Pharma a key sector in driving India’s next wave of competitiveness

The Indian pharmaceutical industry is projected to surpass other leading emerging economies in the 21st century as a global centre for end-to-end drug discovery and innovation

With a new government in place, projections of solid growth, and a flourishing middle class, investors appear increasingly willing to back India. This is precisely what would be required to drive its next wave of competitive industries, according to a new report by Deloitte Touche Tohmatsu.

Deloitte Global’s latest competitiveness report, 'Competitiveness: Catching the next wave in India', examines the sectors that would be critical to India’s future advancement, the challenges they face, and the potential for growth. The report also outlines the policy initiatives, including an emphasis on infrastructure, partnership with business, and better central-state coordination, that would be essential for India to realise its full potential.

Pharma is one of the key industry sectors poised to drive growth in India over the next 30 years. Deloitte noted that low investment and poor health infrastructure in India have traditionally limited the growth of this sector. However, the Indian pharmaceutical industry is projected to surpass other leading emerging economies in the 21st century as a global centre for end-to-end drug discovery and innovation.

Limited affordability and insurance coverage, low awareness of diseases, poor basic hygiene and living conditions, and shortage of a skilled workforce pose major hurdles to growth

The changing profile of health problems, rise in early detection of acute diseases, and increasing availability of treatment facilities have boosted the demand for drugs, as well as the need for healthcare diagnostic facilities in the metropolitan areas due to a rising middle class, the report stated. It added that although a large proportion of the rural Indian market still remains untapped, it represents a huge growth opportunity for pharmaceutical companies.

With regards to the key challenges, the report noted that low spending on healthcare and poor health infrastructure in India have restrained the growth of the sector. Total healthcare expenditure in India was only 3.9% of GDP in 2013 (of which government spending accounted for only 1%), compared with 8.9% for Brazil, 6.2% for Russia, and 5.2% for China.

According to the World Health Organisation, the doctor:patient ratio in rural areas is 1:20,000, versus the urban ratio of 1:2,000. Limited affordability and insurance coverage, low awareness of diseases, poor basic hygiene and living conditions, and shortage of a skilled workforce pose major hurdles to growth.

The sale of patented products may pick up in 5–10 years with the implementation of improved patent laws and increased reach of health insurance to the public

Domestic and international pharmaceutical companies operating in India face issues ranging from the new Drug Price Control Order, which sets a ceiling on the prices of several essential medicines, to drug and clinical trial quality, patent issues, regulatory pressures, and misclassification of medical devices.

Delays in drug approvals following the new regulatory controls are prompting multinationals to rethink their strategy of conducting clinical trial activity in India, the report added.

Commenting on the road ahead, Deloitte said that generics account for approximately 75% of the drug market, and will continue to dominate in the medium term to long term. However, the sale of patented products may pick up in 5–10 years with the implementation of improved patent laws and increased reach of health insurance to the public.

With better public awareness of common ailments and the ease of availability of products everywhere – from post offices to local department stores – the over-the-counter segment is expected to be one of the potential growth drivers for the sector.

The government has unveiled 'Pharma Vision 2020', with a goal to make India a global leader in end-to-end manufacturing. These initiatives would help boost investments in this sector. Significant investments by multinationals and public private partnerships for strengthening health infrastructure would propel the pharmaceutical sector to new heights, the report added.

India is poised for improved prosperity as new government reforms begin to take shape

'India is poised for improved prosperity as new government reforms begin to take shape,' said Gary Coleman, Deloitte Global Managing Director for Industries. 'To fully realise its potential, India must continue to invest in infrastructure, particularly transport networks and power systems, as well as work to enhance the employability of its working population.

'In addition, adopting an environment that enables innovation and collaboration to flourish across borders is critical to India’s economic growth.' Anis Chakravarty, Senior Director, Deloitte India said, 'Recent announcements made by the government signify a sentiment change, which can lead to a significant boost to the Indian economy. As policies start to take shape, it will be critical to take advantage of the demographic dividend, not just through the creation of jobs and employment, but also by developing a clear roadmap to navigate tough economic reforms.'

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