Pharma Sector Achieves 10% Growth in India during First Half of 2006

Market Gains Momentum

The Indian pharmaceutical industry has published encouraging numbers, reflecting the growing interest in its local market among global pharma firms. A KPMG report cited by Business Standard has stated that the market has grown by 10% during the first half of 2006, to reach US$6 billion, in comparison with a global growth rate of 7%. Accounting for nearly 22% of the global generics business, the Indian industry is well poised to compete with Chinese and Latin American producers to gain 30% of the market resulting from drugs going off-patent in 2007 and 2008. Of this, the majority (US$40 billion) will occur in the United States, plus a further US$25 billion from Europe.

The industry's performance in contract research and manufacturing and research (CRAM) services has also attracted interest, with the segment reporting robust 40% growth. The contract research industry segment is expected to reach US$1 billion in the medium term, from its current level of US$100 million. Indian companies such as Nicholas Piramal, Cipla, Orchid Chemicals and Shasun Chemicals have cemented alliances with multinationals for custom manufacturing, contributing to the more than US$2 billion business that has been generated in the segment in the past two years. The emergence of a new group of clinical research organisations (CROs) has further expanded the market, branding the country as a potential regional hub for contract services. The main reasons for the interest include a significant cut in operational service costs, a ready, diversified and growing patient profile, and assured scientific human resources.

Patented Drugs Launched

One of the reasons for the market's momentum is the increasing confidence of global drugmakers about introducing their patented drugs onto the Indian market. According to the source, six patented drugs were launched during the last six months, and the flow of drugs is expected to increase, with five vaccines and two drugs in the pipeline. Time lags between the U.S. and European launch of patented drugs and their introduction in India have lessened, and Pfizer, GlaxoSmithKline, Gilead and Roche have taken the initial plunge. However, some companies, such as Merck, still remain a little unsure over the regulatory environment, although this uncertainty is expected to diminish, as clarity will emerge later in the year, with the Pharmaceutical Policy 2006. Therapeutic areas that are registering prominent activity include vaccines, cardiovascular, diabetes and neurology. Biopharmaceuticals is another segment touted to witness increasing multinational presence.

Outlook and Implications

Although it remains a developing market, there is no denying that India represents vast untapped potential for global pharmaceutical companies to reach out to. The burgeoning population, recent regulatory changes and a slowly but gradually increasing health insurance market ensure that the initial interest shown by innovative research companies will not be swayed. Despite the cumbersome regulatory procedures, the likelihood of Big Pharma expanding its basket of products throughout the second half of the year is high. In most ways, as far as the dynamics of the Indian market are concerned, 2006 has proved to be more of a testing ground than 2005, when the product patent regime was first introduced. The regulatory delays and the constant industry-government wranglings provided for a overcast climate, leading many multinationals to wait for more clarity to emerge. There is still some uncertainty, but as Pfizer and GSK have proved, there is also an element of urgency, with the recognition that if the wait proves too long, the market potential will be snatched away. Significantly, the Indian market still accounts for just 1% of the US$ 650 billion global industry.

In domestic terms, the country’s 'back office’ culture - propagated by the IT services industry - has flowed into pharma, as CRAM initiatives are high on the agenda of both large and medium-sized Indian pharma companies, such as Nicholas Piramal and Orchid Chemicals. During the last two years, most Indian companies have ramped up their capacities and invested in rising manufacturing standards, preparing the ground for forays into markets such as Europe and the United States, assured in the knowledge that the country has one of the largest number of FDA-approved facilities outside the United States.

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