30 PricewaterhouseCoopers
Conclusion
The Indian market is impossible to
ignore, given its economic prospects.
Foreign companies view India as a
potential signicant contributor of
future sales and are ramping up their
investments in the country accordingly.
India’s domestic market looks promising
for global pharma looking to launch
new products. The country’s growing
capabilities in contract manufacturing,
R&D and clinical trials also make it a
preferred outsourcing partner for global
pharma at every stage of the value
chain. So what strategy should foreign
pharmaceutical companies eager
to enter the country or expand their
existing operations adopt?
One approach is to call on India’s
increasing expertise in biotechnology,
bioinformatics and clinical testing.
Several overseas companies have
outsourced research and clinical trials
to Indian contractors, while others
have entered into collaborative R&D
arrangements to supplement their R&D
productivity. Many foreign companies
have also already initiated research on
neglected diseases. We believe that
many more will do so, as the patent
regime is strengthening. This will enable
them to capitalise on the cost savings to
be gained from shifting some research
activities to India, without jeopardising
their most valuable intellectual property.
Another approach is to tap into the
growing domestic market. Foreign
companies with a product portfolio
spanning across different therapeutics
segments can look at bringing newer
products in India by entering into
collaborative networks across the value
chain, from sourcing and manufacturing
to marketing and distribution. These
companies will have to understand
how to get their product to market and
develop a realistic pricing strategy,
particularly as India is still far away
from a widespread shift to an insured
payer model.
India’s pharma market is highly
fragmented and remains extremely
price sensitive. Affordable healthcare
continues to pose a challenge, although
there are a number of healthcare
initiatives by the Government underway
to improve the situation for India’s vast
population. Indian courts and regulatory
authorities are very sensitive to pricing
issues in making decisions around
intellectual property. Pharma companies
coming into India may need to consider
a differential pricing. They will need
to evaluate access to medicines, a
volume-based pricing strategy and
take into account gradually increasing
per capita incomes to come up with
acceptable price levels for their drugs.
Global pharma companies will then
need to decide how to manufacture
their products, and identify and develop
strong local partners.
One way to build a presence in India
may be through an increased presence
in the OTC market. Promoting a range
of OTC products could serve as means
of building brand awareness and as a
source of new revenues. Indigenous
producers dominate the generics
business, and about 97% of all drugs
sold in India are already off patent. The
OTC market is, by contrast, relatively
undeveloped. Indian consumers already
pay privately for the lion’s share of their
healthcare, and the Government is too
hampered by budgetary constraints
to reverse this pattern. In future, then,
it seems likely that access to OTC
medicines will be improved and the
market will continue to expand.
The pharmaceutical business model
is witnessing a paradigm shift, moving
from a fully integrated company
structure towards a future where
companies use a wide range of
outsourcing, partnership initiatives
and other contractual and relationship
arrangements to create networks of
collaboration and discovery. Investing
in India will be a vital component of
this networked future. Companies
that will be most successful in doing
business in India will be those that are
most adept at managing and mixing a
range of contractual relationships and
partnership strategies.
Some practical issues will need to be
addressed, regardless of the business
model selected. Infrastructure decits
continue to exist, although some are
being addressed. Intellectual property
protection has improved substantially
but some holes remain. And while
the regulatory environment in India
has improved substantially in recent
years, the industry still faces a number
of question marks. Finalisation of
Government policies around drug
price control, access to OTC drugs,
tax policy, intellectual property
protection and infrastructure spending
is still pending.
Nonetheless, India’s appeal is growing
rapidly in a number of respects. It
has long been a formidable player in
pharmaceutical manufacturing, but
its socio-economic strengths provide
even greater grounds for optimism. If
the economy outpaces that of every
other emerging country for the next
half century, as many commentators
expect, large portions of the population
will be able to afford modern medicines.
India’s increasing scientic expertise
will also equip it to play a signicant
role in researching and developing
those drugs. It has a large pool of
highly educated, English speaking
scientists who can undertake research
and conduct trials more cheaply and in
some cases faster than their Western
peers. These are major advantages in
a world where drug development
costs are soaring and getting to
market fast is vital.