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Sunday, 2 December 2018
Future of pharma outsourcing
The pharmaceutical industry’s main markets are under serious pressure. North America, Europe and Japan jointly account for 82% of audited and unaudited drug sales; total sales reached US$773 billion in 2008, according to IMS Health. Annual growth in the European Union (EU) has slowed to 5.8%, and sales are increasing at an even more sluggish rate in Japan (2.1%) and North America (1.4%).1 Impending policy changes, promoting the use of generics in these key markets are expected to further dent the top- and bottom-line of global pharma majors. The industry is bracing itself for some fundamental changes in the marketplace and is looking at newer ways to drive growth.
More than that, India has a growing pharmaceutical industry of its own. It is likely to become a competitor of global pharma in some key areas, and a potential partner in others. India has considerable manufacturing expertise; Indian companies are among the world leaders in the production of generics and vaccines. As both of these areas become more important, Indian producers are likely to take a large role on the world stage – and potentially partner with global pharma companies to market their wares outside of India.
The Indian economy is worth about US$1,243 billion and rapidly getting bigger.2 Real GDP growth reached 9% in the year to March 2008.3 The rate of increase has since slowed down due to the global financial crisis; in the year to March 2009, growth eased to 6.7%.4 Even so, most forecasters believe that India will continue to show robust growth over the long-term; a survey of professional forecasters performed for the Reserve Bank of India (RBI) anticipates growth improving to 6% in the year ending March 2010,5 and expects robust growth of 7.8% p.a for the next ten years.6 Previous forecasts such as those of Goldman Sachs suggest that India will be the only emerging economy to maintain such an outstanding pace over the longer term, i.e. to 2050 you can check this in figure shown below
An expanding pharmaceuticals market
India’s pharmaceuticals industry looks set for a solid long-term growth. It already ranks fourteenth in the global league table, with sales of almost
US$19 billion in March 2009.10 However, PwC estimates that it will rise to approximately US$50 billion by 2020 – a 163% in the space of eleven years.11 Indeed, in our report, Pharma 2020: The vision, we anticipate that India will be one of the industry’s top 10 markets by 2020.
The Indian Government’s Department of Pharmaceuticals has also initiated operations for a peoples’ medicines shop, called ‘Jan Aushadhi,’ in various locations. These shops sell generic medicines at much cheaper rates than the price of corresponding branded medicines.18
PwC estimates that India’s 10 largest drug firms spent US$480 million on R&D in 2008. The bulk of this investment went towards developing new formulations, however R&D in the Indian pharmaceuticals industry is changing. The new patent regime means companies need to be more innovative, rather than relying solely on reverse-engineering existing formulations. The reliance on anti-infectives is also likely to lessen. As already noted, as the illnesses of affluence and age increase, the demand for many other types of pharmaceuticals will rise, and Indian pharma companies need to begin transforming their portfolios accordingly.
A number of Indian pharma companies have spun off their R&D divisions into separate units in order to scale up resources and to attract focused investments. DRL started the trend in R&D spin-offs in 2005. Piramal Life Sciences, Piramal Healthcare’s R&D division, was recently demerged from the latter. Sun Pharma Advanced Research and Ranbaxy Life Science Research have also been demerged from their parent companies Sun Pharma and Ranbaxy respectively. Some spin offs have faced difficulties stemming from uncertain resources and declining PE interest in research. Several companies are now seeking a collaborative approach towards drug discovery, in order to mitigate the risk associated with failure of a drug molecule.
The modern process for drug discovery and testing now generates very large quantities of data through computer modeling and simulations, genetic sequencing, and other data-intensive processes. Further, as we noted in Pharma 2020: The vision, pharma companies are under increasing pressure to document the efficacy of their products; tracking patient outcomes represents a further source of large quantities of data. In order to facilitate the storage, management, retrieval and analysis of this large pool of data, a new subsector of the IT sector has emerged – bioinformatics. Tools have been developed which can help lower cost, improve efficiency, and streamline the process of documenting a drug’s efficacy throughout development until launch and beyond.
Global pharma players can take advantage of a variety of options to maximise their investment in India. As many pharma companies turn to more collaborative business models, Indian companies are likely to play an increasingly important partnering role.