The pharmaceutical industry in India was valued at an estimated US$50 billion in FY 2023-24 and is estimated to reach $130 billion by 2030. India is often described as the “pharmacy of the world,” supplying around one-fifth of global demand for generic medicines and exporting pharmaceuticals to over 200 countries in 2023–24, with approximately 70% of exports destined for highly regulated markets such as North America and Europe. In the United States, Indian pharmaceutical companies supply nearly half of all generic prescriptions by volume. India is also the largest vaccine manufacturer globally by volume, accounting for over 60% of the world’s vaccine production.
According to Economic Survey 2023, the turnover in the domestic pharmaceutical market was estimated to be $41 billion. India's pharmaceutical exports revenue was $25.3 billion in fiscal year 2022–23, according to the data released by Pharmexcil. India ranked third globally in terms of dollar value of drugs and medicines exports.
Major pharmaceutical hubs in India are, broadly anticlockwise from the northwest: Baddi, Paonta Sahib, Sikkim, Kolkata, Visakhapatnam, Hyderabad, Bangalore, Mysore, Chennai, Pondicherry, Goa, Mumbai, Navi Mumbai, Pune, Aurangabad, Indore, Pithampur, Ahmedabad, Vadodara, Ankleshwar, and Vapi.
Overview
As of 2023, the Indian pharmaceutical industry is the world's 13th largest by value and third largest in the world by volume. The industry produces over 60,000 generic drugs in different 60 therapeutic categories. India's revenue from pharmaceutical exports was $25.3 billion in the 2022-2023 financial year. In terms of the global market, India currently holds an accountable share and is known as the pharmacy of the world. The country is the largest global supplier of generic medicine. India produces more than 50% the world's vaccines. It supplies 40% of the US's demand for generic drugs. India gained its foothold on the global scene with its innovatively-engineered generic drugs and active pharmaceutical ingredients (API), The country accounts for around 30% (by volume) and about 10% (value) in the US$70–80 billion US generics market. Growth in other fields notwithstanding, generics are still a large part of the picture. The Indian pharmaceutical industry supplies over 50 per cent of the global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in the UK. India is the largest contributor in UNESC with over 50-60% share.
As of 2023, there are about 670 USFDA-approved manufacturing facilities in India, the highest for any country outside the US.
Industry sector development
Government intervention
The Indian government established the Department of Biotechnology in 1986 under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. India's science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large animals as part of the minister's initiative. States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities.
The Government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970. The government has addressed the problem of educated but unqualified candidates in its Draft National Biotech Development Strategy. This plan included a proposal to create a National Task Force that will work with the biotech industry to revise the curriculum for undergraduate and graduate study in life sciences and biotechnology. The government's strategy also stated intentions to increase the number of PhD Fellowships awarded by the Department of Biotechnology to 200 per year. These human resources will be further leveraged with a "Bio-Edu-Grid" that will knit together the resources of the academic and scientific industrial communities, much as they are in the US.
The biotechnology sector faces some major challenges in its quest for growth. Chief among them is a lack of funding, particularly for firms that are just starting out. The most likely sources of funds are government grants and venture capital, which is a relatively young industry in India. Government grants are difficult to secure, and due to the expensive and uncertain nature of biotech research, venture capitalists are reluctant to invest in firms that have not yet developed a commercially viable product.
Incentives for R&D, product development and high-value production
Government of India has launched a Production Linked Incentive (PLI) Scheme for Pharmaceuticals with provision for disbursal of US$2 billion or 15,000 crore government incentives, which will run from 2020–21 to 2028–29, to reduce import dependence, benefit domestic manufacturers, boost product diversification and innovation for development of complex and high-tech products especially in in vitro diagnostic devices and emerging technologies especially in cell based or gene therapy, employment generation and production of wide range of lower cost affordable medicines for consumers with the aim to achieve incremental sales of US$4 billion or INR 29,400 crore and incremental exports of US$2.7 billion or INR 19,600 crore between 2022–23 to 2027–28.Cabinet approves Production Linked Incentive Scheme for Pharmaceuticals, Press Information Bureau of India, 24 Feb 2021.
Manufacture of API supplies in India
To eliminate the dependence on China after the 2017 China–India border standoff to foster an Atmanirbhar Bharat, in July 2021 India's Council of Scientific and Industrial Research (CSIR) initiated a Make in India program in collaboration with the coal and petroleum industries of India to end-to-end manufacture 56 prioritised active pharmaceutical ingredient (API) for the essential medicines. In 2016–17, China was the largest supplier of API to India with 66% share by volume of API raw material supplies to India worth US$2.4 billion or INR 18,000 crore, followed by US$1.6 billion API imported from Germany, the US, Italy and Singapore are other major suppliers to India.CSIR working on making 56 bulk drugs in India as Modi govt wants to cut imports from China, The Print, 3 July 2021.
Foreign investment
Per India's Consolidated FDI Policy, 2020 (the "FDI Policy"), foreign direct investment ("FDI") in the pharmaceutical sector in greenfield (new) projects is permitted up to 100% without the approval of the Department of Pharmaceuticals (the "DoP"). In brownfield (existing) projects, FDI exceeding 74% requires the investor to seek prior approval from the DoP in compliance with the prescribed conditions under the FDI Policy.
Separately, FDI up to 100% is permitted for the manufacturing of medical devices for both greenfield and brownfield projects without the approval of the DoP.
An FDI approval from the DoP can be obtained within a period of ten to twelve weeks from the date of the application, depending on the completeness of the documentation submitted by the investor in support of the application, failing which, this timeline could vary.
Relation between pharma and biotech
India's biopharmaceutical industry clocked a 17% growth with revenues of Rs. 137 billion ($1.8 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at Rs. 8,829 crore, followed by bio-services at Rs. 2,639 crore and bio-agri at Rs. 1,936 crore. Indian companies carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs which became the advantage for industry.
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India, with biotech a much smaller part of the economy. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 13th in the world in number of biotech. In 2004–5, the Indian biotech industry saw its revenues grow 37% to $1.1 billion. The Indian biotech market is dominated by biopharmaceuticals; 76% of 2004–5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep the market in bio-generics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities.
Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. At last count there were 265 firms registered in India, over 92% of which were incorporated in the last five years. The newness of the companies explains the industry's high consolidation in both physical and financial terms. Almost 30% of all biotech are in or around Bangalore, and the top ten companies capture 47% of the market. The top five companies were homegrown; Indian firms account for 72% of the bio-pharma sector and 52% of the industry as a whole.[4,46] The Association of Biotechnology-Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible.
Comparison with the United States
The Indian biotech sector parallels that of the US in many ways. Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies. Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable for years. Pharmaceutical companies in both countries see growth potential in biotechnology and have either invested in existing start-ups or ventured into the field themselves.
Research and product development
Product development
Indian companies are also starting to adapt their product development processes to the new environment. For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and thus a legitimate competitor in the global industry. Local firms have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities. To push for further R&D the government is planning to introduce a Research Linked Incentive (RLI) Scheme on the lines of Production Linked Incentive Scheme to encourage development of new medical products.
Patents