Indian Pharmaceutical Industry to Triple by 2020

India has grown into the world’s third largest drug producer in volume and twelfth largest in value, according to India’s Minister of State for Health and Family Welfare on September 10, 2012.

With a quickly growing economy and large population, India’s pharmaceutical market is expected to reach $55 billion in 2020 from $15 billion today, based on a McKinsey & Company report. Government officials projected that the Indian drug industry will continue to grow exponentially. As per Minister of State for Chemicals and Fertilizers of India, the industry growth rate is expected to increase from its rate of 12 percent per year in 2011 to 18 percent per year by 2016.

The Indian government is increasingly supportive to the domestic pharmaceutical industry, and encourages more research and development (R&D). India has created an over $30 billion fund for pharmaceutical research and development and a tax holiday program for drug companies focusing on R&D.

India is also starting to allow more foreign drug companies into the country. In early September 2012, India approved eight foreign pharmaceutical investments with a total worth of $333 million, according to the Foreign Investment Promotion Board (FIPB). As India gradually opens up its fast-growing drug market, Western medical companies may be able to enter India with more ease.

Current regulations allow foreign drug companies 100 percent ownership in newly registered companies in India today. But to invest in existing Indian companies, current regulations stipulate that foreign investors will need approval from the FIPB. For more information on regulatory changes for the Indian pharmaceutical industry, please see our report: India Pharmaceutical Regulatory Report 2012.

However, it is noteworthy that the recent government approvals for foreign pharmaceutical companies are under special conditions. For example, Western companies such as Pfizer and B-Braun would not be allowed to enter unless they fulfill these requirements: continue to produce cheap drugs, and continue financing current research and development projects piloted by their local partners in India for five years.