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:

* predicted

4% of avg household income in

1995

7% of avg household income in

2005

13% of avg household income in

2015*

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…

• However, Generics will continue to dominate the Indian market .

• Reasons:– Current pipeline of generic products is strong.– Domestic players have the opportunity to develop new

combinations & formulations of existing products.– New generic launches from the Pre-1995 basket

( approx. 200).– Growth in sales & marketing infrastructure of domestic

companies.

• Despite this, mass therapies will remain significant due to 2 reasons:– Gap between prevalence & treatment

rates is high.– 140 million people will move above the

poverty line in the coming decade, thus increasing the basic healthcare spending & consumption of mass therapy drugs.

• Factors influencing the patent-protected products:• Global product pipeline• Share of the pipeline introduced in India.• Time gap between the global & India launches• Likely commercial success of the products launched

The findings…

• Market for patented products would be concentrated in:– Neuropsychiatry– Oncology– Anti-Infective– Gastro-Intestinal– Cardiovascular

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

• 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.• Tier-1 markets would remain important because:

– 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.

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.

• Adopt new and differentiated business models:– Sales infrastructure needed

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

• Sustain product access:– For local players- 200+ pre 1995

products.– New innovative fixed dose

combinations.– In-licensing

• 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.

• Customise the strategy and business model:

• 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.

ALIGN

ASPIRATIONS AND

BUSINESS

MODELS

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.

• Ensure smooth implementation of patent law:– Maintaining the current momentum

and ensure a speedy and effective approval process.

• 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.

• 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:

ENCOURAGE ACCESS

AND INNOVATION

THE CONCLUSION…

The conclusion…

• The overall described outcomes depend on 3 preconditions:• India maintains a relatively high rate of long term

growth, in the range of 7-8 % per year.• Public and private sector continue to invest in the

development of healthcare related hard and soft infrastructure and creating a thriving labour market.

• The government adopts a regulatory stance on pricing and implementation of patent legislation that encourages industry growth.

• India’s pharmaceutical market has grown at a reasonable pace during the past decade.

• The market has the potential to transform itself over the next 10 years and play a crucial role in countering the growing burden of diseases.

• Sustained, Progressive and Collaborative efforts by the government and the pharmaceutical industry hold the key to achieving India’s full

potential.