Study Suggests India's Drug Demand to Reach US$20 bil. in Less than a Decade

The US$6.3-billion Indian pharmaceutical market has received a boost from the latest findings of a study conducted by McKinsey confirming that the fresh demand for drugs and pharmaceutical products in the forthcoming years will propel growth in the size of the market to US$ 20 billion by 2015. Factors helping the surge include a growing middle class segment with disposable incomes, health insurance coverage, increasing incidences of lifestyle diseases such as diabetes and hypertension, and the expanding healthcare infrastructure both in private and public sectors.

Key Figures Highlighted in the Study

• Per capital disposable income is to grow to US$765 from US$463. An increase in middle class households will account for 40% of the projected growth.
• Health insurance coverage is to double to 220 million, accounting for 15% of the expected growth.
• Private-sector investment in the healthcare sector is to increase. The number of hospital beds is to double to 2 million, with the number of doctors to rise to 400,000 from 200,000. Medical infrastructure will account for 20% of the growth.
• The projected range for the rise in the pharmaceutical market is given at US$16 billion to US$24 billion. US$20 billion assumes the sustenance of current economic growth at 12.3% CAGR (compounded annual growth rate).
• Specialist treatments will make up 45% of the market, with patented products constituting 10% of the growth. India will rank tenth in the market, up from fourteenth in 2005, overtaking Brazil, Mexico, South Korea and Turkey.

Source: Economic Times, Khaleej Times and Business Standard.

Marketing practices, volume and scale, the relationship with the increasingly demanding Indian consumer and juggling these issues with the constraints of the Indian regulatory system will play into the future strategies of both home-grown and multinational companies. The study suggests that the battleground will shift from fighting off multinationals to consolidating a position against smaller rapidly growing firms for India's big pharma majors such as Cipla, Ranbaxy and Dr Reddy's. It reaffirms the need for Big Pharma to recognise and establish local units to impress its position in the growing domestic space or lose market share altogether.

Outlook and Implications

The study once again underpins the importance of the Indian pharma market in shaping international strategies for global pharma majors. The figures highlight several aspects of the industry that is set to be expanding in the years to come, driving the drug demand and consequently the value of the market overall. India's economic growth trajectory is a huge part of this story and healthcare and pharmaceutical industries were known to be impacted positively by the development. Multinationals for their part have had to struggle for their presence lately with the growing dominance of the home-grown pharma firms fuelled by a burgeoning exporting opportunity. The market is expected to become tougher even as the avenues open up as regulatory constraints have marred investment policies. This week, disappointed by the Indian courts' judgment on product patents, Novartis said it will consider pulling out all new investments in India. Some other multinationals also expressed concern. However, investments in India cannot be ignored, as has been highlighted in this report. The country's pharma market will be one of the most important markets for drug companies and a growing presence will be inevitable.