India’s Pharmaceutical Industry: Significance & Challenges

• “India, a global leader in generic and branded drug exports, faces a 100% U.S. tariff on branded and patented pharmaceuticals from October 2025. Exemptions for new U.S. manufacturing units may force firms to rethink investments and supply strategies.”

India’s Pharmaceutical Industry: Current Scenario

• Market Size: India’s pharma market is US$ 50 billion (FY23–24), projected to reach US$ 130 billion by 2030 and US$ 450 billion by 2047.
• Global Supply: India, the ‘pharmacy of the world,’ provides 50% of global vaccines, 40% of US generics, and 25% of UK medicines.
• Industry Scale: India ranks 3rd in production by volume & 14th by value, contributing 1.72% to GDP.
• Investment & API Share: India holds 8% of the global API market, with 100% FDI for greenfield and 74% for brownfield projects
• Biosimilars Growth: Indian biosimilars market is projected to grow from US$ 51 million (2025) to US$ 192.5 million by 2034, CAGR 14.2%.
• Pharma Exports: India exported US$ 26.5 billion of pharmaceuticals in FY23–24, covering ~20% of global generic drug exports.
• FDA Facilities: India hosts the largest number of FDA-approved pharma plants outside the U.S., highlighting its global manufacturing role.

Significance of India’s Pharmaceutical Industry

• Global Supply: India provides 50% of vaccines and 20% of generic drugs worldwide.
• Economic Contribution: Pharma adds ~1.7% to GDP and is projected to reach US$ 130 billion by 2030.
• Employment Generation: The sector supports millions of jobs via 3,000 companies and 10,500 units.
• Cost Efficiency: Low-cost manufacturing ensures affordable medicines and vaccines globally.
• Export Strength: Pharma exports of US$ 27.8 billion (FY24) boost foreign exchange.

Reasons for Low Value Addition in India’s Pharmaceutical Industry

• API Dependence: India imports nearly 70% of its APIs from China, making it vulnerable to supply disruptions and cost fluctuations.
• R&D Deficit: Indian pharma invests ~5% of revenue in R&D, far below 15–20% in developed markets, limiting novel drug development.
• Innovation Gap: India contributes mainly to generics, patented or high-value drugs account for a small fraction of its output.
• Infrastructure Limits: Limited high-tech manufacturing, cold-chain logistics, and testing facilities restrict production of biologics and complex formulations.
• Quality Concerns: Despite 2,000+ WHO-GMP and USFDA-approved plants, quality lapses and fragmented regulation affect global trust.
• Market Reach: Indian firms dominate low-cost generics, with limited presence in regulated markets like the US, EU, and Japan.

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Challenges Associated

• Patent Barriers: Current patent protections prevent Indian companies from producing affordable generics or biosimilars of new medicines, limiting access to essential drugs.
• Regulatory Hurdles: Outdated, resource-intensive guidelines for biosimilar approval in India create barriers for domestic producers, contrasting with more streamlined practices in the U.S. and EU.
• 2024-25 Budget: Proposes removing 10-12% customs duty on AstraZeneca’s cancer medicines, which may not significantly affect high prices or improve affordability.
• Department of Expenditure (DoE) Order: Authorizing global tenders for 120 medicines, including key anti-diabetes and anti-cancer drugs, could strengthen foreign market control.
• Price Regulation vs. Local Production: The Drugs Price Control Order, 2013, regulates prices, but promoting local production is a more effective way to ensure affordable access to critical medicines.

Way Forward

• Utilize Compulsory Licenses: Use compulsory licenses to boost local medicine production and affordability, especially during pandemics and for critical illnesses.
• Streamline Biosimilar Approval: Update guidelines to align with global standards (like in the EU) facilitating easier market entry for domestic producers.
• Align Policies: Adjust policies to support domestic pharma growth, reduce import reliance, and ensure affordable medicines.
• Enforce Section 83 of Patents Act: To ensure patents promote local production and affordable pricing.
• Utilize Government Licenses: Leverage Section 100 of the Patents Act to grant licenses for producing generic versions of patented drugs for public health.

India, as the “Pharmacy of the World,” must boost R&D, API independence, and infrastructure to sustain global leadership. Collaboration, government support, and initiatives like PLI schemes and Bulk Drug Parks under “Make in India” will drive innovation and investment in the sector.

Reference: The Hindu

PMF IAS Pathfinder for Mains – Question 364

Q. India ranks third in global pharmaceutical production but lags in value addition. Critically examine the reasons for this gap and suggest measures to enhance India’s competitiveness in the global market. (250 Words) (15 Marks)

Approach

• Introduction: Write a contextual introduction by mentioning the current data and facts.
• Body: Write key drivers of India, 3rd in global pharmaceutical production, also write the reasons for the gaps between volume and value addition and suggest measures to enhance competitiveness.
• Conclusion: Write a comprehensive conclusion by mentioning the future course of action.