INDIA PHARMA 2015

Unlocking the Potential of the Indian Pharmaceutical Market

Presented by: Zaid Usmani

THE BACKGROUND

The Scenario
Real average household income in India has doubled over the past 2 decades. Disease pattern has also shifted to more incidences of chronic diseases due to stressful lifestyles. However, a sizeable part of the population is still susceptible to wide range of acute diseases.

The Scenario
Due to increased affordability, shifting disease patterns and modest healthcare reforms:
Healthcare spending grew at a compounded rate of 14% from 2000 to 2005. Pharm. Industry which accounts for 15-20% of total healthcare spend, grew at 9%.

McKinsey predict healthcare spending will witness the highest growth rate over the next 2 decades.

Healthcare Expenditure:

4% of avg household income in 1995

7% of avg household income in 2005

13% of avg household income in 2015*

* predicted

The How(s) & What(s)

How is the market likely to grow? To what extent will increasing incomes and spending power drive this growth? What role will health insurance and medical infrastructure play? How is the spending on Pharm. Products likely to differ in urban & rural areas? What share would the patent protected products capture? What are the implications of domestic players, multinational companies & policy makers?

The Research Model

The Demand Model was based on 5 fundamental growth drivers:
Income demographics Medical infrastructure build up Health Insurance penetration Disease incidences Competitive intensity

THE FINDINGS

The findings

This implies a compounded annual growth rate of 12.3 % materially higher than 9% in 2000-2005.

The incremental growth of 14 US $ billion is third largest among all markets.

The findings

Real GDP will grow at 7.3% compounded annual rate. Per capita disposable income will rise from US$ 463 in 2005 to US$ 765 in 2015. Health insurance penetration is expected to double by 2015 to cover 220 million people.

The findings

Despite this, mass therapies will remain However, Generics will continue to dominate the Indian market . significant due to 2 reasons: Factors influencing the patent-protected products: Reasons: Gap between prevalence & treatment Current pipeline of generic products is strong. rates Global product pipeline is high. Domestic players have the opportunity to Share of the pipeline introduced 140 million people will move above the in India. develop new combinations & formulations of poverty line in the coming decade, thus Time gap between the global & India launchesexisting products. New generic launches from the Pre-1995 the basic healthcare spending &products launched increasing Likely commercial success of the basket ( approx. 200). consumption of mass therapy drugs.

Growth in sales & marketing infrastructure of domestic companies.

The findings

Market for patented products would be concentrated in:

Neuropsychiatry Oncology Anti-Infective Gastro-Intestinal Cardiovascular

Nearly 45% of the market growth in the next 2 decades will take place in the tier-2 markets.
The market size would be around US $8.8 billion. Strong shift in income demographics being the main reason for the growth potential for the tier-2 markets. By 2015, these markets will add 46 million households with high and medium levels of affordability. Significant rise in affordability. Higher prevalence of lifestyle-related aliments. Opportunity for further intensifying coverage of GPs. Will have the steepest rise in standards of healthcare infrastructure.

These therapies would contribute 60-70% of total patented product launches.

Tier-1 markets would remain important because:

THE IMPLICATIONS

The implications
Upcoming changes would create opportunities for both Indian & Multinational companies alike. In Tier-1: Mass therapy- US$ 5.7 billion Specialty therapy: US$ 5.5 billion In Tier-2: Mass & Specialties therapy- US$ 8.8 billion Biologicals: US$ 1.4 billion Institutional Sales: US$ 4.1 billion Changes have been observed in the past 5 years in the relative performance of the pharmaceutical companies in India. Rising influence of retail which currently constitutes of less than 1 % of the Pharmaceutical market

The implications for Indian players

Shift focus from market share capture to market creation:
Expanding the prescriber base to CPs & GPs for anti depressants.

Sustain product access:

For local players- 200+ pre 1995 products. New innovative fixed dose combinations. In-licensing

Adopt new and differentiated business models:

Sales infrastructure needed and expected financial returns would differ across Tier-1 and Tier-2 markets.

Strengthen sales and marketing capabilities:

Upgrade sales & marketing capabilities. Capabilities to be improved include:
New product development Brand lifecycle management Marketing spend effectiveness Sales force effectiveness

The implications for Multinationals

Clarify aspirations for India business:
Can either focus on high end specialised segments and be niche players Could aspire to be the market leaders by introducing a full portfolio of products, extending presence to generics and indigenising their business models.

Invest in local organisations:

Strong local team with local market experience is the key to success. Corporate organisation and senior leaders need to visibly support and champion India business.

Customise the strategy and business model:

The implications for Policy makers

Emphasise access through health insurance:
Govt. should play 3 roles in this area:
Encourage private health insurers through regulatory reform Build consumer awareness of the need of health coverage. Provide a minimum level of coverage to the deprived section both in rural & urban areas.

Support capability building in R&D:

To compete with several countries in Asia, Eastern Europe and Latin America.

Continued emphasis on improving public health resources and infrastructure:

Create awareness on public issues such as sanitation & access to healthcare support.

Ensure smooth implementation of patent law:

Maintaining the current momentum and ensure a speedy and effective approval process.

Adopt a broader view of healthcare costs:

Take a holistic view of healthcare costs and pursue a broader set of initiatives to ensure accessibility & affordability. Other measures include:

THE CONCLUSION

The conclusion
The overall described outcomes depend on 3 preconditions: Indias pharmaceutical market has grown at a reasonable pace during

India maintains the a relatively high rate of long term past decade. growth, in the range of 7-8 % per year. The has the private potential to transform itself over the next 10 market Public and sector continue to invest inyears the and play a crucial role in countering the growing burden of and diseases. development of healthcare related hard soft infrastructure and creating a thriving labour Sustained, Progressive and Collaborative efforts by the government market. and the pharmaceutical industry hold the key to achieving Indias full The government adopts a regulatory stance on potential. pricing and implementation of patent legislation that encourages industry growth.