Why is India's pharmaceutical industry set to boom?

Pharma industry: The Indian Pharmaceutical Industry has demonstrated remarkable resilience and growth, with a Compounded Annual Growth Rate (CAGR) of approximately 8 per cent from FY18 to FY24, a report by CareEdge said on Wednesday. This robust growth has been driven by both domestic and export markets, each contributing significantly to the industry's expansion.

FY24: A year of impressive growth

In FY24, the Indian pharmaceutical industry expanded by nearly 9 per cent year-over-year, reaching approximately $54 billion. This growth was fueled by a 10 per cent increase in exports and a consistent 9 per cent rise in the domestic market compared to FY23. The export sector, particularly in regulated markets, saw an 11 per cent year-on-year growth, while semi-regulated and unregulated markets rebounded with a 7 per cent increase after a contraction in FY23 due to geopolitical issues.

CareEdge Ratings expects the export segment to continue its upward trajectory at a CAGR of about 8 per cent for the period FY25-FY27, with exports to regulated markets projected to grow at approximately 9 per cent during the same forecast period. Overall, the industry is forecasted to maintain a growth rate of around 9 per cent in the forthcoming years, driven by balanced growth across both domestic and export markets.

Drivers of domestic market growth

Several factors contributed to the domestic market's 9 per cent growth in FY24. Increased demand in both acute and chronic segments, price revisions allowed under the National Pharmaceutical Pricing Authority (NPPA), and the launch of new products all played a significant role. Therapies for cardiac conditions, diabetes, and central nervous system (CNS) disorders experienced over 10 per cent year-on-year growth, with other therapeutic areas also showing strong performance.

Export market performance

Exports showed robust growth, especially in the North American market, which comprises about 40 per cent of India’s total pharmaceutical exports. After significant pricing pressures post-COVID-19 up to FY23, the region saw a turnaround with a growth rate of approximately 13 per cent in FY24. This was due to the easing of pricing pressures, revitalization of biotech funding, the launch of specialty products, and deeper penetration into the generic market. European, African, and Asian markets reported growth rates between 7 per cent and 8.5 per cent during FY24.

The key growth drivers for the export market include a more selective approach in Abbreviated New Drug Application (ANDA) filings due to heightened competition and high costs. This shift has altered the trajectory of price erosion and increased the demand for critical drugs.