Change underfoot in India's pharma markets
A recent KPMG International report, Collaboration for Growth, predicts India’s pharma industry “has unprecedented opportunities to expand in a number of areas.
By on Jun 20, 2006A recent KPMG International report, Collaboration for Growth, predicts India's pharma industry has unprecedented opportunities to expand in a number of areas.
India currently represents $6 billion of the$550 billion global pharmaceutical market, but KPMG says its share is increasing at 10% per year, compared to just 7% annual growth for the world market.
The country's existing strength in high quality generics is poised to deliver significant new benefits, KPMG says, as key patents on many blockbuster drugs expire in the next few years and the push for lower cost drugs continues in key markets, including the US and Europe.
India's leading drug manufacturers are becoming global players, utilizing both organic growth, through the gradual development of their business, and mergers and acquisitions, as they seek to boost their presence in existing markets and open up new ones, says John Morris, Global Chair, Pharmaceuticals Practice at KPMG.
And the group says multinational companies are beginning to turn to India for more outsourced activities. Having long been a preferred destination for contract manufacturing, leading international drug makers are also beginning to bring their R&D and clinical trials activities to India, capitalizing on the country's high levels of scientific expertise as well as low wages.
The cost of clinical trials in India, KPMG reports, is about one-tenth of their levels in the US, and it is estimated that outsourced clinical trials could be worth $300 million to India by 2010.
India's rich human capital, the group says, is believed to be its strongest asset. Various studies, KPMG says, show that India's English-speaking scientific talent pool of more than 4 million is second only to the US.
India's potential to further boost its role in global generics production, as well as an outsourcing location of choice for multinationals, presents an opportunity worth an estimated $48 billion in 2007, KPMG reports.
Multinationals and domestic pharmas are beginning to work together, KPMG says, utilizing each other's strengths for mutual benefit. And for foreign firms, the group says, that means access to Indian companies research and manufacturing capabilities, as well as the comprehensive marketing and distribution networks already in operation throughout India's vast territories.
With 74 facilities, KPMG says, India has the largest number of US Food and Drug Administration-approved manufacturing facilities outside the US. Indian firms now account for 35% of Drug Master File applications and 25% of all Abbreviated New Drug Application filings submitted to the FDA, the group reports.
In addition, India's vast market potential offers new opportunities for the industry. Experts predict a boom in the availability of health insurance for the nation's more than one billion people and new government initiatives seek to enable the majority of the population to access life-saving drugs.
A further huge boost to the local market is coming from the rise of India's new affluent consumers, who lead more Western-style lives and are demanding innovative drugs to treat the chronic illnesses that these changing lifestyles many produce, says Morris.
Despite the positive outlook, however, the group says there are still many hurdles to be faced in India. First, they say, the country's new product patent system, while a good thing for attracting multinationals, may spell the end for small domestic players.
And KPMG says, overall, the domestic industry is spending far too little on R&D. And that, the group says, is something that must change quickly if domestic pharmas are to seize the new opportunities and address the challenges of this changing market.
On the international front, the report reveals, India's pharma industry still has some catching up to do when it comes to quality assurance and locally, pricing remains an issue.
To counteract strong competition from China, KPMG stresses, India must enact regulatory reforms that will encourage global pharmas to continue and accelerate the outsourcing of their R&D activities. And the government must move quickly, the group says, on promises to speed the patent approval process and to define patentability and compulsory licensing.
There are significant obstacles ahead, and overcoming them will require new commitment by both industry and government, and unprecedented levels of partnership between them, Morris says.
With its enormous advantages, including a large, well-educated, skilled and English-speaking workforce, low operational costs and improving regulatory infrastructure, India has the potential to become the region's hub for pharmaceutical and biotechnology discovery research, manufacturing, exporting and health care services within the next decade, predicts Ekkehart Hansmeyer, Head of Pharmaceuticals, KPMG in Germany.