Pharmaceuticals Market In India By 2020: A Healthy Decade

Current Scenario

Currently the domestic Indian Pharmaceutical market is valued at US$4.30bn growing at a healthy double digit CAGR of 13% since 2005-06. The domestic pharmaceutical industry registered satisfactory double digit growth of 10% in FY 2010-11 vs. 8% in 2009-10 YOY. The major growth contributors are strong Indian demographics with robust economic YOY growth, growing Indian middle class with rise in disposable income, sound technical capability, an increased percentage of disposable income being spent on healthcare and increased penetration of health insurance, supportive government initiatives, low cost outsourcing opportunities, rising medical tourism and medical infrastructure, increased M&A activities by Indian private companies.

Over the last three decades, the Indian pharmaceutical industry has transformed into a world leader in the production of high quality generic drugs. Domestic manufacturers dominate the Indian pharmaceutical market, with generics accounting for over 99% of the total market volume and 20% of market value.

According to estimates, more than 85% of the formulations produced in the country sold in the domestic market. India is largely self-sufficient in case of formulations.

Acute therapy segment dominates the market with a share of over 75% of the total market value during 2009-10. The chronic segment has registered a growth of 21% versus 16% in the acute segment. The share of chronic segment expected to grow much faster than the acute segment mainly due to ailments in chronic segment ensures regular consumption of medicines for the longer period.

The Indian population is experiencing a shift in disease profiles. Due to issues related to public hygiene and sanitation India is going to remain victim of acute disease. However, with increase in the affluence and adoption of western lifestyle the disease profile is gradually shifting towards the chronic diseases segment.

Around 40% of the total pharmaceutical produce is exported. 55% of the total exports constitute of formulations and the other 45% comprises of bulk drugs. The Indian Pharma Industry produces around 20% to 24% of the global generic drugs. Almost 70% of the domestic demand for bulk drugs is catered by the Indian Pharma Industry.

2020: Decade of Healthy Growth

Looking at the immense potential Indian Pharmaceutical industry have, IKON estimates that the current decade will be going to change the prescription in Indian Pharmaceutical industry. IKON estimates that by 2020, the Indian pharmaceutical industry can be of US US$43bn i.e. triple the current size growing at CAGR of 12%if the current driving factors continue to drive the industry in same manner. India will emerge as a leading global player holding the rank among top 5 major global markets by 2020.

The major growth driving factors in current decade will be largest domestic demand, increased spending on drugs, penetration of health insurance, booming Indian healthcare industry, shifting pattern of diseases, new emerging sector opportunities, rise of tire 2,3 and rural areas, global future market segments, rise of diseases as an epidemic in India such as diabetes, glaucoma, etc.

The global Pharma market is expected to grow at 7% to 8% CAGR over the next five years, reaching an anticipated US$1.7 trillion in 2020, India is going to rank among top 10 global players by 2015 itself.

Considering the market value by 2015, India’s robust economic growth compared to other large emerging economies, low cost manufacturing hub and a significant share in world export will place India on 7th Rank in global pharmaceutical market by 2015 leaving behind Spain, Italy and Canada.

Currently Indian consumer is spending nearly 1% of his total income on drugs and pharmaceuticals. According to IKON’s estimates, the spending is not going to alter significantly in current decade. However value wise, with the rise in the per capita income, the spending is going to be triple (approx US US$33) of the current spending by 2020.

The government’s long term vision of making quality healthcare affordable, at least 50% of country’s population should be covered by health insurance by 2020 (current coverage only 15% ), the coverage should increased to 80% within next ten years by 2030. By 2020 nearly 650 million people will enjoy health insurance coverage. Private insurance coverage will grow by nearly 15% annually till 2020. However the largest impact will be seen through government sponsored programs that are largely focused on the ‘below poverty line’ (BPL) segment and are expected to provide coverage to nearly 380 million people by 2020. By 2020, the Indian healthcare industry is estimated to be worth US$ 275.6bn. Currently, 8% of India’s GDP is spent on healthcare. India needs to spend at least US$80bn more in the next five years to meet targets.

In current decade, the spread of diabetes and CVDs will drive the growth of new therapies in India’s pharmaceutical market. Diabetes presently affects around 50 million Indians, killing about 4 million annually, as per official statistics. Treatment for chronic diseases such as asthma, cancer, diabetes, heart ailments, osteoporosis and kidney problems will likely constitute more than half of India’s pharma market by 2020. According to estimates, CVDs and diabetes will surge the most, rising to six times by 2020.

Five new opportunities will capture 45%of the market by 2020, growing from the US$3bn industry today to US$14-18bn in 2020. These are patented products, consumer healthcare, biologics, vaccines and public health. In addition, emerging sectors such as bio pharmaceuticals, bio generics, bio similar, and pharma packaging are going to contribute significantly.

Metros and Tier-1 markets, which have been growing at 14-15% in the last five years, will drive growth in the industry. They account for 60% of the Indian pharmaceuticals market today and look set to continue growing to a market size of US$33bn by 2020.This will be the result of rapid urbanization and the expansion of medical infrastructure. Rural markets, on the other hand, will constitute 25% by 2020, up from 20% currently, while Tier-2 markets will decline from the present share of 20% to 15%.-India Infoline