INDIAN

PHARMACEUTICALS

MARKET

Presentation Outline

1. The Indian Domestic Pharma market

2. Future Scope of IPM

3. Indian Pharma Market Segments

4. Rural Markets – The Next Frontier

5. IPM – Challenges & Critical Success Factors

Indian domestic pharma market

Indian Domestic Market

The Indian Pharmaceutical Industry (IPI) is globally the 3rd largest in terms of

volume and 10th in terms of value.

More than 24,000 registered units (330 in organized sector)

The top ten companies make up for more than a third of the market.

The total market size of USD 12.3 billion includes domestic consumption market of

6.0 billion (contributing ~48.6%) and the exports market being 6.3 billion (contributing

~51.4%).

India's drugs and pharmaceuticals industry is expected to grow at a (CAGR) of 14

per cent to reach a turnover of Rs 2.91 trillion (US$ 47.06 billion) by 2018.

Capable of fulfilling 70% of country’s demands

API / Intermediates / Formulation / Capsules / Tablets / Injections etc.

Top Indian companies significant footprint at Global level including markets like

US, Europe & Japan.

Top 25 companies in IPM

Source: AIOCD Oct 14

Therapy Areas in IPM

Anti infectives is the biggest

therapy area.

Chronic therapy areas

growing at much faster rate.

GI, Nutrition, Respiratory,

Diabetic, Derma, Ophthal

segments are growing at

double digits.

Source: AIOCD OCT 14

Indian Pharma Industry-SWOT

Strengths

1. Cost competitiveness

2. Low cost, highly skilled set of labor force

3. Growing treatment native patientpopulation

4. Higher GDP growth leading to increaseddisposable income in hands of generalpublic and their positive attitude towardsspending on healthcare

Weaknesses

1. Lack of data protection

2. Poor health insurance coverage

3. Stringent price controls

4. Poor all round infrastructure is a majorchallenge

Opportunities

1. Rapid OTC and generic market growth

2. Increased penetration in the non-metromarkets

3. Large demand for quality diagnosticservices

4. Increase in healthcare insurancecoverage

5. Significant investment from MNCs

6. Public-Private Partnerships forstrengthening infrastructure

7. Global demand for generics rising

Threats

1. Wage inflation

2. Labor shortage

3. Government expanding the umbrella ofthe DPCO

4. Considerable counterfeiting threat

5. Competition from other emergingeconomies

Key Recent Trends and Implications

Increase

Investment &

MNC activity

Increasing

reach in

Non-Metro

markets

Growing

Insurance

Changing

disease

profile

Healthcare

Innovation

•Shift towards a

Networked

business model

•Increasing

M&A and

Alliances

•Consolidation

in the market

•Seen as the

next volume

driver, though

costs of

operation is

high due to

poor health

infrastructure

•More number

of patients will

be coming in for

treatment

•Shift towards

biotech &

specialty

therapies,

increased

investment inn

R&D and acute

disease

segment will

sustain strong

growth

•Use of

technology & It

for innovation in

healthcare

delivery e.g.

Mobile clinics

MNCs vs Indian companies - Business

Models

Future Scope of IPM

Global Pharmaceuticals Market Scenario

Dramatic shift in focus towards emerging markets

EM growing faster than the leading economies

40% incremental growth from EM in this decade

Emerging Markets

1 IMS Health Prognosis, Mar 2010 2.IMS Health Pharmemerging

Shake up 2010

India – Country profile

Republic of India

7th largest country by area

World’s 3rd largest economy by PPP

Currency – Indian Rupee

Official languages – Hindi & English

28 states & 7 Union Territories

Capital – Delhi

Multilingual – Multi-ethnic society

Population: 1.2 billion+ @ 1.3%

Indexmundi.com, wikipedia.org

FUTURE IPM (2020)

In pessimistic scenario

characterised by

regulatory controls &

economic slowdown.

Growth drivers are

Epidemiological factors,

Increasing PPP,

increasing accessibility,

rural penetration.

Source: Mckinsey analysis 2020.

2013Pessimistic

case

Base

case

Aggressive

case

12.33 $$ 35

$ 55$ 70

17% CAGR

14.5% CAGR

10% CAGR

Propellant of Growth

Population Expansion

Growing Middle Class with higher purchasing power

Changing Disease Profile

Healthcare Infrastructure & Expenditure

Healthcare Insurance

Population Expansion & Middle class

HPP

2nd most populous country in the world

Rapidly Expanding Middle Class (USD 5K – USD 25K)

1/3rd population expected to join middle class in near future.

Population Growth Projections 1 Ascent of Middle Class as % of Population2

1 ISI analytics 2010 2.Economic Times, PwC

analysis

Expenditure Break - % of Disposable

Income

Consistent

increasing

spend on

healthcare

IDFC Institutional Securities, Indian Pharma (June 2010)

Government has increased health expenditure from 1.4 per cent to

2.5 per cent of GDP by the end of the twelfth Five-Year Plan (2012-

2017)

Eg. Central Government Health Scheme (CGHS), National Programme

for Healthcare of the Elderly (NPHCE), Rashtriya Arogya Nidhi (RAN)

and Janani Suraksha Yojana (JSY)

Source: EIU Report, Datamonitor, primary interviews, Deloitte Consulting LLP analysis

Increase in public spending would lead to more penetration of

healthcare opportunities for rural and remote areas

Eg. RSBY ( Rashtriya Swasthya Bima Yojana)

Source: High Level Expert Group on UHC, 2011 Source: Pharma 2020 Mckinsey &

company

Increase in disposable income will help in larger per capita health

care expenditure

Rising rural market will increase the volume consumption

Source: Pharma 2020 Mckinsey &

company

Changing Disease Profile

Chronic Increase

Ageing Population

Lifestyle

Diabetes capital

Pollution

Shift in Disease Profile towards Chronic

Acute Maintained

Mass therapy

Public hygiene

Sanitation

IDFC Institutional Securities, Indian Pharma (June 2010)

Increasing population as well as increase in geriatric population will

thus increase the patient pool

Declining Crude death rate will thus result in higher life expectancy

Source: Office of the Registrar General and Census Commisioner of India,

various years

Growing incomes and a faster pace of life, increased sedentary living,

high work stress, rising pollution levels and consumption of unhealthy fast

food are factors leading to a rise in lifestyle disorders

Source: Patel et al., 2011

Source: EIU Report, Datamonitor, primary interviews, Deloitte Consulting LLP analysis

India has about 65 million diabetics, will see the number grow to 100

million by 2030

Chronic diseases like cardiovascular disease and diabetes are expected

to drive demand for new drugs

Apart from nearly 65 million diabetics, India has 77 million pre-

diabetics

Demand for Oncological product will rise

Increased awareness programs by companies and R&D

expenditure will help in building the Chronic segment.

Source: Takiar et al., 2010

Healthcare Infrastructure & Expenditure

Healthcare

infrastructure

Healthcare

expenditure

1.5

Mn

2.3

Mn

3.7

Mn

‘10 ‘15 ‘20

Fast expanding Pvt hospitals coupled with

significant investment in medical

infrastructure (estimated 200 Bn USD)

expected to propel the growth of India HC.

Telemedicine and usage of web based

technology expected to improve health

outcomes

Np of hospital beds

6.7

Govt spend on HC in

USD Bn

2006 2009

11.7

760940

No of physicians

(‘000s)

‘10 ‘20

Govt committed to establish rural hospitals

with initiatives like National Rural

Health Mission & sponsored programmes

like RSBY

Govt spend on HC as % of GDP expected

to increase to 3% till 2020

7.79.2

2007 2008

+18%

Share of

GDP%0.84% 0.88%0.84% 0.93%

Source: India Pharma 2020, Mc Kinsey; Overview of Indian Pharma Market, Accenture, Sept 11; Secondary published reports and websites

Health Insurance

80% India’s Healthcare

expense = Out of

Pocket

This limits the propensity of

Indians to spend on

healthcare, particularly in

lower & middle class ~ 95%

population

Pricing

Gov. Pol

OOP

ISI analytics, Healthcare Industry (2010), General Insurance Council of India (2010)

Other Factors :

Increasing demand for high-quality services

Affordability

Growing medical tourism industry

Increasing Literacy rate will thus increase drug compliance

M&A and JV will increase market penetration

Patent cliff will increase the generic market

Domestic R&D capability will govern growth and shape the market

opportunity

Indian pharma market segments

Branded Generics Market

Indian market largely dominated

by branded generics – 90%

Generics & innovator products

constitute 10% with an

approximate split 6% & 4%

respectively

Patented products to capture

around 10% MS by 2020.

Market for patented products to

be concentrated in therapeutic

areas – CNS, Oncology,

diabetics, & CVS

INN – International Nonproprietary Name Industry Interviews – PwC,

McKinsey analysis

Medical Representative – The key link

Avg. No. of medical reps

meeting a doctor per day: 15

Average call time: 3 mins

Average Number of Calls: 9-

10

Approx Doctor list ~ 150

doctors

Approx No. of Products ~ 5 –

7

Continued….

New models of sales force coverage and excellence are

emerging

Debate: Coverage vs Capabilities

Content marketing by MR’sEmkay Research – August 2010, McKinsey

Analysis

Rural Markets

Rural Markets – The Next Frontier

Metro and Tier-I accounts for

30% of IPM

Rural market accounts for 20% of

IPM and is estimated to move up

at 25% till 2020.

The driver of growth for rural

market is affordability which will

be covered under RSBY.

The other factors are better

infrastructure (i.e. hospital),

skilled manpower (i.e. doctor)

and healthcare awareness

among people.

Challenges & critical success factors

Key Challenges

Price Controls

Labour

Intellectual Property

Counterfeiting

Infrastructure

Healthcare penetration in rural areas is significantly lower than in urban

areas

Critical Success Factors

Increasing public spend

on Healthcare

Innovation

Use of Technology

Infrastructure

Development

Health Insurance

Enabling Policies &

regulatory framework

THANK YOU