In a white paper entitled “CII-Interlink Paper on Growth Agenda of pharmaceutical industry in India”, prepared in August 2008 for Confederation of Indian Industry (CII), Interlink- a business and management consulting firm in the pharmaceuticals and healthcare industry, has developed an income consumption model to forecast growth of pharmaceutical industry by 2015.
The growth of pharmaceutical industry in India is facilitated by health consciousness of people, affordability due to rising incomes of expanding middle class and also health insurance facilities. A large number of untreated and under-treated medical conditions will lead to higher demand for newer and better medicines. In addition to this potential market, rural markets offer a substantial growth for the pharmaceutical industry.
Interlink has quantified market growth of six specific growth drivers. These include middle class population, health insurance facilities, unpenetrated markets, marketing efficiencies, generics and brand development. These drivers taken together will contribute 6.64% of market growth. The pharmaceutical market is estimated to grow at 19.64% by 2015.
These developments will trigger pharmaceutical industry to be more focussed to meet the challenges of innovative new medicines and contain pricing pressures.
As per CII - Interlink study, the following factors will contribute to incremental growth rate of the Indian pharma market in 2015.
Middle Class- 2%. We expect the expanded middle class to drive 2% incremental growth as it will be consumer of new, value added products.
Pricing- 1%. Since relaxation of price control has slim chances, pricing will drive only 1% growth.
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Rural Markets-2% .Rural markets are expected to contribute 2% incremental growth as rising disposable incomes of rural people are likely to make them steady consumers of old products.
Marketing Efficiencies -1%. Enhancing marketing efficiencies resulting in higher marginal productivity of the sales force is expected to contribute 1% incremental growth by achieving deeper market penetration and higher returns on investment.
Health Insurance- 0.14%. Increase in Health insurance, even at optimistic growth rates can impact the market only marginally resulting in incremental growth rate of only 0.14%.
Brands –0.5% Brands can drive incremental growth of 0.5% by creating differentiated products originated and developed in India with a global market for themselves.
The year 2008 has been described as an important inflection point for the global pharmaceutical industry. The significant developments motivating the pharmaceutical industry in India to become stronger in both domestic and global arena include the shift of pharma market from mature markets like North America, Europe and Japan to emerging markets like E-7 countries which will register higher growth rate; more focus of specialty products as compared to primary care products; expansion of generic market; loss of patents of leading products; strong and persistent demand for more effective healthcare delivery.
According to Mr Anjan Das, Senior Director, CII, “A large number of global pharma companies will look forward to initiate collaborative alliances with Indian companies in research, manufacturing and even distribution.”
Dr.R.B. Smarta, Managing Director of Interlink has developed a distinction between factors contributing to value addition and value creation. Interlink focused on value creation as it drives the growth. Value creation comes from drug discovery, biotechnology, manufacturing, innovation and technology, wellness industry and brands. Value addition comes from CRO, CRAMS, APIs and M&A activity.
Although Indian economy cannot remain insulated from global economic factors such as oil prices and food shortages, it has a much better adjustment capacity. India can aspire to be in the league of developed economies by 2015. It will drive the global market rather than being driven by global forces. India has both capabilities and competitive edge in terms of entrepreneurship, innovation and talents of becoming a strong global hub in both research and manufacturing.