Look back of growth drive for Indian pharmaceutical industry after 75 years of independence and future roadmap.
This year, India is celebrating 75 years of independence from British rule and it is interesting to know Indian pharmaceutical industries have evolved from almost nonexistent to a world leader in the production of high quality generic medicines. India has garnered a worldwide reputation for producing high quality, low cost generic drugs. It is fascinating to know how Indian pharmaceutical industries have become the pharmacy of the world and now aiming to become the pharma market of the world.
At the time of independence in 1947, the value of the Indian pharmaceutical sector was around Rs. 10 Crore. The Indian pharma market was dominated by Western MNCs that controlled between 80 and 90 percent of the market primarily through importation. Approximately 99 percent of all pharmaceutical products under patent in India at the time were held by foreign companies and domestic Indian drug prices were among the highest in the world. The need for import substitution by strengthening technological capability, reducing foreign dominance, building indegenous capacity, encouraging small scale industries, reducing income inequalities was a necessity of time.
To survive against many odds, the first step was taken by the Indian Government by creating the Justice Bakshi Tek Chand Committee in 1949 to examine patent laws in the country. The committee recommended prevention of misuse or abuse of patent right in India and suggested amendments to sections 22, 23 & 23A-G of the Patents & Designs Act, 1911 on the lines of the United Kingdom Acts 1919 and 1949. The committee also observed that the Patents Act should contain clear indication to ensure that food, medicine, surgical and curative devices are made available to the public at the cheapest price commensurate with giving reasonable compensation to the patentee.
The first central pharmacy council of India was constituted on 9th March 1948 to regulate educational requirements of the pharmaceutical sector. The Central Drug Research Institute Lucknow is one of the chains of national research laboratories under CSIR that was opened in 1951 to promote drug research in general; along with testing and standardization of drugs according to approved methods.
Pharmaceutical Inquiry Report Committee created in 1954 which recommended that foreign firms to operate in India, they would have to start manufacturing units. This committee also recommended reducing import duties on raw materials; Encouraging new units under government or private sectors. It recommended easing license processes for small scale units and implementing a system for fair trade prices under Drug Controller (India).With these recommendations, the Government of India had set up Hindustan Antibiotics Ltd, Pimpri in 1956 and two plants of Indian Drugs and pharmaceutical Ltd in 1961 at Hyderabad and Rishikesh.
Justice N Rajagopala Ayyangar Committee was appointed by the Government to examine the question of revision of the Patent law in 1957. The report was submitted in 1959 for provision of process patenting of drugs as against product patenting. As per the recommendations of this committee, the bill was introduced in parliament in 1965 which later became the first patent Act of Independent India that came into existence in 1970. However, the Act finally came into existence on April 20, 1972. It was truly a national patent Act wherein provisions were made to favour the domestic industry to a great extent.
The immediate effect of Patent Act 1970 was seen in the number of patent applications filed. In 1978-79 the patent applications filed in India fell to 1010 from 4200. However, the number of domestic firms that entered generic drug manufacturing increased, thereby ensuring that the prices of medicines effectively remained low and affordable.
In 1975, there were 116 units in the organised sector which were registered or licenced under the industries and more than 2500 small scale units were operating. The organised sector had 25 units with foreign equity exceeding 50% and 26 units with foreign equity of 50% or less.
The industry had been expanding its manufacturing activity and total turnover of this industry in respect of bulk drugs during 1973, was estimated at about Rs. 75 crores and that of formulations at Rs. 370 crores. The R&D Expenditure was just Rs. 4.5 crores per annum, about 1.1% of the total turnover.
Despite big turnover during that time, It was estimated that only 20% of the Indian population had access to those modern medicines.
The Hathi Committee was formed to study the pharmaceutical sector in 1975. The committee reported 116 essential medicines. The committee recommended developing the National Drug authority to ensure production and distribution of essential drugs to poor populations.
The Indian drug policy was shaped as a direct result of the recommendation of the Hathi Committee. MNCs had monopoly in pricing in the country where they kept the prices of non-essential medicines low and prices of essential medicines high. To control monopoly in the market, the Government created a price control regime known as Drug Price control order (DPCO) in 1966 and 1970 under essential commodities act 1955 by declaring drugs to be essential commodities. Thereafter DPCO came in 1979 and 1987. The DPCO regulated drug prices by allowing marked up prices, inclusive of profits by 40% life saving drugs, by 55% essential drugs and by 100% of less essential drugs. The DPCO has brought nearly 347 drugs under price control. Under DPCO 2013, the prices of 348 drugs appearing in the national list of essential medicine (NLEM 2011) covering 628 formulations have been brought under the purview of price control.
Prior to independence, the role of indigenous firms was limited. In 1901, Acharya P. C. Ray set up the Bengal Chemicals and Pharmaceutical Works (BCPW); a production unit for simple medical formulations from plant and animal tissues. BCPW was followed by Alembic Chemical Works (1907) and Bengal Immunity (1919). The research institutes established worked mostly in the area of malaria, tuberculosis and vaccines; Over the next few decades, various small-scale and large-scale domestic production units were established like Indo Pharma. Unichem. Chem Pharma, Chemical Industries and Pharmaceutical Industries (CIPLA), Calcutta Chemicals, Zandu Pharmaceutical Works, etc. The domestic industry saw a shift in production from aspirin and quinine salts to synthetic drugs, chemotherapeutics, alkaloids etc. Thus highlighting the progress of domestic pharmaceutical firms and research institutions towards self-reliance and self-sufficiency to meet the growing demand for affordable drugs.
In 1952, the market share of Foreign MNCs and Indian companies were 38% and 62% respectively, which grew for Foreign MNCs up to 68 % till 1970 before patent laws were enforced. The market share of foreign MNCs declined continuously after the process patent was adopted by India. In 1980, the market share of foreign MNCs declined to 50% and till 2004 it further declined to 23% in comparison to domestic pharmaceutical industries.
Subsequently, most foreign pharmaceutical manufacturers abandoned the Indian market due to the absence of legal mechanisms to protect their patented products. Accordingly, the share of the domestic Indian market held by foreign drug manufacturers declined to less than 20 percent in 2005. As the MNCs abandoned the Indian market, local firms rushed in to fill the void, and by 1990, India was self-sufficient in the production of formulations and nearly self-sufficient in the production of bulk drugs.
Thirty-five years of protection has enabled the Indian pharmaceutical industry to perfect its scientific and manufacturing capabilities, allowing many of its leading companies to move up the value- added chain. India’s pharmaceutical industry consists of large, medium, and small companies and is one of the world’s most price competitive. It is also highly fragmented with more than 20,000 domestic production units. Because of low barriers to entry and low capital requirements, the number of domestic pharmaceutical firms engaged in the formal and informal sectors expanded dramatically from 2,257 in 1970 to more than 20,000 in 2005.
In 1991, India launched massive economic reforms, stepping into the era of globalization. The new economic reforms propelled market liberalization synergizing with the world economy. This also marked the end of the ‘License-Raj’.
While India was jostling with her own internal reform- driven economic reconstruction, the world was adapting to a new-trade order, the TRIPS (Trade Related-Aspects of Intellectual Property Rights). TRIPS was adopted by most of the signatory member states of the World Trade Organizations but was in direct conflict with the Indian Patent Act, 1970. The TRIPS conferred product patent rights (in context of drugs) exclusively to the producer for a period of 20 years. It was pertinent for India to join the WTO. In 1995, post-economic liberalization and while moving into globalization, India joined the WTO. As a binding, India had to adopt the TRIPS agreement, Provisioning this adoption, the Indian Patent Act saw three landmark amendments namely Patent (Amendment) Act 1999 and Patent (Amendment) Act 2002. Patent (Amendment) Act 2005.
In 1999, The outcome of this act saw many foreign companies file for patent applications, with as many as 9000 companies filing for patent protection of their drugs. Roche (Switzerland) became the first company to win a patent application for its Hepatitis-C drug, Pegasys.
Post TRIPS, Foreign firms got an opportunity to revisit the pre-1970 monopolistic era. Theoretically, patent granting pushes for higher innovation by increasing the competition sphere and creating demand for greater technological capacity. However, the theory collapses when technological progress does not occur in the same capacity across developed and developing countries, leading to high costs and reduced access to medicines.
With changes in India’s patent laws in the early 1970s, Indian drug producers became experts in ‘reverse engineering’ and increased its supply of less expensive copies of the world’s best-selling patent- protected drugs. Under the new patent law, Indian drug markers can no longer manufacture and market reverse-engineered versions of drugs patented by foreign drug producers. To replace sales lost to TRIPs compliance, many of India’s leading pharmaceutical producers have increased their exports of generic drugs to the United States and Western Europe and entered into research and development agreements, mergers and acquisitions, and other alliances with foreign pharmaceutical firms.
When India joined the WTO in 1995, its pharmaceutical exports were valued at less than USD 600 million. By 2005, its exports had grown to USD 3.7 billion and accounted for more than 61 percent of industry turnover. This became possible by delaying the implementation of TRIPS by India which gave a chance to domestic industries to evolve and compete with foreign players.
TRIPS caused concern to domestic industries and they were seeking scope beyond generic manufacturing which led them to the field of research and development. And dometic industries had started investing in new entity research. Five domestic companies with highest capital values were Sun Pharma, Dr Reddys Lab, Cipla, Aurobindo Pharma and Ranbaxy which showed upward growth after 2005. Since 1995, total industry R&D spending has grown from nearly USD 30 million to more than USD 495.3 million in 2005-06.
After 2005, governments started concentrating on developing clusters based on a public-private partnership model.Till October 2006, there were around 32 pharmaceutical and biotech Special Economic Zone (SEZs) which received in-principal/formal approval. Out of these, 20 were dedicated to the pharmaceutical industry while 12 were dedicated to biotechnology.
The National Institute of Pharmaceutical Education & Research (NIPER) was established by the Government of India to cater to the long-standing demand for setting up a dedicated nodal agency for quality higher education and advanced research in the pharmaceutical sciences. First NIPER, SAS Nagar was established in 1998 and later in 2007, Government established six more at Hyderabad, Ahmedabad, Hajipur, Kolkata, Guwahati and Rae Bareli.
Domestic companies which were US centric for exports, then eyeing other potential markets of Japan. Japan was the world’s largest pharmaceutical market after the US. With sales worth USD 60 billion in 2006, it constituted around 11 per cent of the global market.
After 2005, many MNCs have turned to contract manufacturing and research services (CRAMS), co-marketing alliances, outsourcing of research and clinical trials to reduce costs, increase development capacity, and trim the ‘time to market’ for new drugs. These strategies permit MNCs to focus on their core profit making activities (competencies), such as drug discoveries and marketing, rather than on manufacturing. India has emerged as the principal destination for global pharmaceutical companies across the pharmaceutical value chain.
In 2009, India had more than 120 US Food and Drug Administration (FDA)- approved plants and approximately 84 UK Medicines and Healthcare products Regulatory Agency (MHRA)-approved plants, with capabilities to manufacture products with exceptional quality standards.
The Department of Pharmaceuticals was formed on July 2, 2008, under the Ministry of Chemicals and Fertilisers with the objective of focusing on the development of the pharmaceutical sector in the country and to regulate various activities related to the pricing and availability of medicines at affordable prices, R&D, the protection of intellectual property (IP) rights and international commitments related to the pharmaceutical sector.
During 2010, India's pharmaceutical industry was the third largest in the world in terms of volume and stood 14th in terms of value. The total turnover of India's pharmaceuticals industry between September 2008 and September 2009 was USD 21.04 billion. Of this the domestic market was worth USD 12.26 billion.
With renewed confidence in the IP regime, large pharmaceutical companies were continuing with patented drug launches in India. Global innovators had secured 302 drug patents from the Indian Patent Office as of October 2008, and this number is expected to grow in the next few years. Between 2005 and 2010, the Indian Patent Office has granted 3,488 product patents. While pharmaceutical MNCs already present in India are further consolidating their presence through acquisitions, many MNCs have staged a re-entry after 2005. The share of pharmaceutical MNCs in the domestic pharmaceutical market is estimated to increase to 35 per cent by 2015 from 25 per cent in 2008.
Since 2010, Foreign MNCs started targeting rural markets prominently. Rural India accounts for more than 70 per cent of all Indian households and close to two-fifths of the total consumption pie. Novartis rural initiative Arogya Parivar covered 25 million people in more than 18,000 villages. Sanofi-Aventis has launched Prayas, a continuing education programme for rural doctors across India. GSK has also strengthened its focus on rural outreach and has initiated a pilot project in Uttar Pradesh.
Indian pharmaceutical companies were ascending the value chain with a focus on innovation. By June 2010, the country’s top 20 leading pharmaceutical companies and their subsidiaries had received US FDA approval for 72 ANDAs. Both the industry and the GoI have enhanced the level of investments in R&D capabilities and infrastructure. Ranbaxy Laboratories, a subsidiary of Daiichi Sankyo, was the top R&D spender during 2009–2010 at USD 102 million.Few indigenous pharmaceutical companies such as Sun Pharma and Piramal Healthcare have demerged their research divisions to form separate companies in the last few years.
Dr Reddy’s Laboratories' new chemical entity Balaglitazone is India’s first indigenously-developed molecule to enter the Phase III trial. The growing R&D pipeline of Indian companies presents significant in-licensing opportunities for global companies.
In March 2016, the government had banned 344 FDCs, adding five more to the list subsequently, following a report submitted by the Prof CK Kokate committee. But drug makers, including Pfizer, Procter & Gamble, Abbott, Glenmark, Sanofi, Wockhardt, Cipla, Lupin and Dr Reddy's, had immediately moved various courts against the decision. The Delhi High Court alone had received over 450 petitions seeking a stay on the ban. In December 2016, the Delhi High Court squashed the Centre's decision, noting that it had acted on the advice of a 'technical committee', instead of consulting the Drugs Technical Advisory Board (DTAB) or the Drugs Consultative Committee. The health ministry had challenged this ruling in the Supreme Court and, in December 2017, the latter directed DTAB to decide the fate of these FDCs. Incidentally, the DTAB has recommended restricted manufacture and sale of six other FDCs, subject to certain conditions based on their therapeutic justification. The SC also ruled that the government could not use the DTAB report to prohibit 15 of the 344 drugs in the original list as these have been manufactured in India since before 1988. According to The Times of India, this exception covers several popular cough syrups, painkillers and cold medication with sales amounting to over Rs 740 crore annually.
Jan Aushadhi Scheme was launched by the Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers, Government of India in November 2008. Till May 2014, only 80 ‘Jan Aushadhi Stores’ were in operation in selected States. The Government revamped the ‘Jan Aushadhi Scheme’ in September 2015 as ‘Pradhan Mantri Jan Aushadhi Yojana’ (PMJAY). To give further impetus to the scheme, it was again renamed as Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP). Till 31st January 2022, 8675 PMBJP Kendras are functional across the country. Government has kept the target to open 10500 PMBJP in the country by 2025 but there are chances that the number will be more than the target.
In the financial year 2020-21, sale of Rs. 665.83 Crore was made, which led to savings of about Rs. 4000 Crore to the citizens as compared to the branded medicines. In the current financial year 2021-22 (till 31.01.2022), PMBI has made sales of Rs. 751.42 Crore which led to savings of approximately Rs. 4500 Crore to the citizens.
In March 2018, Pradhan Mantri Jan Arogya Yojana (PMJAY) was launched as an ambitious reform to the Indian health system that seeks to provide financial health protection for 500 million of the most vulnerable Indians and halt the slide of the 50–60 million Indians who fall into poverty annually as a result of medical-related expenditure. As a result, Poor patients of the country can easily get access to certain medical procedures which were not affordable in the past. Ultimately, it led to an increase in the patient pool for pharmaceutical and medical devices industries.
Online pharmacies are becoming domestic bulk buyers from pharmaceutical industries. The revenue of the online retail sector stood at INR 38.15 Bn in 2020 and is likely to reach 317.87 Bn in 2026. Online Pharmacy offers 10-20 % discount than offline medicines or retail pharmacy. Online players cut out so many of the costs — real estate, inventory, salaries to employees, utilities, intermediaries etc.
In 2020, the pharmacy retail market was valued at INR 1,783.83 Bn and is expected to reach INR 3,078.46 Bn by 2026, expanding at a CAGR of 12.02 percent. The organized retail pharmacy sector stood at INR 134.21 Bn in the same year and is anticipated to reach INR 370.39 Bn by 2026.
The emergence of retail pharmacy chains is expected to organise the currently unorganised Indian retail pharmacy sector. Modern retail pharmacy chains have the advantage of being digitised, organised and tech enabled. This helps them to track medicine inventories, sales and patient records. They have neat and appealing displays that attract customers to browse at ease and inquire about a range of healthcare and wellness products.
Zydus Pioneers a Breakthrough With LIPAGLYN, India's First NCE to Reach the Market. In December 2020, Zydus Lifesciences (formerly Zydus Cadila) saroglitazar (brand name, Lipaglyn) was given fast-track designation by the US Food and Drug Administration (FDA) to treat individuals with PBC. The drug also received orphan drug designation in January 2021. In 2012, Zydus submitted a new drug application (NDA) for Lipaglyn’s approval to the Drug Controller General of India (DCGI). The company received marketing approval for Lipaglyn from the DCGI for treating diabetic dyslipidaemia in T2D patients in June 2013. Saroglitazar Mg received orphan drug designation for the treatment of PBC from the European Medical Agency in July 2021. The company had spent USD 250 million developing Lipaglyn, which took nearly 12 years to fructify. It will be spending another USD 150-200 million to launch the drug in overseas markets.
As India reeled under the impact of the Covid-19 pandemic, its healthcare sector rose to the the occasion and was able to manufacture and maintain supply chains even during the lockout period, and exported medicines such as hydroxychloroquine and paracetamol to more than 150 countries, keeping its image of ‘Reliable Pharmacy of the World’.
In January 2021, India rolled out the world’s largest vaccination drive on to vaccinate around 300 million priority groups against the coronavirus disease (COVID-19). Initially, two vaccines, COVAXIN and COVISHIELD, were considered by the Government of India and the Indian government provided it to large masses free of cost. As per today, India’s Cumulative COVID-19 Vaccination Coverage exceeds 207.99Cr. Out of which 93.78cr Second Dose and 12.07cr Precaution Dose) have been administered so far under Nationwide Vaccination Drive.
NIPER amendment bill passed in December 2021, which makes NIPER as institute of National Importance to boost pharmaceutical research. National Importance refers to an autonomous institute established under an Act, with the power to hold examinations, grant degrees, diplomas and other academic distinctions or titles. These institutes of national importance receive funding from the central government.
Today, India is the largest provider of generic drugs globally. Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by value. The domestic pharmaceutical industry includes a network of 3,000 drug companies and around 10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.According to the Indian Economic Survey 2021, the domestic market is expected to grow 3 times in the next decade. India’s domestic pharmaceutical market is estimated at USD 42 billion in 2021 and likely to reach USD 65 billion by 2024 and further expand to reach around USD 120-130 billion by 2030. India's biotechnology industry comprising biopharmaceuticals, bio-services, bio-agriculture, bio-industry, and bioinformatics. The Indian biotechnology industry was valued at USD 64 billion in 2019 and is expected to reach USD 150 billion by 2025. India’s medical devices market stood at USD 10.36 billion in FY20. The market is expected to increase at a CAGR of 37% from 2020 to 2025 to reach USD 50 billion. As of August 2021, CARE Ratings expect India's pharmaceutical business to develop at an annual rate of 11% over the next two years to reach more than USD 60 billion in value.
Under Union Budget 2021-22, the Ministry of Health and Family Welfare has been allocated Rs. 73,932 crore (USD10.35 billion) and the Department of Health Research has been allocated Rs. 2,663 crore (USD 365.68 billion). The government allocated Rs. 37,130 crore (USD 5.10 billion) to the 'National Health Mission’. PM Aatmanirbhar Swasth Bharat Yojana was allocated Rs. 64,180 crore (USD 8.80 billion) over six years. The Ministry of AYUSH was allocated Rs. 2,970 crore (USD 407.84 million), up from Rs. 2,122 crore (USD 291.39 million).
To achieve self-reliance and minimise import dependency in the country's essential bulk drugs, the Department of Pharmaceuticals initiated a PLI scheme to promote domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four separate ‘Target Segments’ with a cumulative outlay of Rs. 6,940 crore (USD 951.27 million) from FY21 to FY30.
In June 2021, Finance Minister Ms. Nirmala Sitharaman announced an additional outlay of Rs. 197,000 crore (USD 26,578.3 million) that will be utilised over five years for the pharmaceutical PLI scheme in 13 key sectors such as active pharmaceutical ingredients, drug intermediaries and key starting materials.
In August 2021, Union Health Minister, Mr. Mansukh Mandaviya announced that an additional number of pharmaceutical companies in India are expected to commence manufacturing of anti-coronavirus vaccines by October-November 2021. This move is expected to further boost the vaccination drive across the country.
In February 2021, the Punjab government announced to establish three pharma parks in the state. Of these, a pharma park has been proposed at Bathinda, spread across 1,300 acres area and project worth Rs. 1,800 crore (USD 245.58 million). Another medical park worth Rs. 180 crore (USD 24.56 million) has been proposed at Rajpura and the third project, a greenfield project, has been proposed at Wazirabad, Fatehgarh Sahib.
The Prime Minister also envisioned creating an eco-system for innovation that will make India a leader in drug discovery and innovative medical devices. He said policy interventions are being made based on wide consultation with all stakeholders. He noted that India has a large pool of scientists and technologists with a potential to take the industry to greater heights.
In many of his speeches, the Indian Prime minister talked about the nation's vision as ‘vasudhaiva kutumbakam’ which means the whole world is a family. And the pharmaceutical industry is proving it right in a real way. All the evolution of the pharmaceutical industry and Indian policies will boost employment opportunities and the Pharmaceutical industry is a skill based industry which will need skilled pharmaceutical professionals for further growth. Apart from that few foreign pharma corporates are setting their headquarters for regulatory and clinical trial requirements in India which again boosting the domestic hiring.
The Global pharmaceutical market is around 1.3 trillion USD and we have plenty of opportunities to thrive and grab the market. As the overall economy is growing for the country, India will require more research molecules to stay ahead in the competition.
"In Pharma, I think India is going to be a World Leader. A lot of manufacturing activity is going to come into India", said, Late Rakesh Jhunjhunwala, one of India's biggest investor on economic revival in India.
REFERENCE:
William Greene, The Emergence of India’s Pharmaceutical Industry and Implications for the U.S. Generic Drug Market, U.S. International Trade Commission, 2007
Nisha Chandran and Samir K. Brahmachari , Policy as a driver of economic growth: historical evidence from the Indian pharmaceutical industry, Current Science 114(6), 2018, 1181-1193
Chaudhry S, WTO and india's pharmaceutical industry 2005, Patent Protection, TRIPS, and Developing Countries, Oxford University Press
RBI bulletin, Drivers of Indian Pharmaceutical Exports, 2021
.png)
