India’s pharma industry to hit $57 billion by FY25 : Report

The Indian pharmaceutical industry is expected to grow 7-8% in the next financial year to reach $57 billion in valuation by FY25 after registering a compound annual growth rate (CAGR) of 6%-8% between FY18 and FY23, according to a report by ratings firm CareEdge. In FY23 alone, the market grew 5 per cent year-on-year to $49.78 billion, up from $35.41 billion noted in FY18.

The previous 5 years saw an 8 per cent growth in exports and 6 per cent growth in the domestic market, both of which contribute equally to the sector. Although, the export market in developing countries was in recent years marred by shipping constraints due to the Russia-Ukraine conflict, a shortage of dollar reserves in African countries and the depreciation of their own currencies, the increased access to healthcare in these countries may drive growth in the long-term.

Developed countries remain a promising market for India, with the US alone making up for 30-35 per cent of the total formulation exports. While recently, price corrections in the US caused by market consolidation were noticed, India nevertheless saw a notable increase in US export sales volume which is expected to sustain on the back of upcoming patent cliff (when products go off-patent) opportunities, as per CareEdge. Drugs worth $188 billion are set to go off patent worldwide between 2023-26, presenting the Indian industry with significant opportunities to expand its market share. The industry’s focus on launching specialty and niche products may also aid growth in the US, the report added.

Going forward, stabilisation of raw material prices, freight rates, and easing of pricing pressure in the US generics market will aid the operating margins of industry players in improving by 100-150 basis points over FY24 and FY25. Operating profitability of Indian pharma companies saw substantial increase in FY21 as the pandemic increased sales opportunities while cutting costs through a reduction in marketing, travelling and conveyance. However, subsequent years saw a correction as costs and delivery timelines were upped, which are now expected to notice easing.

“The Indian pharma sector is expected to grow at a steady pace in the medium term due to structural factors such as ageing of the population, rising lifestyle or chronic diseases, healthcare awareness and insurance penetration apart from increasing government spending under various schemes. Further, changing world demography along with complex and specialty generic products are expected to drive the export growth of Indian pharma companies, said Krunal Modi, associate director at CareEdge.