The Indian pharma industry?s growth rate will touch 19% from the current normal growth rate of 13%, according to a projection in a white paper released by the Confederation of Indian Industries (CII) on Monday. The incremental growth of 6.6% will be fuelled by factors like a growing middle class (contributing 2% of the incremental growth), pricing of the pharma products (1%), untapped rural markets (2%), and marketing efficiencies (1%).
At present, the middle class population, defined as households with an annual income in the range of Rs 2,00,000-Rs 10,00,000, is estimated to be around 91 million in the country. The middle class, estimated to consist around 8% of total population, is expected to grow four-fold by 2015 to reach 364 million, which will generate an additional demand for the existing and new medical products.
Rural areas have earned 23% of the value growth for some pharmaceutical companies in the mid-year ending June 2006. Even for low growth companies, rural markets contributed 40% of growth. Once the digital revolution and cell phone coverage penetrate deeper into rural areas, along with spread of business, rural markets will offer a substantial growth for the pharmaceutical industry, predicts the report. Currently the reach of modern medicines is hardly about 30% of the total population of the country and is acutely skewed in favour of urban or semi-urban centres.
Increased efficiencies in marketing, expected to contribute 1% of incremental growth, will be tailored to local conditions and will propel higher growth in revenue of small and medium size companies. Acute therapies as opposed to chronic therapies are likely to occupy a major share of the Indian pharma market in the next decade. Share of acute therapy was almost thrice that of chronic therapies in the three years leading to 2005. The share of acute therapy brands was 75% of the total pharma market in 2007 and is likely to occupy a dominant share in the market during the next decade. This trend will continue, said the report despite the fact that the three year CAGR of chronic therapies is 16%, while the growth rate for acute therapies is 12%. Increase in health insurance could impact the market only marginally resulting in incremental growth rate of only 0.14%. This is despite the fact that the health insurance market in India has recorded a robust growth rate of 44% in 2006-07 and international reinsurer Swiss RE has estimated a substantial growth in health insurance business at $ 7700 million by 2015.