India’s pharmaceutical industry is a global powerhouse. It is already a massive $50 billion market and is projected to grow to $130 billion by 2030. India makes 60 per cent of the world’s vaccines and 20 per cent of the world’s generic drugs.
This shining star does however have two chinks in the armour that industry leaders will be well served to address. One is the need for the sector to invest more in research and development (R&D) for the innovations that will fuel long-term competitiveness. This R&D is not just for newer healing combinations, but also innovation across the product lifecycle (from formulation to disposal) for drugs that are less resource-intensive, increasing recyclability in packaging, and other environmental benefits like biodegradable formulations to reduce waste.
The second chink is its climate and environmental footprint. It is not intuitively thought of as a high-emissions sector, but one study found that the emissions intensity of the world’s top 15 pharma companies was 55 per cent higher than comparable figures for automotives, which are more conventionally regarded to be a high-emissions sector. Indeed, another study made the comparison that if healthcare was a country, it would be the world’s fifth largest emitter.
Firstly, let’s consider emissions. The sector must actively look at reducing emissions not just because it is good for the planet – which it undoubtedly would be – but also because it is good for business. Healthcare across the world is a politically sensitive sector, with massive shares of government budgets going towards it. As the chorus on sustainability gets louder, a key lever of government action is going to be to direct public procurement towards greener products. This could be strict guidelines for products to adhere to strict emissions targets to be eligible for government purchases. There are still challenges in both availability and cost in other sectors (though these will reduce over time) but not so for the pharma sector. The manufacturing process and cost structure of this sector make it a prime candidate for early inclusion in this form of climate action. With a similar rationale, large healthcare buyers (like global pharmaceutical companies, retailers, medical chains, etc.) who have sustainability ambitions will also pressure the sector to go green. The sooner it readies itself by using more renewables, reducing waste, improving industrial efficiency, and increasing circularity, the more ahead of this regulatory curve it will be. Also, the more profits they will make, the inevitably higher margins!
A second and most worrying area that needs to be addressed is the role of the pharma sector in antimicrobial resistance (AMR). AMR is when bacteria and viruses adapt to medicines, rendering antibiotics less effective or even useless. Infections and diseases once easy to treat become dangerous. There have been persistent concerns about AMR being aggravated by effluents from pharmaceutical manufacturing plants. Some studies suggest that the concentrations of antibiotics from this pharmaceutical pollution can be up to 1000 times higher than in hospital effluents or municipal sewage. The solution set for this is clear and available. The solution set has some obvious challenges but is by no means impossible. The risks and costs of inaction should not be acceptable. Every pharma company and regulator should urgently plug these leakages.
Lastly, given the size and success of the pharma sector in India, it is inevitable that it will also be subject to scrutiny on regulatory matters like ESG (Environmental, Social, and Governance) practices and reporting. These will increasingly include both emissions footprints but also transition plans – and leaders will benefit from better allocation and cost of capital, apart from serving to build brand equity. Enhanced ESG reporting and compliance are also critical, with pharmaceutical companies adopting international standards and frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI). These measures help build trust and ensure accountability with stakeholders and innovation. For the pharmaceutical sector, adopting proactive measures towards climate change, social well-being, fairness, and transparency is not just beneficial, it is essential.
As the Indian pharmaceutical industry advances in sustainability, the ripple effects could significantly amplify the country’s overall climate action efforts. The sector – being one of India’s largest – holds a unique position of influence. Moreover, a sustainable pharmaceutical sector could lead to innovations in green technology and sustainable practices that could be replicated across other sectors. The benefits to India’s pharma leadership are increased revenues, improved margins, derisked supply chains, stable energy prices, and even larger benefits of global leadership from and towards ethical conduct.