domestic market and exports by doubling the market size by 2030.
(IPA Service)
