The Indian pharmaceutical industry is estimated to be worth of US$ 6 billion, growing at over 13 per cent annually, Indian pharmaceutical companies now supply almost all the country’s demand for formulations and nearly 70 per cent of demand for bulk drugs.  

The Indian pharmaceutical industry, which is  a US $ 22 billion Industry, has been growing at a faster pace in recent years. The industry produces bulk drugs which include all major therapeutic groups requiring systematic and modern manufacturing technologies. In India, most of the formulations in various dosage forms are being produced in GMP compliant facilities. India now ranks 4th largest producer of drugs in the world which is accounting 8% of world’s production by volume and 1.5% by value. Indian pharma industry ranks 17th in terms of export value of bulk actives and dosage forms. Indian exports are exported to more than 200 countries around the globe including highly regulated markets of US, Europe, Japan and Australia. Product patent in pharmaceuticals has been introduced in the country with effect from 1st January, 2005 by amending the Patents Act, 1970 in conformity with the TRIPS agreement. The physical infrastructure in the four patent offices in the country (Kolkata, Delhi, Chennai and Mumbai) has been substantially strengthened and computerization has been introduced. Steps are now being taken to further augment and improve the software and human resources in these offices to enable them to deal with the new responsibilities.

Some of the official estimates published by the government shows that the exports of pharma constitute nearly 40 per cent of the production with formulations contributing 55 per cent and bulk drugs 45 per cent. The industry ranks 17th in terms of export value of bulk actives and dosage. It comprises large, medium and small-scale operators out of which some 300 companies together account for nearly 90 per cent of the domestic market, while the rest is accounted for by a large number of small companies which total about 9000 units. The export import policy guidelines for Drugs and pharmaceuticals stipulate that the Import of most of the bulk drugs, intermediates and formulations under Chapters 29 & 30 is free. However, quite a few narcotic drugs & psychotropic substances, that were restricted as per Exim Policy 2002-2007 at the instance of the Department of Revenue. On account of structural similarities and non availability of specific codes for many narcotic drugs & psychotropic substances, a large number of organic chemicals including vital bulk drugs & intermediates required by the Pharma industry were also put under restricted category by virtue of their coverage under 9 residual categories of “Others”. Keeping in view the difficulties of a large number of genuine actual users of these substances, the import restrictions on the narcotic drugs & psychotropic substances including those under “others” were lifted. At the same time a new regime for import of narcotic drugs & psychotropic substances has been brought in by DGFT vide Notification No.52 (RE-2005)2004 dated 9th March 2006. 

Estimates show that the Pharma exports touched a level of over Rs. 24942 crores during 2006-07. Exports constitute a substantial part of the total production of Pharmaceuticals in India. Another note worthy feature of export is more of dosage form export to advanced markets like Europe, US, CIS Africa etc. The trend of exports is as follows: - 

According to IBEF, the domestic Indian pharmaceutical industry is likely to more than triple to US$ 20 billion by 2015 from the current US$ 6 billion to become one of the top ten pharmaceutical markets in the next decade. Ever since the new patent regime is in force, the pharmaceutical market is witnessing structural changes. Consequently, patented drugs are likely to see increased sales in the domestic pharmaceutical market, growing from virtually nothing at present to about US$ 2 billion in seven years.

According to a study done by Goldman Sachs, it is estimated that India will be the fifth largest pharmaceutical market in the world by 2020, with sales of US$ 43 billion. With the market is growing with increased disposable incomes, growing middle-class households, expansion of medical infrastructure, greater penetration of health insurance etc have made a positive impact on the pharmaceutical market. Consequently, a number of multinationals have entered the Indian Pharmaceutical market. Already 15 of the 20 largest pharmaceutical companies in the world have been doing business in India. In effect the drugs and pharmaceuticals constitute the 8th largest FDI category in India.

India is emerging as the global hub for contract research and manufacturing services (CRAMs) as the low cost and upgraded quality levels helped to put the destination as an emerging one. Some of the companies like Dishman Pharma, Divis Labs and Matrix Labs have been undertaking contract jobs for MNCs in the US and Europe. Pfizer, Merck, GSK, Sanofi Aventis, Novartis, Teva etc. are largely depending on Indian companies for many of their APIs and intermediates.  The Indian CRAMS market which is valued at US$ 895 million in 2006 (as against US$ 533 million) accounts for between 6-7 percent of the global CRAMS market and many expect India will command at least 15 per cent of the market by 2009-10. Research agency Frost & Sullivan estimates this segment to reach close to US$ 6.6 billion by 2013. The Boston Consulting Group estimated that the contract manufacturing market for global companies in India would touch $900 million by 2010. Industry estimates suggest that the Indian companies bagged manufacturing contracts worth $75 million in 2004.

Contract research--including both drug discovery research and clinical research has been growing at a phenomenal rate. While clinical trials represent 65 per cent of this market and new drug discovery makes up the remaining 35 per cent. Frost and Sullivan estimates outsourced contract research in India to reach US$ 2 billion by 2010. Similarly, according to a McKinsey report, the global clinical trial outsourcing to India in the pharmaceutical industry is estimated to be worth US$ 1.23 billion by 2010.

Over 15 prominent contract research organizations (CROs) are now operating in the country which includes names such as Novartis, Johnson & Johnson, Pliva, Astra Zeneca, Bristol-Myers Squibb and Glaxo Smith Kline among others.

Contract manufacturing is another new opportunity for the Indian pharmaceutical industry. Already, India has the largest number of US Food and Drug Administration (US FDA)-approved plants outside the US, with over 100 facilities. And now even small and medium scale pharmaceutical companies are setting up new and upgraded high-quality manufacturing plants to take part in this growing segment.

About 40-50 new plants (which are in addition to the plants being set up by major Indian pharmaceutical companies) are likely to be commissioned by these companies in the next two years conforming to the quality standards suggested by the US FDA and the UK Medicines and Healthcare Regulatory Agency (MHRA), making India one of the largest drug manufacturers in the world.  

Already, Indian drug companies account for over 25 per cent of the total generic drug applications made to the FDA of US, which accounts for over half of the US$ 60 billion market. Also, India has over 100 US FDA-approved plants, the highest number outside the US. Indian companies are also able to build their US generic pipeline with Indian filings of around 408 products.

Industrial Licensing for all bulk drugs cleared by Drug Controller General (India), all their intermediates and formulations has been abolished, subject to stipulations laid down from time to time in the Industrial Policy. 100% FDI is also permissible for the manufacture of Drugs and Pharmaceuticals.

Foreign Direct Investment (FDI) in Drugs and Pharmaceuticals:

•    FDI upto 74% in the case of bulk drugs, their intermediate Pharmaceuticals and formulations (except those produced by the use of recombinant DNA technology) would be covered under automatic route.  
•    FDI above 74% for manufacture of bulk drugs will be considered by the Government on case to case basis for manufacture of bulk drugs from basic stages and their intermediates and bulk drugs produced by the use of recombinant DNA technology as well as the specific cell/tissue targeted formulations provided it involves manufacturing basic drugs

Automatic approval for Foreign Technology Agreement (FTA) is already available in the case of all the bulk drugs cleared by Drug Controller General (India) , all their intermediates and formulations, except bulk drugs produced by the use of recombinant DNA technology.

National Pharmaceutical Pricing Authority (NPPA) attempts to streamline and simplify the procedures with regard to drug price monitoring and bring about a greater degree of transparency as well as objectivity to the whole exercise. Fixation and notification of drug prices, both of bulk drugs as well as formulations, is thus the most important function of the authority. The criteria for calculating the fair price are drawn from the Drugs (Prices Control) Order, legislation under the Essential Commodities Act. Set up in 1997, the authority has been enforcing the provisions of the Drugs (Prices Control) Order, dealing with all legal matters arising out of its decisions, undertaking and/or sponsoring relevant studies in respect of pricing of drugs/pharmaceuticals and rendering advice to the central government on changes/ revisions in the drug policy over the years. NPPA is currently fixing prices on the basis of Drugs Price Control Order (DPCO) 1995, which has separate methodology / procedure for price fixation / revision of bulk drugs and formulations.