Global Insight Perspective | |
Significance | The rural pharma market share of the Indian market as a whole has increased from 16% in 2004 to 21% in 2006. This increase is expected to grow to represent close to 24% of the overall market, according to a McKinsey report. |
Implications | The growth strategy is outlined by the increasing economic stability and the level of disposable income, combined with the notable rise in lifestyle diseases, such as cardiovascular conditions and diabetes. Other contributors to the projected growth will be the increasing focus of pharma wholesalers and retailers as the urban areas begin to witness greater corporate setups. |
Outlook | The Indian pharma market is experiencing double-digit growth, which is expected to continue in to the next decade. Rural markets represent a major portion of that growth, and drug-makers will need to establish field forces dedicated to this segment in order to tap the potential. |
The US$6.5-billion Indian pharmaceutical market is known to be witnessing a robust growth trajectory continuing into the coming decade. One of the contributors to this growth is the rise of the rural market. As reported by the Times of India, rural markets are increasingly accounting for a larger portion of the overall market. The rural market segment accounts for 21% of the overall pharma market, marking a 31% increase since 2004. The source reveals that current figures indicate that the urban market, comprising metros and class-one cities (Tier 1), collectively has 60% of sales revenues gained by Indian drug-makers, leaving class-two, three, and four cities and rural centres (Tier 2) with 40%. A McKinsey report called India Pharma 2015: Unlocking the Potentials of the Indian Pharmaceuticals Market expects the growth in rural markets to grow to 24% by 2015, with tier two markets collectively accounting for 44% of the US$20-billion market.
The increasing share of the traditionally smaller markets is due to a series of factors changing the healthcare dynamics of the country. This includes the rise of incomes levels, with 140 million people expected to rise above the poverty line. These dynamics are also affected by a documented increase in lifestyle chronic diseases such as cancer, diabetes, and heart diseases. As noted by the source, while the prevalence of the lifestyle diseases is expected to be higher in urban areas, rural India, where anti-infective treatments have long dominated, is also expected to experience a shift in disease patterns; an example is the alarming rise in diabetes cases. The emergence of the health insurance market involving both government efforts and the rise in private insurance in urban areas is expected to permeate into the rural sector once saturation is reached in urban areas.
Outlook and Implications
The rise in importance of the rural healthcare market in India is not going unnoticed by drug-makers. Traditionally, the emphasis—particularly from multinational drug firms—has been towards dedicating a strong distribution network targeted at medical practitioners and pharma retail chains in urban areas. However, factors such as increasing investments into the rural health infrastructure with private sector participation and pharma wholesalers and retailers' focus in the rural market have changed the sector's dynamics. In terms of health infrastructure, private hospital chains are looking at tapping the potential in Tier 2 and rural centres as cities are saturated with health centres and specialty hospitals. In addition, the slow but steady uptake of the National Rural Health Mission (NRHM) has bolstered plans to providing secondary healthcare services.
The implications for multinational firms already facing a competition from resident generic drug producers will be to find new areas to sustain growth. The rural market present that opportunity, with the potential of lifestyle diseases contributing to revenues, albeit not expected to dominate at least in the short to medium term. Product access will be a key element of any foray into these markets, which are still in the process of developing infrastructure. Hence, investment into the strengthening of marketing and distribution capabilities will be pursued.