2024-01-18

An Overview of the Indian Pharma Industry in 2023

Following a period of higher revenue during the Covid-19 pandemic (mostly as a result of increased demand in particular categories, like vaccinations and anti-infectives), the Indian pharmaceutical business has remained strong in 2023. The domestic formulations market is expected to increase at a rate of 8–10 percent CAGR (USD 20–22 billion) in FY24, which is marginally lower than the growth rate in the pre-pandemic era. We forecast 10 percent (USD 22–24 billion) growth in exports for FY24, compared to a 15 percent CAGR historical long-term growth in pre-covid era. In the US market, regulatory scrutiny and pricing pressures remain major barriers. Due to continued intense competition from China, APIs have been growing slowly between FY18 and FY23, with a CAGR of nearly 5 percent.

Key Emerging Trends in the Indian Pharmaceutical Industry in 2024

Domestic Market

The historical model of success which is driven by brand-distribution-doctor will likely face threats from rising genericization, price pressure (due to NLEM and increased competition), etc., Volume expansion will need to take precedence over price led growth.

Recent measures by CDSCO and state licensing bodies against sub-standard players indicate that the government is putting a stronger emphasis on quality standards in the domestic market. This is likely to encourage overall consolidation and higher share of the major quality-focused players, including both captive and contract manufacturers.

Successful companies businesses will focus on specialty products and therapies, there will be an emphasis on growing local micro markets, and improved patient interaction with digital programs (Beyond the Pill)   

Exports Market

Concerns about regulatory compliance, increased competition, and pricing pressures in the US market will likely pose challenges to formulation export growth.

Exports will grow faster and successful Indian players in exports will have a mix of conventional products and complex generics (injectables, inhalation, sprays etc.), bio-similars as well as new products (branded)

R&D will primarily be focused on delivery changes (complex generics)/ new formulation. NCE introductions are unlikely to be significant – both in terms of investments and out licensing

APIs and Import Substitution

The Production-Linked Incentive (PLI) scheme and an industry view to reduce dependence on China is driving Indian API companies to indigenise intermediates and KSMs and to improve competitiveness in the medium term. Private Equity-led consortiums are fostering consolidation and investments to build scale, potentially leading to a move into Contract Development and Manufacturing Organizations (CDMOs).

An Overview of Indian Healthcare industry in 2023  

The Indian Healthcare industry continued its healthy growth in 2023 and reached a value of USD 372 bn driven by both private sector and government. The government continues to play a critical role in the sector with its focus on creation of facilities in rural India – for primary healthcare and ensuring availability of diagnostics, funding medical insurance to the low-income population (through Ayushman Bharat), driving penetration of generic medicines (through Jan Aushadhi centers) as well as funding R&D in medical technologies and diagnostics in various labs and through ICMR.

Govt. spending on healthcare as a share of GDP has shown a 33 percent growth from 1.4 percent in 2019 to 2.1 percent in 2023. The government has also been allocating investments to support healthcare start-ups and ecosystem. Out of pocket spend on healthcare is at 45 percent (in 2020) compared to 63 percent in 2014 – indicating both increased penetration of insurance as well as government spend..

On the other hand, the private sector has been investing strongly in capacity creation across areas (hospitals, diagnostics, medical devices etc.) as well as laying the foundation for long term growth through skill development.

Key Emerging Trends in the Indian Healthcare Industry in 2024

Covid Induced Transformations in Healthcare: Specific trends in patient behaviour induced by Covid will continue to strengthen and accelerate e.g. Telemedicine and Remote Healthcare (supported by mobile and internet connectivity) has become mainstream with leading hospitals and other private players offering it.

Consolidation in Hospitals Sector: PE firms, MNC players, and other large national hospital chains will focus on acquiring smaller standalone private hospitals (in both large centres and in Tier-2 and 3 cities). This trend is already evident and various factors are contributing to this e.g. lack of succession planning among the promoters of family-owned private hospitals, profitability impacted due to compliance with EWS reservation requirements  in hospital beds as well as overall challenge in competing with larger players for purchase of medicines and equipment, lack of quality workforce etc.

Increased Indigenisation of Manufacturing in India: There is an increased focus on local manufacturing of medical devices and components in India. The Government has initiated several schemes such as the successful PLI scheme, the Public Procurement Order (PPO) forcing government organisations to purchase local products, Government e-Marketplace, and MedTech clusters will further be enhanced.

Advent of Digital Healthcare Technology: Digital technologies will find increased usage across various healthcare areas including Diagnosis Technologies (e.g. AI in medical imaging, smart wearables for real time diagnostics), service delivery enhancement (pathology workflow automation, omnichannel diagnostics service platforms), optimising healthcare delivery (e.g. Big Data Analytics of patient data at Hospital Labs), Point of Care Testing (PoCT) in remote areas.

Increased focus on compliance and quality standards: 2024 will see the medical devices industry coming under full regulatory scrutiny by CDSCO with the implementation of standards for Class C and D devices (alongwith Class A and B implemented in 2023). This will ensure that uniform quality standards, testing and validation protocols are followed. Similarly, there will be an increased thrust on standardisation of diagnostic labs with the widespread adoption of NABL / QCI accreditations.