What are the investment opportunities in healthcare delivery in India
In many segments above the poverty line, healthcare affordability is ahead of access to quality healthcare. Investors who can create scalable, relatively low fixed-cost operations that expand healthcare deliverys reach and capacity will profit handsomely.
Creating access to specialty care for the middle and upper class segments in rapidly urbanising areas is a huge opportunity. In rural India, there is an urgent need to create widespread access to affordable primary healthcare. Delivery mechanisms that leverage technology to expand reach while keeping costs low will be well received.
Why are we not seeing a continuous flow of foreign investment in the pharma market
Compared to other emerging markets of similar value, the Indian market is particularly challenging due to low pricing, high percentage of generic products and policy uncertainties in the areas of patent protection, pricing and equity ownership. For MNCs that have explored acquisitions in India, unrealistic valuations, promoters unwillingness to relinquish control and some business practices have been major deterrents. However, smaller companies entered on their own or through alliances. Their objective is to be a market leader in chosen specialties, not overall size. This is a prudent and profitable way to establish a foothold in the worlds second most populous market.
Do drug prices go up when foreigners acquire companies
I dont think so. Pricing power is limited by intense competition and government policies. Despite acquisitions, the Indian pharma market is highly fragmented. There are many reputable domestic pharma companies with hundreds of molecules in their portfolio. For every high-volume generic drug, there are more than fifty brands, keeping prices low. So, in India where drug costs are an out-of-pocket expense for most patients, MNCs cannot command a huge premium, at least for generic drugs. In addition to competition, government caps prices of essential drugs. Annual price increases are also monitored closely and limited for all drugs.
The best source of pricing power is patent protection for a first in class treatment. However, if you take the example of Januvia, the most successful patent protected product, the fully-imported product was launched in India at around 15% of the US price. In other cases of patent protected products, government threats of mandatory licensing or controversial launches by competitors have kept pricing down.
What are the changes that the industry will have to adapt to
As a higher percentage of the newer molecules get protected by Indias product patent law, it will become difficult for companies to have a rich pipeline for the domestic market. Key account selling to hospitals and pharma chains will become important. Insurance companies will also become key decision influencers as medical insurance penetration increases. Scientific selling will also become a key differentiator as drugs for specialty therapies grow faster than the overall market. Finally, as healthcare affordability and accessibility in rural India improves, selling to these dispersed markets will be very different than selling in urban markets.
Volume in the domestic market is doubling every five years. This is a huge undertaking from the manufacturing side because a pharma plant takes five years to build, validate and reach full capacity.
Biosimilars, generics will require deep pockets and new skills in the areas of development, manufacturing and marketing.
What are the other opportunities for global pharma in India
Besides selling products, global firms can leverage Indias talent pool to improve innovation, productivity and capacity. For chemically synthesised molecules and some biological products, India has the capability to contribute from early stage research through to commercial manufacturing. India can also provide support in areas like IT and business processes like pharmacovigilance.
How can India position itself to benefit from providing services to the industry
Countries like China, Korea, Singapore, Ireland; states and provinces in developed markets; academic institutions and many others are all coveting pharma industry jobs. For India, having the talent pool alone is not enough. Government, academia and private sector will have to ensure that all aspects of doing business in India becomes easy and transparent. One area requiring immediate attention is clinical trials. Dramatic improvements are required in the entire ecosystem in areas including governance, ethics, skills and transparency.