Adapting to the evolving consumer landscape

Ankit Suri

Given its traditional resourcefulness and determination, it is beyond doubt that India is a key driving force for the current global pharmaceutical industry. In recent years, healthcare demands among the region’s populations have increased and its low operating costs continue to attract pharma companies. And, it is emerging as a powerhouse of pharma Research & Development (R&D) facilitated by the availability of a vast patient population, quality data, lower costs and skilled manpower.

The Indian pharma industry is growing at about 12 to 13 per cent annually and is expected to grow to $45 billion by 2020. Along with the change in the growth momentum, the industry is deliberating over how Indian market can scale up to an even higher growth trajectory. Seeing the aggressive growth of this sector the Government of India also aims to position the country among the top five pharma innovation hubs by 2020, with one out of every five to 10 drugs discovered worldwide originating from the country, by 2020. The drivers of growth have proliferated and become more nuanced.

Key growth driver factors such as an increased patient pool, increasing accessibility to drugs due to a rise in investment in medical infrastructure, greater acceptance of new medicines and higher affordability will be the drivers of growth in this sector.

A greater acceptance of new medicines and greater affordability

Affordability will result in half of the forecasted growth, with rising incomes and increasing insurance coverage lowering the cost of drugs. Increases in income will result in an additional 73 million people in middle and upper class segments, while 650 million people will have health insurance by 2020. While private insurance will grow by 15 per cent by 2020, the majority of people will be provided insurance through government-sponsored schemes which focus on the ‘bottom of the pyramid’ segment of society.

Increased chronic diseases

Treatment for chronic diseases such as asthma, cancer, diabetes, heart ailments, osteoporosis and kidney problems will likely to constitute more than half of India’s pharma market by 2020. According to estimates, cardio vascular diseases (CVDs) and diabetes will surge the most, rising to six times by 2020.

Preventive care

The acceptance of biologics and preventive medicine is rising and companies are aligning their focus from treatment to prevention in healthcare. The market expects an increase in the usage of preventive medicines like vaccines. Vaccines can grow at over 20 per cent over the next decade. The biologics market will also grow rapidly to become a $3 billion segment by 2020.

Challenges

To compete with domestic generic players, pharma MNCs are launching patent-protected drugs in India at relatively low price points than those in developed markets. Simultaneously, a differential pricing strategy is helping these MNCs to enhance their market reach by addressing affordability issues.

Identifying changes in consumption patterns and trends will be of utmost importance for pharma companies to adapt suitably to the changing environment. There will be a heightened emphasis on building of large brands through brand portfolio managements. A shift away from traditional business models is also suggested, with companies being advised to import talent from outside the industry and encouraging more risk-taking.

The government will also have to take an active role to ensure the potential of the industry is realised.

Corporate moves (2013-2020)

The market dynamics are pointing towards new tools that companies are adopting that will see a widespread acceptance by 2020. The pharma companies are moving away from traditional blockbuster sales model to a more sophisticated direct-to-consumer distribution channels that will diminish the role of wholesalers. Companies will provide total health care packages.

All companies, including MNCs, will be increasing their field force in the coming years as they are looking at tapping a larger chunk of the Indian population in the rural markets by enhancing presence. On one hand, Indian companies are entering into strategic tie-ups with MNCs to strengthen their product portfolio while on the other hand even MNCs are actively looking at acquisitions to gain a quick foothold in the fastest growing pharma market.

Between 2010 and 2015 patent drugs worth $171 billion are estimated to go off-patent leading to a huge surge in generic products. In fact, Indian companies file the highest number of ANDA’s with US FDA leading to greater chances of approvals and thereby increasing export to regulated markets especially the US. There are a number of pharma SEZ in India which provides various opportunities for the manufacturers.

Future focus: Research

Indian pharma companies are investing on the R&D front to tap opportunities in the domestic and global markets. To encourage the same, the weighted deduction on R&D expenditure to 200 per cent (in-house research) has been extended for a further period of five years.

R&D process will improve our understanding of the underlying biology of the human body and its diseases, allowing researchers to better predict the effects of new drug candidates before they enter human beings. It discusses the fact that these changes could enable the shortening of the R&D process by up to two thirds, a dramatic reduction in attrition rates and a substantial reduction in the costs of clinical trials. It is estimated that this decade innovators will launch at least 25 per cent of their patented products in India, patent products will be launched in four therapies metabolics, neuro psychiatry, oncology and anti-infectives.

Conclusion

India is a high growth centre for the pharma sector and MNCs are actively looking at capturing a higher share in the market through innovative products, campaigns and reaching out to new regions earlier than the competition. Indian companies will have to be on their toes to be ahead of their foreign counterparts, and to keep their advantage of an early footprint as well as the regional connect through stronger product portfolio and quick strategies to adapt to the evolving market and consumer landscape.