By Pratik Avhad, Senior Analyst, Insight

Over the past months, our first blog in our series on the Indian pharma industry explored how the industry became the ‘pharmacy of the world’. Our second blog ‘the time of transition’ explored some of the new initiatives that the industry has embarked on to kick-start growth and tackle the stagnation and growth volatility that it has experienced over the past decade. However, some of these initiatives have been undermined by the health challenges and economic impact due to the COVID-19 pandemic. In this third blog of the series, I explore what the likely future looks like for this critically important industry.

The Indian pharma industry’s role in the response to COVID-19

Indian pharma companies supply around 20 per cent of the world’s generics and 62 per cent of its vaccines.¹ Thus, from the beginning of the pandemic, the industry has played a pivotal role in maintaining the supply of existing drugs and in manufacturing others to help combat the crisis. The industry’s ability to quickly ramp up production during the pandemic and deliver cost-effective and quality generic medicines to more than 133 countries has helped it live up to its reputation as the ‘pharmacy of the world’.² In particular, six Indian pharma companies are currently manufacturing the anti-viral drug ‘remdesivir’ for distribution in 127 countries and territories to help to meet the surging demand for this treatment.³

With its deep expertise in cost-effective vaccine manufacturing, it is also highly likely that any potential COVID-19 vaccine will be mass-produced in India. Moreover, around 30 groups, from both pharma and academia in India, are trying to develop COVID-19 vaccines, two of which are now in the early stages of human clinical trials.^4,5

The impact of COVID-19 on the Indian pharma industry’s short-term outlook

Indian pharma companies import around 70 per cent of active pharmaceutical ingredients (API) from China. When China locked down at the start of the COVID-19 pandemic (during February and March), the Indian pharma industry experienced its first supply chain disruptions and the industry faced 20 to 30 per cent increases in prices of a few key APIs.^6,7

On 25 March, India also went into lockdown to try and curb the spread of COVID-19. During lockdown, essential services like the pharma industry were allowed to operate, but the industry was still adversely affected by the disruption in both manufacturing operations and the supply chain, with some companies reporting only 15 to 30 per cent of their installed capacity utilisation due largely to the reduction in manpower.⁸ From May onwards, and the phased easing of lockdown, manufacturing capacity picked up and by June 2020 was operating at 60 to 80 per cent of its original capacity.⁹

In March, the Indian government had restricted exports of 26 APIs and drug formulations due to concerns around an expected surge in domestic demand for drugs, as local outbreaks intensified in parts of the country. While these restrictions were lifted in April and May, the industry nevertheless suffered export revenue losses, with domestic pharma sales down (year-on-year) by 11 per cent in April and 9 per cent in May.^10,11,12

Though the industry has experienced a number of subsequent challenges, India Ratings and Research (Ind-Ra) expects only a limited impact across the financial year with the Indian pharma market growing by three to five per cent compared to the previous year.^13,14 Moreover, the industry’s continued support in tackling the ever-evolving pandemic could result in further growth as domestic and international demand for generic drugs is also likely to rise, particularly in developing countries such as Africa amid recent spikes in infections. At the same time, API supplies from China are returning to normal and previously-hiked prices of key APIs have started to normalise since June.¹⁵

What opportunities does the future present?

A 2019 report by the Indian Pharmaceutical Alliance (IPA) estimated that if the industry maintains its current growth rate of seven to eight per cent per year (i.e. same as average growth of the past three years), annual revenues will reach around USD($) 90 billion by 2030 compared to $38 billion in 2019.^16,17 In the ‘best-case’ scenario, an annual growth rate of 11 to 12 per cent would increase revenues to $65 billion by 2024 and $120-130 billion by 2030.¹⁸ Opportunities for growth include:

• Increasing domestic consumption: The ageing population, the increasing prevalence of chronic diseases, a push for universal healthcare by the government with the National Health Protection Scheme, and other government initiatives, such as establishing stores to provide cheaper generic drugs, should help to boost volumes.¹⁹ Indian domestic pharma spending is expected to grow by 8 to 11 per cent from 2019 to 2023, to $28-32 billion.²⁰
• Loss of exclusivity: Between 2020 and 2024, branded medicines with cumulative sales worth $139 billion will lose exclusivity in the developed markets.²¹ This will pave the way for Indian generic and biosimilars makers, as well as contract research organisations and manufacturers to capitalise on their dominance in the global market.
• Riding the wave of biosimilars: By 2030 the global biosimilar market is expected to be worth $60 billion, and capturing even 10 per cent of this market could grow the Indian pharma industry by 13 per cent.²² As biosimilars have more complex regulatory pathways than small molecule generics, the industry will have to address quality and compliance issues by deploying India-specific interventions coupled with global best practices to better realise this opportunity.
• Innovative drugs and ‘Next Gen’ therapies: Indian pharma companies are transitioning to build pipelines of innovative drugs, with three to five new molecular entities launched or in late clinical trial phases each year until 2030. This is expected to boost the industry to reach $130 billion.²³ With personalised medicines taking centre stage in treating chronic and rare diseases, the global cell and gene therapies market is expected to grow over 36 per cent (CAGR) from 2019 to 2025.²⁴ This presents a growth opportunity for the Indian pharma industry, provided it can make substantial investments in this space with a long-term view of 8 to 10 years.²⁵
• World’s reliable drug supplier: Indian pharma imports 60 to 90 per cent of APIs (depending on type of API).²⁶ This heavy dependence on external sourcing, in addition to the disruption in the supply chains caused by the COVID-19 pandemic, has led to calls for self-sufficiency to enable India to become the world’s most reliable drug supplier. A recent announcement by the government of a $1.3 billion investment to develop three mega bulk drug parks, together with production incentive schemes to manufacture 53 critical bulk drugs, should help the industry become more self-reliant over the next five to eight years.²⁷

Conclusion
Moving from a time of transition to a bright future will depend on how the Indian pharma industry can tap into the short- and longer-term opportunities identified above. What is clear is that the time is right for all stakeholders, from government, academia and industry to invest in this future, to achieve the Indian government’s target of becoming a $5 trillion economy by 2025. However, to do so, the pharma industry will need to take some well-thought-out risks, embrace the right opportunities and, importantly, fire on all cylinders! One solution to reduce risks is to optimise the potential of digital technologies to help Indian pharma companies improve the efficiency and effectiveness of their drug development process, from discovery, through clinical trials to regulatory approval, making the whole process faster and cheaper than what is currently possible. I will explore the role of AI in the digital transformation of the pharma value chain in my next blog.

Pratik Avhad, Senior Analyst, Deloitte

Pratik is a senior analyst within the Insight team based in Hyderabad, India. He supports Deloitte’s UK Centre for Health Solutions by producing independent and objective business research and analysis into key industry challenges and associated solutions.

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¹ https://www.investindia.gov.in/sector/pharmaceuticals
² https://health.economictimes.indiatimes.com/news/industry/india-playing-pharmacy-of-the-world-role-during-covid-19-crisis-sco-secretary-general/76492871
³ https://www.gilead.com/purpose/advancing-global-health/covid-19/voluntary-licensing-agreements-for-remdesivir
⁴ https://www.straitstimes.com/asia/south-asia/india-pharmacy-of-the-world-in-overdrive
⁵ https://www.clinicaltrialsarena.com/news/india-trials-second-covid19-vaccine/
⁶ https://www.thehindubusinessline.com/opinion/editorial/indias-dependency-on-china-for-pharma-bulk-drugs-must-be-addressed/article30736188.ece
⁷ https://www.deccanherald.com/national/pharma-sector-reels-as-coronavirus-rages-in-china-806025.html
⁸ https://www.tribuneindia.com/news/business/lockdown-hits-output-of-pharma-firms-64018
⁹ https://www.medicalbuyer.co.in/limited-covid-19-impact-on-indian-pharmaceuticals-market-to-grow-in-size/
¹⁰ https://www.thehindubusinessline.com/economy/policy/govt-puts-export-curbs-on-26-pharma-ingredients-medicines/article30971571.ece
¹¹ https://www.business-standard.com/article/companies/antibiotic-sales-drive-domestic-pharma-mkt-down-11-2-in-lockdown-hit-april-120051301499_1.html
¹² https://www.business-standard.com/article/companies/covid-19-crisis-drug-sales-in-may-down-9-fiscal-growth-to-be-flat-120060900046_1.html
¹³ https://www.indiaratings.co.in/PressRelease?pressReleaseID=41265&title=Limited-COVID-19-Impact-on-Indian-Pharmaceuticals%3B-Market-to-Grow-in-Size
¹⁴ https://www.indiaratings.co.in/PressRelease?pressReleaseID=41265&title=Limited-COVID-19-Impact-on-Indian-Pharmaceuticals%3B-Market-to-Grow-in-Size
¹⁵ https://www.indiaratings.co.in/PressRelease?pressReleaseID=41265&title=Limited-COVID-19-Impact-on-Indian-Pharmaceuticals%3B-Market-to-Grow-in-Size
¹⁶ https://blogs.deloitte.co.uk/health/2020/03/the-indian-pharmaceutical-industry-the-pharmacy-of-the-world.html
¹⁷ https://www.ipa-india.org/static-files/pdf/publications/position-papers/2019/ipa-way-forward.pdf
¹⁸ https://www.ipa-india.org/static-files/pdf/publications/position-papers/2019/ipa-way-forward.pdf
¹⁹ The Economist Intelligence Unit
²⁰ https://indiancompanies.in/top-10-pharma-companies-in-india/
²¹ https://www.iqvia.com/insights/the-iqvia-institute/reports/global-medicine-spending-and-usage-trends
²² https://www.ipa-india.org/static-files/pdf/publications/position-papers/2019/ipa-way-forward.pdf
²³ https://www.ipa-india.org/static-files/pdf/publications/position-papers/2019/ipa-way-forward.pdf
²⁴ https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/challenges-in-the-emerging-cell-therapy-industry.html
²⁵ https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/challenges-in-the-emerging-cell-therapy-industry.html
²⁶ https://www.expresspharma.in/uncategorized/making-india-pharma-inc-self-sufficient/
²⁷ https://www.investindia.gov.in/siru/government-indias-measures-boost-business-improve-eodb-welcome-fdi-during-covid-19