The outlook for pharma innovation in India

By Editorial Team for CPhI Worldwide Special - Sriram Shrinivasan of Ernst & Young

With CPhI Worldwide returning in November for the first time in two years, the industry is hugely excited to be finally meeting again in person. Interviewed ahead of the event, Sriram Shrinivasan, Global Generics Leader and India Health & Lifesciences Leader at Ernst & Young, provides a wide-ranging overview of what’s ahead for pharma innovation in India.

What’s the current outlook for Indian CDMOs?

SS:  I think the outlook for Indian companies is very good. We estimate that the Indian contract manufacturing market exported goods worth around $10 billion in 2020, and this is expected to reach $27-28 billion by 2026. That’s a fantastic  growth of 18-20% and we are finding a lot more global focus on outsourcing, research and manufacturing in India. A lot of this is driven by the fact that India has a vastly skilled workforce, with one of the largest pool of pharmacy graduates anywhere in the world, and we still have a reasonably low labour cost. As a result, we are finding that many companies are looking at this scientific talent and seeking to harness this to their advantage. Also, don’t forget, from a manufacturing standpoint, India has the highest number of FDA-approved manufacturing facilities outside of the USA.

There has been a lot of talk about the Indian Government trying to enable pharma companies. How much have initiatives like Start up India had on the Indian pharma sector? 

SS: Well, that’s a great question. I think these have had tremendous amount of impact. There are about 50 thousand start-ups in India every year, which gives India the third highest total in the world after the US and the UK. Although the great majority of these are focused on technology, we estimate some 2,700 plus are involved with pharma and biotech. Furthermore, this number is expected to grow to 10,000 by 2025, and many of these could be supported by Biotechnology Industry Research Assistance Council (BIRAC) – a Government body that provides venture capital assistance to early stage start-ups and tends to nurture between 300 and 500 start-ups every year.

The Government also launched the $2.7 billion Production Linked Incentive (PLI) scheme focusing on two themes viz  1) on bulk drugs and 2) on moving up the value chain, with the aim of boosting India’s security of supply and reducing dependence on China. They identified some key APIs, starting with the intermediates, and created the PLI scheme to help Indian companies invest in infrastructure.  By incentivizing the sector with fiscal benefits and creating these initiatives, I believe the Government will help Indian pharma take manufacturing to the next level in the next three to five years.

Regarding China, do you think that India has benefited from the macroeconomic changes and pharma’s decision to move some of its sources of manufacturing?

SS: To be honest, it’s a bit early to say that, and it’s too early to measure. The problem with pharma manufacturing is that it’s very ‘sticky’. Once you’ve registered your product, switching it is not easy, it takes time.  But many companies are looking at a ‘China plus one other source’ strategy,  and with its existing and planned infrastructure in investment,  India is a natural choice – certainly for APIs and generics. The pandemic has taught us that agility and resilience are important aspects of running a business, so you need to develop a range of sources.

What would you say are the main drivers for growth in India right now?

SS: I will deal with the export market first.  If you look at the main drivers, India already supplies about 60 per cent of the global demand for vaccines and 40 per cent of the generics demand from the US, Europe and the UK. India also supplies to about 150-plus countries.

Meeting the required quality standards has clearly been a strength in penetrating great swathes of the global market. However, areas like Japan and China are still not yet completely penetrated, so there are still massive opportunities for growth. Collaboration with global funds will become a key factor, especially in the development of vaccines for the likes of HIV, AIDS, and many other diseases. In fact, with the pandemic putting the focus back on preventative healthcare, I suspect that we will be taking a lot more vaccines for many other preventable diseases.

Another interesting area is compliance. There are statistics that imply that people who should take a drug for 365 days a year end up taking it for only around 200 because they forget or don’t care.  What we saw during the pandemic was that people became worried that not treating their chronic condition, such as diabetes or an underlying heart condition, might make the impact of COVID far worse. So, compliance actually got better, and I think this change will lead to increased global demand for drugs controlling chronic conditions.

With its focus on complex generics, biosimilars and other value-added products, the value of exports from India is likely to increase, while in terms of the domestic market, there are still huge problems with accessibility and affordability in India. Although prices in India are among the lowest in the world, there is still a large part of the population that cannot afford them. So, the Government has developed schemes  – almost on the lines of the UK’s NHS –  where people can buy insurance and gain access to medicines and healthcare. I think this is going to be an important driver for the domestic market, plus, the fact that we now have an emerging economy in the middle classes. This will certainly create massive demand, much of it to treat chronic, long-term conditions.

India is known for generics but non-generics are really emerging right now. How can Indian pharma capitalize on this?

SS: You are absolutely right. India is probably best known for generics and this is what has got Indian companies to where they are today. A similar approach is now being taken in biologics, with companies scaling up in biosimilars etc.  So, I think the journey has just begun, and many Indian companies realize that for them to be successful in the next 10 years, they need to move away from commodities and into complex speciality products, such as biologics, biosimilars and cell/gene-based therapies. These seem to be the real value drivers.

We recently commissioned a study with the local trade body, FICCI, to ascertain how our market is likely to grow. Whereas today, the Indian pharma industry is worth about $42 billion, evenly distributed between export and domestic markets, this is likely to increase three-fold and reach more than $ 130 billion by 2030. A significant amount of this growth is likely to come from biosimilars, new molecular entities, vaccines, and other value-added products, as opposed to our traditional volume-driven products.

Is there anything we perhaps haven’t highlighted that you want to highlight?

SS: We are in for really exciting times, with a new decade of growth and development. Indian pharma is strategically poised. It has competitive advantage and the right skill base, and we are going to see a transformation driven by digitization and innovation. Traditionally, our strength has been frugal innovation focusing on low-cost manufacturing and producing good-quality products. That has been the mantra for success thus far. But that’s not going to be enough in the future – we now need to move up the value chain driven by innovation.

This is the first time in a long time, that pharma is seen in a good light. Is that your perspective?

SS: Trust in the industry has actually improved. You are absolutely right. Prior to the pandemic it was a lot of distrust of ‘big bad pharma’. But that is changing. During the pandemic, pharma companies have been working round the clock to ensure supply of medicines on one hand and fast-tracking the innovation engines to produce life-saving drugs and vaccines. I know of personal stories from companies in India whose staff worked 24/7 including weekends to keep lines running, avoid disruption and ensure shipments reached the intended destinations thereby avoiding global shortages. It is now essential for pharma to build on the trust that has been gained and build truly patient-centric models.

Anything else?

SS: Globally, these are exciting times in which India has a large role to play. Ultimately, we are all part of a global value chain and an integrated ecosystem. We have to make sure we are all in it together and working together as a global team, no single country can solve the problem of global health. However, together we can surmount any global pandemic.

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