Indian Pharmaceutical Market Outlook -Rural Market Penetrationand Expanded Access To Healthcare Attracting Big Pharma Investment ,Enhanced Purchasing Power

Anil kumar Registration No. -12PMM382

MBA (Pharm),DOPM NIPER(Mohali)

Flow Of Presentation Indian domestic market contribution in pharma from different segment list of Indian pharma companies in terms of sale Growth driver of Indian pharmaceutical industry Indian healthcare-new avenues for growth Indian rural market Indian healthcare sector Enhanced purchasing power conclusion

The Indian Pharmaceutical Industry is ranked 3rd globally in volume and 14th in value, supplying around 10% of total global production

India is among one of the largest bulk drug exporter but represent only one fourth of the total pharmaceutical market while formulation drugs account for the three fourth share 

Source: BMI, Datamonitor, Various industry estimates, Aranca Research

DOMESTIC MARKET Top 23 cities 25% of Pharma sales of which the Tier‐I towns One third of the total sales and Tier‐II cities (population less than

one lac) including the rural Domestic market accounting for about 40% of market share 30%

annually growth increase This increase in the growth is catching attention of the major companies who are now focusing on them for future growth

In terms of global export of herbs, India account for 9.10% of the market share

Domestic market size to be US$12 billion. We estimate that by 2020 it will grow to US$49 billion

Cont…….

There has been a consistent growth in the total healthcare spending in India with an estimated 4.20% of GDP spent on healthcare through 2008-10. Pharmaceutical industry contributed 1.71% of GDP in 2011

Pharmaceutical industry (domestic, import and export) by value reached USD 27.40 billion, growth of 13.22% from previous year

CONTRIBUTION IN PHARMA FROM DIFFERENT SEGMENT

Biopharma segment growing at a CAGR in the range of 10-13% over the next 10 years to reach a size between US$1.4 billion and US$1.8 billion by 2020, vaccine segment (human and animal) witnessed growth of 11.21%

Bulk drug segment registering a growth of 6.41%. This segment is further expected to grow at CAGR of 14.80% (2011-2016) and it will be of US$ 20 billion size by 2015

Vitamins and minerals is a rapidly growing category which was the fifth largest therapeutic segment in 2011

Source: BMI, Datamonitor, Various industry estimates, Aranca Research

Cont…..

The Indian generic drug market is projected to grow at a CAGR of around 11.13% during 2011-2016 from 9.69% (2010-2011)

The herbal supplements market in the country reached at a growth of 6.44US$ from previous year and is further expected to grow at a CAGR of 2.44% by 2015

The OTC market was worth about US$1.8 billion in 2010 and it is estimates that by 2020, it will grow to US$11 billion - a CAGR of 18%,with the potential to reach US$13 billion– at an aggressive CAGR of 20%.

Contract research and manufacturing services (CRAMS) Market size USD2.5 billion as of 2009 Fragmented market with more than 1000 players Expected market size of over USD9 billion by 2014

India's own market is increasing, which is being penetrated by high technology products beyond off-patent small molecules such as

Biosimilars sales in India are around $200 mn in 2010, and expected to grow to $580 mn by 2013

Biosimilars Medical devices

Source: IMS Health, Market Prognosis

List of Indian Companies In Terms Of Sale

The Pharma Industry Scenario in 2020

Source: PwC Analysis

However, government affairs and pricing functions can play a very

important role in the Indian scenario with India investing enormously in healthcare infrastructure The Government has been inviting Public Private Partnerships

(PPP) The Government of India is increasingly investing to improve the

healthcare infrastructure in India, hence government affairs today plays an important role

Government

affairs

Pricing functions

Source: Emkay research (August, 2010

Growth Driver Of Indian Pharmaceutical Industry

Indian Pharma industry has always been a leading industrial sector of the country, with a paralleled dominance of both domestic and foreign pharma companies

Growth of the industry can be attributed by prominent factors

Growing middle class population Rapid urbanization Increase in lifestyle-related diseases Increasing issuance of health insurance  Generics is emerging as one of the leading segments  The Indian pharmaceutical Industry is driven by knowledge, skills,

low production costs, quality

Indian Healthcare - New Avenues For Growth

The focus of the industry will shift towards capitalizing the potential of tier-III and rural areas. Emerging sectors, such as bio-generics and pharma packaging will also pave way for the pharmaceutical market to continue its upward trend during the forecast period

India has the maximum number of diabetic patients in the world after China, and communicable diseases like malaria and tuberculosis

Hospital services is one of the fastest growing segments

Source: Emkay research (August, 2010)

Some of the fastest growing therapeutic segments Anti-diabetic segment-29% Cardio-vascular medication and nervous system disorder

medication - 22% Indian population spent 7% of its disposable income on healthcare

in 2005 but ,13% by 2025

The Indian Middle Class-Percentage Of The Population

11.7%

2007-08

13% 2009-10

34%

2020 (forecast)

Source: Economic Times (April 2009), PwC analysis

source-IDFC Institutional Securities, Indian Pharma

Indian Pharma market is predominantly a branded generics market

Other drugs 10%

Branded generics 90% 90%

10%

Key Drivers Behind The Growth Of The OTC Segment

Widerdistributionchannel

Direct toconsumeradvertisements

Increasedconsumerawareness

Lowpricecontrols

.

Companies can sell theirproducts outside ofpharmacies, for example inpost-offices anddepartment stores

Other than acetylsalicylicacid and ephedrine andits salts, very few of theOTC active ingredients fallunder the current DPCO

price controls.

Other than acetylsalicylic acid and ephedrine and its salts, very few of the OTC active ingredients fallunder the current DPCOprice controls

There is an increasedReliance on self-medicationas public awareness of Common ailments goes up

The government allowspublic advertising of theseproducts, giving drug makers greater freedom to use more Creative methods while marketing their products.Magic Remedies(ObjectionableAdvertisments) act prescribes a negative list of disease for which medication cannot be publicly advertised

Source: PwC Analysis, Primary Research

Indian companies that manufacture and sell OTC products

eg. Cipla, Ranbaxy and Zydus Cadila

eg. Novartis, Pfizer and Johnson & Johnson

GROWTH FROM RETAIL TO INSTITUTIONAL

91%Retail

88% Retail

12%Institutional

91% Retail

9%

Institutional

What Company Should Do To Enter In Rural Market

Create demand by increasing awareness and education Work with the government through public-private partnerships

(PPP),in order to improve infrastructure conditions Mobilize primary care givers and paramedics through health and

diagnostic camps Bring specific product solutions to the market and use local

languages Improve accessibility of medicines by innovative distribution

channels Make products affordable, through appropriate pricing and

packagingSource: Novartis, Arogya Parivar: Health for the poor 2010

Geographical Split of The Indian Population

27 Cities

(11%)

398 Towns (9%)

4,738 Periurban (13%)

600,000 Villages (67%) Bottom ofthe Pyramid

33% of Market(cities & towns)

Source:: Health for the poor (April 2010)

Key Challenges Of The Rural Market

Low government spend on healthcare

Poor Infrastructure

Low awareness of diseasesand possible treatment

Poor basic hygiene andliving conditions

Limited affordability

Source: Novartis, Arogya Parivar: Health for the poor 2010-2011

Population Rural (72%) 742 million Urban (28%) 285 papulation papulation Million

•Hospital % 31 69

• Hospital Bed% 20 80

• Doctors % 08 92

•Doctors/100,000 people 05 50

•Spurious Pharma sales % 75-80 20-25

According to estimates of the planning commission, village dwellers have

started spending 12% of their household income on healthcare This has resulted in a spurt of Pharma companies targeting this market

Source: IDFC India research, MNC Pharma: New Avatar

Novartis Arogya Parivar Case Study 4 A’s

Arogya Parivar is a social innovation to improve healthcare for the poor in rural by promoting disease prevention through a healthy lifestyle and laying focus on Community Education

It also aims to form partnerships with NGOs & healthcare companies to implement a complete healthcare program

Cont…..1. Awareness• Community Education meetings• Physician knowledge sharing[BAMS/BHMS

2.Adaptability• Rural specific solutions[oral rehydration solutions(ORS)/Zinc

3. Availability• Linkages to city supply points• Mobile Health camps

4.Affordabilty• Custom small packs

“Novartis has improved access to healthcare for 42million underserved people in rural India throughArogya Parivar (Health Family), a sustainablesocial business model.”

Cont…..

Elder Pharmaceutical ltd. Setup a dedicated division called “Elvista”

Nicholas Piramal it has tied up with sorento healthcare communication of epilepsy outreach program launched under the banner “reach more teach more”

Ajanta Pharma it use stalls at fairs ,moving van he also educates tertiary health workers who works in small villages

Ranbaxy “viraat”

Indian Healthcare Sector

Medical care providers: physicians, specialist clinics, nursing homes and hospitals;

Diagnostic service centers and pathology laboratories

Medical equipment manufacturers

Pharmaceutical manufacturers

Third party support service providers

(catering)

Major factor for driving healthcare sector

INCREASING POPULATION

GROWING LIFESTYLE RELATED HEALTH ISSUES

CHEAPER COSTS FOR TREATMENT

THRUST IN MEDICAL TOURISM

IMPROVING HEALTH INSURANCE PENETRATION

INCREASING DISPOSABLE INCOME

GOVERNMENT INITIATIVES

FOCUS ON PUBLIC PRIVATE PARTNERSHIP (PPP) MODELS.

Source: Consolidated FDI Policy, DIPP

Government vs. Private Spending on Healthcare Sector

PRIVATE

PUBLIC

Source: Cygnus Indian Healthcare Overview Report

Indian Players In Healthcare Sector

Key Players in the

Healthcare Segment

Apollo Hospitals

Arvind Eye

Hospital

Manipal Health

Systems

Wockhardt

Max Healthcar

e

Fortis Healthcar

e

The Escorts Group

Foreign Players In Indian Healthcare

Atlas Medical Software Bayer Diagnostics General Electricals and Bharat Electronics Limited Isoft Group plc (iSOFT) Siemens

Enhanced Purchasing Power

Subsidizing drugs for target population group - Ensuring use of drugs for high priority services and drugs for diseases of public health importance (such as TB) (e.g. Bitran and Giedion)

Government agencies, whether central or local, tend to provide subsidies for health services

For a number of diseases of public health importance are waived except the cost of prescribed drugs, i.e. meningitis, cholera, malnutrition, typhoid, rabies and 18 other diseases

Sources: UNDP, HDR, and WHO

Cont…..

Targeting of geographical areas-There may be considerations given to the geographical distribution of drugs and larger share often tend to go to hospitals

Currently budgets are often historically determined rather than related to need. One way of targeting drugs to the poor could be to ensure that deprived regions get preferential allocations of drugs reflecting their needs for drugs

Promoting rational prescribing- Because of the information asymmetry between the patient and the provider regarding how the welfare of the patient will be affected by treatment alternatives, the provider remains in control of the decision over treatment strategy Prescribers are therefore an important target group for improving rational use of drugs

Cont…..

Promoting adequate patient use of drugs-Poor people more often than rich people turn to self-medication or traditional healers to save costs Inappropriate use of self-medicated drugs or lack of compliance on the part of patients is a problem for achieving the potential gains related to the expenditures on drugs or avoid cash demands

Conclusion

“Having considered the market access landscape, successful strategies and having discussions with Indian Market Access leaders, it can be concluded that India is a market with tremendous potential that cannot be ignored

While a rising per capita income provides an opportunity for global companies to launch their premium products, lack of a public reimbursement system calls for a careful pricing strategy”

Thank you