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Day 82 – Q 5.Why is India a leading manufacturer of pharmaceuticals? What are the challenges being faced by the pharmaceutical sector in India?

5. Why is India a leading manufacturer of pharmaceuticals? What are the challenges being faced by the pharmaceutical sector in India? 

भारत फार्मास्यूटिकल्स का एक प्रमुख निर्माता क्यों है? भारत में फार्मास्यूटिकल क्षेत्र को किन चुनौतियों का सामना करना पड़ रहा है?


The Indian Pharmaceuticals Industry is ranked the third largest industry by volume. It serves as one of the major manufacturers around the globe. India has become a prime destination for manufacturing of branded and generic medicines with a strong export element. The Patent Act, 1970 and Economic Liberalization in the 90s led to the huge transformation of the pharmaceuticals industry in India.


The pharmaceutical industry has played a key role in driving better health outcomes across the world through its affordable and high-quality generics drugs. Increased accessibility to affordable drugs has been one of the key enablers for lowering the disease burden in India. 

In this regard, the following factors can be considered as important for India to have emerged as a leading manufacturer of pharmaceuticals:

  • Largest Generic Drugs Manufacturer in the world – Generic drugs have been the main reason for the success of Indian Pharma industry. It is the third largest manufacturer of generic drugs by volume. The drugs are the same as the branded drugs but have a patent right. 
  • Export to the western world – Owing to the easy availability of low price as well as high quality manpower in India, the smaller size pharma companies are able to produce drugs at low prices. Now, a significant amount of the drugs manufactured are exported to the United States.
  • Patent system – The patent system (Patent Act of 1970) associated with the pharma sector of India is also quite flexible and agile. The Paten Acts, 1970 and the Drug Policy in 1978 resulted in the expansion of the sector.
  • Governmental support – The strong support provided by the Indian government also proves to be an encouraging factor for the pharma sector in India. At present, more than 70 percent of FDI or Foreign Direct Investment is allowed in this sector. For this reason, it is easier for the businessmen in India to set up a new pharma company by finding a foreign source of funding. 
  • Globalization Process – Economic Liberalization lead to the growth of the Pharma industry. India offers the benefit of quality manpower and low cost attracted major pharma companies from all around the world to have a subsidiary here.

India Pharmaceutical Industry is one of the best developed and fastest growing market that produces about 20 % of the world’s drugs. Even then, there are various challenges in the Indian Pharmaceutical Industry, some of which are :

  • Lack of capabilities in the innovation space – Indian pharmaceutical companies have been slow to grow in the innovation space (e.g., new molecular entities, complex generics), with a limited government-supported research ecosystem. For example, government policies such as reversing the weighted deduction of erstwhile 200% on spend on R&D, which ends in 2021 has an adverse impact on innovation.
  • Dependence on external markets for intermediates and APIs – Around 80 percent of India’s requirements for Active Pharmaceutical Ingredients, by volume, are fulfilled by China, putting importers at the risk of supply disruptions and unexpected price movements (e.g., a policy shift by the Chinese government had resulted in a price increase of up to 50 percent for a few molecules). India has been unable to seize the API opportunity due to inadequate infrastructural facilities.
  • Indian pharma’s eroding competitive advantage – especially in the US generics market and limited presence in other markets and products. Generics exports, specifically to the US, were a key driver of double-digit growth for top Indian pharmaceutical companies over the last few years. However, growth in the US market is moderating, in part by price erosion – generics prices declined by about eight percent annually between 2015 and 2018.
  • Increased scrutiny in quality compliance when supplying to international markets – As the industry expands in different geographies and concerns on the quality of imported drugs increase globally, there will be greater scrutiny from regulators on quality norms. India has faced the highest number of USFDA inspections since 2009.
  • India needs user friendly government policy for the common man to establish small scale, raw material manufacturing units/ incubators in all states of the country to improve the availability of raw materials to manufacture generic drugs at affordable rates.

Some of these challenges can be overcome through – 

  • Increased budgetary allocations for healthcare to boost the domestic market.
  • Increased focus on attracting pharma investment.
  • Indian academic institutions are full of ideas born from the young, creative brains of students. Indian pharma industry can explore these ideas for future progress.


Looking at the urgent need of the nation for quality healthcare, the pharma industry has to develop strategies for raw material producing units with user friendly government policy for the small scale industry as well as focus on high-quality generic medicines at most affordable price for a healthy ‘New India’.

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