Glenn Saldanha, CMD, Glenmark Pharmaceuticals
The Indian pharmaceutical industry has witnessed healthy growth in the last decade, driven by factors like rising consumption levels in the country and strong demand from export markets. The domestic pharma market which has recorded a CAGR of around 14-15 percent in the last 10 years is now the third largest in the world in terms of volume and 14th largest in terms of value.
However, despite this high growth, drug consumption per capita in India is still among the lowest globally. The per capita consumption volumes are estimated to be 8-12 times lower than in the US and Japan. Hence, the tremendous growth potential for the industry cannot be understated. But having said so, the industry is expected to face some major transformational challenges in the coming decade.
While patent expirations, lack of new product pipelines, coupled with general economic downturn are just some of the challenges confronting the global pharma industry, the Indian pharma sector on the other hand, is braving odds of weak macro factors of the economy, increasing competition and pricing pressures in certain categories.
In the past two years, the growth of the domestic pharma market has slowed down a bit to 12-13 percent due to weak macro factors and increasing competition from unlisted players and MNC pharma companies. Over the last couple of years, we have seen more and more big pharma firms entering the branded generic space to compete with domestic drug makers. This trend is expected to intensify in the coming years adding more pressure in this already fragmented market. You could also see increased mergers and acquisition activities, with MNC Pharma companies acquiring the India related businesses of firms. The high growth rates of 15-20 percent enjoyed by the industry just a couple of years back are most likely to be a thing of the past. Under such a scenario, the Indian industry has to settle for a muted growth of around 10-12 percent in the immediate future.
But pricing pressures will not only come from increasing competition, but also from regulatory bodies. The new National Pharmaceutical Pricing Policy (NPPP), which is proposed to be implemented in the near future, could change the structure and dynamics of the Indian pharmaceutical industry. It is likely to impact the profitability of firms and would make new product introductions a challenging proposition. The Indian market, it should be noted, is already amongst the lowest priced in the world.