The VUCA In Indian Pharma
The turbulence created by the ongoing pandemic has somehow ignited the dormant energy in the pharmaceutical sector, India has undoubtedly harnessed the opportunity in this area and emerged as a world leader in supplying low-cost generic medicines and vaccines, whether to the developed nations like US and UK or the developing nations. The exports grew at 18% to $24.44 billion in FY 21 from $20.58 bn in previous year. This has been possible due to a highly supportive ecosystem nurtured by the state actors and the future is exciting for those willing to tap into the business opportunities in the segment.
In fact, the decade we are in till 2030 can be rechristened as the decade of Indian pharmaceutical industry where a lot of convergence is emerging to take it to greater global heights. In fact, some segments of the Indian pharmaceutical industry are the most competitive ones globally. The future looks promising but will require hard work on part of both actors-players to build up international geo-political associations and will also depend on the risk taking capacity of the businesses. It will also involve substantial investment in technical education and R&D. The inherent weakness in the Indian context has always been the low priority accorded to investments in R&D. Even a calibrated increase in the annual budget allocations, will equip the pharmaceutical industry with capability to create new products and optimize cost in production processes. Some diverse area from where additional revenue generation of substantial scale can be achieved are from API, Contract Development & Research Organisations (CDMO), bio-generics and plant-based health products etc. This will eliminate sole reliance on production and export of generic drugs. This is realistically achievable and should emerge as the preferred route, the insights from a new report “The VUCA in Indian Pharma” issued by The Centre for VUCA Studies, Amity University also suggests so. The report is comprehensive in nature and some of the salient discussion points which feature in it are:
Huge global opportunity for expansion of API industry. Industry should aim for 40% of world’s merchant supply of API and it is possible for a global market of $60 billion by 2030 at a CAGR of 16%. A beginning has already been made with the PLI scheme.
CDMO is the dark horse of Indian pharmaceutical industry with potential to reach $100 billion in revenue by 2030 including $60 billion from export of APIs, $10 billion from export of professional manpower and balance from contract research activities.
After Covid19, at least 30 countries & regions are setting up greenfield plants or ramping up production of generic drugs. Indian companies should be more active in Africa, Europe & Latin America in building local capacity. China is very active in setting up new plants in Africa. Even Bangladesh has set up its first overseas plant in Kenya.
Indian exporters will increasingly face stiff competition and price pressure from local production and growing exports from countries like China, Bangladesh, Indonesia, Turkey, Egypt, Qatar and Jordan in both developed and developing countries.
Take export production of common generic drugs (WHO Model List) and vaccines to overseas plants and move domestic production into high value segments such as injectables, complex generics and biogenerics (or biosimilar). Increased low-cost funding is available from a variety of sources including Impact Investment consortiums. Two Indian companies have already availed of these funds for African ventures.
Africa is the next big market. Indian companies should introduce integrated services such as warehousing, distribution & retail into export strategy for Africa to create an unbreachable competitive advantage in the borderless African continental market.
India is ahead of China in API technology & manufacturing (except antibiotics). The government should facilitate the growth of API technology through API R&D Centre as well as continuous processing technology development.
The government should protect the Indian API industry from predatory Chinese pricing not only in
India but also export markets.
Create Technology Park for CDMOs around a nucleus of R&D Centres and tertiary pharma focused educational institutions.
Indian companies should re-examine the cost of bringing out a new drug and not rely upon the ball mark figure $1-1.2 billion given by multinationals. Recent research has shown that the cost is much lower.
The government should facilitate establishment of biogenerics R&D Centre for a larger number of companies to enter this sector.
Due to worldwide shortage of skills, export of knowledge workers for the entire drugs value-chain knowledge can be a big foreign exchange earner by 2030 and also allow transfer of knowledge.
Major investment rebates & subsidies will be available under European Union’s Pharmaceutical Strategy for Europe which will be unveiled in 2022. Indian companies must gear up for increased investment in The European Union and aim for a sizable market share.
There are opportunities for India in President Biden’s 100-day Supply-Chain Analysis Report entitled “Building resilient supply chains, revitalizing American
Manufacturing, and fostering broad-based growth”.
India must join international harmonisation organisations such as ICH & PIC/S at the earliest to protect existing and enter new markets.
The pharmaceuticals sector represents a high-potential opportunity for India, both because the COVID-19 pandemic underscores the need for strong medical capabilities all over the world and because India’s traditional strength as a pharmaceuticals export powerhouse can be leveraged to enhance GDP and generate jobs. The domestic pharmaceuticals market revenue could reach about $105 billion by 2030 from about $40 billion in 2020 at a compound annual growth rate of 9 percent. The country could also increase its pharmaceutical exports from $20 billion in 2020 to $50 billion in 2030 (The authors of the above report estimate is that India should aim for a global market of $70-80 billion with APIs taking the lead over formulations). The key to achieving this will be for India to accelerate Contract Research and Manufacturing (CRAMs), and bulk drug (API) manufacturing built upon a strong innovation structure.
The country already has a highly resilient ecosystem for innovation given its strong domestic market and technical capabilities. The key for India to unlock its full potential in this sector will be to add value to its innovation space through prolonged commitments of focussed investment in R&D and tertiary education in the sector.
"The full report on “FUTURE OF PHARMA A FORESIGHT STUDY-2030 authored by Dr Aseem Chauhan, Mr. Suhayl Abidi, Dr. Manoj Joshi and Dr. Ashok Kumar is available at weblink…"
