Industry Overview

As per the National Health Policy, 2017 (“NHP 2017”), the private health care industry is valued at USD 40 billion and is projected to grow to USD 280 billion by 2020. As per market sources, the private health care industry includes insurance and equipment which accounts for about 15% (fifteen percent), pharmaceuticals over 25% (twenty five percent), diagnostics about 10% (ten percent) and hospitals and clinical care about 50% (fifty percent). As per the International Finance Corporation, the Indian private health care industry is the second highest destination for its global investments in health.

Shri M. Venkaiah Naidu, the Hon’ble Vice President of India recently said that India contributes 20% (twenty percent) of the global generic medicines market exports in terms of volume, making the country the ‘Pharmacy of the World’, and is now among the top 5 (five) pharmaceutical emerging markets of the world.

The Indian pharmaceutical industry is recognized as a global leader in the production of generic drugs and is ranked third in terms of manufacturing pharmaceutical products by volume. The pharmaceutical sector was valued at USD 33 billion in 2017, and is expected to expand at a compounded annual growth rate (“CAGR”) of 22.4% (twenty two point four percent) and projected to reach USD 55 billion by 2020. India’s pharmaceutical exports stood at USD 17.27 billion in 2017-18. The country is expected to be among the top 3 (three) pharmaceutical markets by incremental growth and the 6^th (sixth) largest market globally in absolute size by 2020.

Recent Initiatives

The Government of India has taken up a number of initiatives in recent years to support the growth of the Indian pharmaceutical industry and to create an ecosystem that fosters manufacturing.

• As per the NHP 2017, Central Government has committed to raise public health expenditure progressively to 2.5% (two point five percent) of the GDP by 2025;
• Under the Union Budget 2018-19, the allocation to the Ministry of Health and Family Welfare, Government of India was increased by 11.5% (eleven point five percent) to INR 52,800 crore (approximately, USD 8.16 billion) on a year-on-year basis;
• With a view to develop India as a global healthcare hub, the Government of India launched a centrally sponsored programme, i.e. the Ayushman Bharat. The Ayushman Bharat programme comprises of 2 (two) major health initiatives: (A) transformation of nearly 150,000 (one hundred and fifty thousand) Sub-Centres and Primary Health Centres as Health & Wellness Centres by 2022 to provide comprehensive and quality primary care; and (B) coverage of up to INR 0.5 million per family per year for secondary and tertiary hospitalization to over 100 (one hundred) million poor and vulnerable families (approximately 500 (five hundred) million beneficiaries);
• The Government of India chose the medical devices sector as one of the 25 (twenty five) flagship industries to boost the ‘Make in India’ program and thus reduce imports. Further, to give a fillip to the sector, rules were formulated for the regulation of the medical devices sector (which were notified under the Drugs and Cosmetics Act, 1940 (“D&C Act”) on January 31, 2017 and came into effect on January 1, 2018), including their import, clinical investigation, manufacture, sale and distribution;
• With a view to ethically and responsibly strengthen the pharmaceutical sector, the Government of India prohibited the manufacture for sale, sale or distribution for human use, of select ‘Fixed Dose Combinations’ (“FDCs”). The Government has also restricted the manufacture, sale or distribution of select FDCs subject to certain additional conditions; and
• In order to achieve full immunization coverage for more than 90% (ninety percent) children and pregnant women, the Central Government launched ‘Mission Indradhanush’ in December 2014, followed by the ‘Intensified Mission Indradhanush’ in October 2017. The programmes are aimed at improving immunization coverage in select districts and cities by December 2018.

Digital Health and Artificial Intelligence Outlook

The Central Government recently launched the ‘Integrated Health Information Platform’ in seven states, which is aimed at gaining access to near-real-time data from healthcare institutions. Such real-time data would better equip the Central Government in detecting outbreaks of disease, reducing mortality, and lessening disease burden in the population.

With the e-commerce boom in the goods and services market, it was only a matter of time when online pharmacies would join the e-commerce bandwagon. According to Kuick Research, Indian e-pharmacy industry it is anticipated to grow at a CAGR of over 20% (twenty percent), crossing the USD 3 billion mark by 2024. The lack of clarity under the D&C Act regarding the permissibility to deliver drugs through e-commerce channels had been a bane to the industry for a long time. In order to provide guidance and restrict opportunities of regulatory arbitrage, the Central Government recently notified the draft of the online pharmacy rules a few months back for public discussions. However, the picture for the online sale of drugs has turned out to be complex and is proving to be the latest recipe of tussle amongst the industry, the policymakers and the judiciary.

Additionally, a number of pharmaceutical companies and healthcare organizations have begun exploring opportunities associated with artificial intelligence to transform areas such as drug development, process optimization, and gathering business intelligence.

Future Opportunities

The increased public healthcare expenditure, and more particularly the roll out of the Ayushman Bharat programme is aimed at providing a fillip to the market size and to address the longstanding demand side gaps which have plagued the domestic medical industry. However, the successful implementation requires the public and private sector to work together in addressing challenges regarding scalability, infrastructure and skill gaps, and sustainability.

Further, with the policy flip-flop on the regulation of the online pharmacies hopefully nearing an end, the e-pharmacy market is expected to take the country’s drug and pharmacy market by the storm.

For any queries, feel free to reach out to Sidharrth Shankar at Sidharrth@jsalaw.com and Rupinder at Rupinder.Malik@jsalaw.com