Image courtesy of Sai Life Sciences

The 2010s have come to an end, fraught with global instability and uncertainty. Given the pace at which the world is changing, it would be futile to predict too far ahead into the next decade. There are, however, a few things that we can be certain about. India’s population will surpass China’s, most likely in 2022, as the largest globally and Narendra Modi will lead India into a new decade.

The often-divisive Prime Minister of India saw his Bharatiya Janata Party increase its majority in the Lok Sabha following the largest democratic exercise ever taken in the 2019 general election. While many will have strong views towards the Gujarati, a number of his visionary policies have shown demonstrable success in recent years. For example, the ‘Make in India’ initiative, set out by Modi in 2014 with government investment promises of US$240 billion, has drastically improved the rates of foreign direct investment in India. The country’s ‘Ease of Doing Business’ Ranking in the World Bank’s Doing Business Report 2019 has jumped to 77^th, up from 100^th in 2018 and 134^th when the initiative began in 2014, and The World Economic Forum’s 2018 Global Competitiveness Index has seen India place at 58^th. Though the past decade will be written in the history books as one where India demonstrated clear economic progress, it is difficult to predict what fortunes the next will bring.

Pharma Vision 2020: From imitation to innovation?

With 2020 upon us, those in the pharmaceutical industry, both in India and globally, will be eagerly anticipating how many of India’s Pharma Vision 2020 targets have been fulfilled. Although the government plan was laid out before Modi’s tenure begun, his government’s policies over the past six years have very much defined its successes and failures. Pharma Vision 2020 was a government commitment to make India into a global leader not only in the production of low-cost generic medicines but also end-to-end drug discovery and development. It also aimed to place India as one of the top five pharmaceutical innovation hubs, which would involve launching one out of every five to ten novel drugs, globally. This would help the pharma industry have a seismic impact on the country’s growth, by adding significant value to the economy. Another aim was to meet the increasing demands brought on by a growing middle-class population and a faster-than-expected aging population that will continue adding pressures to India’s healthcare system. To enable this, the government promised a multi-billion-dollar investment plan with a 50% public funding commitment through a public-private partnership model.

A quick observation of the numbers points to success. The pharma industry has seen continued growth throughout the decade, with turnover at US$37.2 billion, exports contributing US$19.14 billion – both in 2019 – and the domestic market in 2018 standing at US$18.12 billion. “At this rate, the Indian pharmaceutical industry is likely to touch the US$50 billion mark by the end of 2020, in line with the expectations of a compound annual growth rate (CAGR) of 22%,” underlined Dr. Rao Vadlamudi, immediate past president of the Indian Pharmaceuticals Association and president of the Commonwealth Pharmacists Association.

Whilst there has been clear growth within the Indian pharma industry, this is almost exclusively rooted in the generics space. “[India] is the single largest provider of generic drugs globally, supplying over 50% of global demand for various vaccines, 40% of generic demand in the United States, 25% of all medicine in United Kingdom and extremely low-cost medicine to African nations,” highlighted Daara B. Patel, secretary general of the Indian Drug Manufacturers Association.

The production of generic drugs remains India’s bread and butter. However, the country has yet to develop a significant roadmap to deliver a long-lasting novel drug development and delivery infrastructure.

R&D, high-caliber academic institutions and capital funding are integral pillars towards the creation of novel drugs, given the high costs associated with their creation. In fact, a Tufts Center for the Study of Drug Development 2016 assessment put the cost of developing and having a drug approved at US$2.87 billion. The sheer capital and risk required to produce novel drugs makes it a completely different ball game to the manufacturing of generics. While there is some private capital in India’s pharma space, it is not being directed into the production of innovative drug development. “The category of businesses typically in the fund's focus are SMEs who need funds to expand, to build larger factories, to develop and register generic products, to acquire different businesses or to launch products in different markets,” remarked Hari Buggana, chairman of InvAscent, a company that provides private equity growth capital through three funds totaling over US$500 million in India.

With a lack of public and private capital available and government tax incentives yet to have much effect, R&D has lagged behind. For example, India’s R&D expense to GDP ratio stands at 0.6% for India compared to 2.1% for China. This is an unfortunate reality for a country with the human capital and academic depth to develop quality biotech hubs. “[I]nnovation is often thought to be synonymous with new drugs developed and launched,” remarked Vadlamudi. “The Indian industry made attempts at new drug discovery and development, but successful launch of a new drug is a very long process. Given that, Indian efforts in the area of new drug discovery still fall below the industry averages. Expecting success in this domain at the current effort levels is unrealistic. A lot needs to be done in the area of innovation by the Indian industry and through Indian academic research. The focus on innovation must change towards finding effective solutions and treatments for country-specific diseases with particular focus in tropical and infectious diseases, targeted delivery of existing drugs to disease-specific sites to improve efficacy and safety and drug repurposing, to name a few.”

The truth of the matter is, while India’s pharma industry growth has been impressive, it has fallen short of fulfilling Pharma Vision 2020. There are clear examples where rising competition in pure generics globally has led a number of the top Indian pharma companies to focus on specialty and complex generics, including complex injectables and oral solids, new drug delivery systems and biosimilars. However, true innovation in the shape of an end-to-end drug delivery and development infrastructure is some way off. The human talent and academic system is in place, but R&D numbers need to increase. The Indian Pharmaceutical Alliance (IPA), which submitted its Vision 2030 in July 2019 underlining plans to make India into an innovation leader by building a strong innovation pipeline, has urged the government to set up a large fund to boost technological innovation in pharma, biotech and healthcare startups. But with capital funding missing, it is not likely to change any time soon as the capital intensity and high risks associated with the creation of novel molecules do not bode well in the current domestic and global economic climate.  

Economic pressures at home and abroad

Analysts have predicted that India will become the third largest global economy by 2030, but the country’s economic performance in 2019 will have raised some concerns over the possibility of this happening. At the time of writing, S&P had reduced India’s growth projections from 6.3% for FY 2020, down from 7.1%. Alongside S&P’s ratings, Moody downgraded India’s GDP growth thrice during 2019. India’s economy has clearly been faced with a number of old and new challenges. Private sector investment is at a 15-year low, the banking sector has slowly entered into crisis and the good and services tax (GST) – rolled out in 2017 – has seen slow rates of collection. India is also set to be impacted by a global economic downturn. OECD downgraded the economic forecasts for almost all countries it examined, reducing global growth projection for 2019 by 0.3% to 2.9%. Whilst Brexit and other political events are impacting this, the global trade wars – rooted in Donald Trump’s belief that increasing global trade tariffs will positively impact U.S. growth and manufacturing – is the key reason. “There are many global factors that affect growth, the primary factor being price erosion as the prices of generic formulations fall,” remarked Ravi Udaya Bhaskar, director general at Pharmexcil. “The second is that most countries are creating policies to develop their own indigenous pharmaceutical industry.”

Indeed, a more insular, less globalized world is likely to heavily impact India’s pharma industry and export numbers. This is even more pressing given the current geopolitical climate in key export markets for India’s pharma industry – the United States and United Kingdom. With 147 FDA formulation sites approved compared to China’s 45 sites and the highest number of FDA approved API plants in the world, India is likely to retain its title as the ‘pharmacy of the world’ for some time. Moreover, with an ever-increasing population that is getting older and richer, demand will continue to increase at home. However, the new decade is set to start with uncertainty for India and where the pharma industry will go. The most pressing concern for the industry will be that the CAGR continues above the 10% mark and for the industry’s trade surplus to grow from the current US$11 billion as the geopolitical climate remains unstable. As the pharma industry is amongst the top five sectors contributing to the reduction of India’s trade deficit, the country needs a secure pharmaceutical industry that will prevail over the coming years. When this happens and if both public and private capital can be brought into the industry, then India can realistically think about building the innovative drug delivery and development R&D ecosystem that will evolve the industry to the next level.