Financial Aspect: Manufacturing Pharmaceutical Drugs in India
With an objective to attain self-reliance and reduce import dependence in these critical Bulk Drugs – Key Starting Materials/ Drug Intermediates and Active Pharmaceutical Ingredients in the country, the Department of Pharmaceuticals had launched a Production Linked Incentive (PLI) Scheme for promotion of their domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four different Target Segments (In Two Fermentation based – at least 90% and in the Two Chemical Synthesis based – at least 70%) totalling 41 products with a total outlay of Rs. 6,940 cr. for the period 2020-21 to 2029-30.
Cost Efficiency
Low cost of production and R&D boosts efficiency of Indian pharma companies, leading to competitive exports.
*Indian drug & pharmaceutical exports stood at US$ 24.60 billion in FY22 and US$ 24.44 billion in FY21.
Economic Drivers
High economic growth along with increasing penetration of health insurance to push expenditure on healthcare and medicine in India.
Policy Support
In June 2021, Finance Minister Ms. Nirmala Sitharaman announced an additional outlay of Rs. 197,000 crore (US$ 26,578.3 million) that will be utilised over five years for the pharmaceutical PLI scheme in 13 key sectors such as active pharmaceutical ingredients, drug intermediaries and key starting materials.
Increasing Investment
The FDI inflows in the Indian drugs and pharmaceuticals sector reached US$ 19.90 billion between April 2000-June 2022.
Government Allocation of Funds
Union Budget 2022-23 allocated
- The total budgetary allocation for FY 2022-23 towards the Department of Pharmaceuticals is INR 2,244.15 cr.
- The total budgetary allocation for FY 2022-23 towards the Department of Health and Family Welfare is INR 83,000 cr.
- The total budgetary allocation for FY 2022-23 towards the Department of Health Research is INR 3,200.65 cr.
Bank Credit
The following table shows the bank credit of the pharmaceutical drugs departments of the year 2022.
In the above table, a month over month bank credit has been given. Here we can also give a month-over-month growth rate calculation. This measures the rate of change in the value of a metric on a monthly basis, expressed as a percentage of the original value.
Calculating the month-over-month growth rate is a two step process.
- The first step is to divide the current month’s value by the prior month’s value.
- In the second step, one is subtracted from the result from the previous step.
As we can see, the growth rate has done quite a good job in recent months of 2022. It is not uniform but still it has shown a bit of an improvement.
Market Size
According to the Indian Economic Survey 2021, the domestic market is expected to grow 3x in the next decade. India’s domestic pharmaceutical market stood at US$ 42 billion in 2021 and is likely to reach US$ 65 billion by 2024 and further expand to reach US$ 120-130 billion by 2030. India’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 stood at US$ 10.36 billion in FY20. The market is expected to increase at a CAGR of 37% from 2020 to 2025 to reach US$ 50 billion.
As of August 2021, CARE Ratings expect India’s pharmaceutical business to develop at an annual rate of ~11% over the next two years to reach more than US$ 60 billion in value.
Domestic investments
The Indian Pharmaceuticals industry plays a prominent role in the global pharmaceuticals industry. India ranks third worldwide for production by volume and 14th by value.
- The Indian pharmaceutical industry generated a trade surplus of US$ 15.81 billion in FY22.
- In November 2022, Sun Pharma and SPARC entered into a license agreement for commercialization of phenobarbital for injection in the US.
- Glenmark became the First Company in India to launch Teneligliptin + Dapagliflozin Fixed Dose Combination in October 2022.
- In May 2022, Sun Pharmaceutical Industries Limited through one of its wholly owned subsidiaries plans to launch Bempedoic Acid under the brand name Brillo, in India for reducing low-density lipoprotein (LDL) cholesterol.
- In May 2022, Dr. Reddy’s Laboratories entered into exclusive partnership with HK inno.N Corporation to commercialise novel molecule Tegoprazan in India & select emerging markets.
- In March 2022, Themis Medicare Ltd. (Themis), announced the approval of its antiviral drug VIRALEX by the Drug Controller General of India (DCGI).
- The National Digital Health Blueprint has the potential to generate nearly US$ 200 billion in added economic value for India’s healthcare industry over the next 10 years.
- The Union Cabinet has given its nod for the amendment of existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100% under the automatic route for manufacturing of medical devices subject to certain conditions.
- In March 2022, Themis Medicare Ltd. (Themis), announced the approval of its antiviral drug VIRALEX by the Drug Controller General of India (DCGI).
- The National Digital Health Blueprint has the potential to generate nearly US$ 200 billion in added economic value for India’s healthcare industry over the next 10 years.
- In October 2021, AstraZeneca India launched a Clinical Data and Insights (CDI) division to further strengthen its global presence and manage data-related aspects of its clinical trials.
- In September 2021, the Indian government contributed US$ 4 billion to the pharmaceutical and medical industries.
- In August 2021, Uniza Group, an Ahmedabad-based pharmaceutical firm, signed an agreement with Lysulin Inc. (an US-based firm) to introduce Lysulin, a nutritional product for Indian consumers.
- In May 2021, Indian Immunologicals Ltd. (IIL) and Bharat Immunologicals and Biologicals Corporation (BIBCOL) inked technology transfer pacts with Bharat Biotech to develop the vaccine locally to boost India’s vaccination drive. The two PSUs plan to start production of vaccines by September 2021.
Foreign investments
- Teva Pharmaceuticals (Israel)
- Nipro Corporation (Japan)
- Procter & Gamble (USA)
- Pfizer (USA)
- GlaxoSmithKline (UK)
- Johnson & Johnson (USA)
- Otsuka Pharmaceutical (Japan)
- AstraZeneca (Sweden-UK)
- Japanese companies have been invited to invest in Indian Pharmaceutical and Medical Device Industry. Pharmaceutical Traders Association and Japan Federation of Medical Devices Associations have come to the mutual understanding that cooperation between the two countries can contribute to stabilize the global supply-chain especially of APIs and Medical Devices. *
- The foreign direct investment (FDI) inflows in the Indian drugs and pharmaceuticals sector reached US$ 1,414 million between in FY 2021-22.
- In October 2022, Lupin signed an agreement to acquire two inhalation brands from Sunovion Pharmaceuticals Inc.
- The FDI inflows in the Indian drugs and pharmaceuticals sector reached US$ 19.90 billion between April 2000-June 2022.
- Dr. Reddy’s Laboratories announced the launch of Lenalidomide Capsules in the U.S. with two of six strengths eligible for first-to-market, 180-day exclusivity in September 2022.
- In June 2022, Cipla partnered with Drugs for Neglected Diseases initiative (DNDi) to announce the launch of a 4-in-1 antiretroviral treatment for children living with HIV in South Africa.
- Glenmark becomes the first pharmaceutical company to launch Indacaterol + Mometasone fixed-Dose combination drug for Asthma in India.
- In April 2022, Dr Reddy’s Laboratories Ltd. inked a pact with MediCane Health to announce the launch of medical cannabis products in Germany.
- The Union Cabinet has given its nod for the amendment of existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100% under the automatic route for manufacturing of medical devices subject to certain conditions.
In the global pharmaceuticals sector, India is a significant and rising player. India is the world’s largest supplier of generic medications, accounting for 20% of the worldwide supply by volume and supplying about 60% of the global vaccination demand. The Indian pharmaceutical sector is worth US$ 42 billion worldwide.
In August 2021, the Indian pharmaceutical market increased at 17.7% annually, up from 13.7% in July 2020.
According to India Ratings & Research, the Indian pharmaceutical market revenue is expected to be over 12% Y-o-Y in FY22.
Ananya Khar
Ananya Khar is a Research Intern at Tatvita. Presently she is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.
