Domestic Pharmaceutical Formulations Market Will Be Worth Rs 5.5 Trillion By 2034: Report | News

The country’s pharmaceutical formulations market will be worth Rs 5.5 trillion by 2034, growing at a compound annual growth rate (CAGR) of 10 percent, investment banker Avendus Capital said in a report on Wednesday.

There was an anticipated shift away from branded physician prescriptions towards a more diversified marketing mix underpinned by strict quality regulations and streamlined supply. “Despite India’s reputation as the pharmacy of the world, the domestic market is under-penetrated, particularly in tier II/III+ cities and rural areas,” said Anshul Gupta, managing director and head of healthcare investment banking at Avendus Capital.

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As life expectancy increases in the country, the number of lifestyle-related diseases increases. This trend, coupled with people’s awareness of such diseases and their ability to seek treatment, will drive the sector’s growth. Chronic and lifestyle therapies such as cardiovascular, neurological, anti-diabetic and dermatological are expected to experience faster growth rates.

“The government of India’s Pharma Vision 2047 initiative aims to make medicines more equitable, accessible and affordable, while ensuring high quality and more sustainable manufacturing practices,” Gupta said.

Generic medicines (TGx) trading and Jan Aushadhi Kendra, government stores, are expected to account for around 30% of the pharmaceutical volume in the next decade. Despite this shift, branded generics (BGx) are expected to maintain 65-70% of market value, at a CAGR of more than 8%. The channel change may result in a moderate decline in ebitda margin, which can be mitigated through cost optimization measures such as rationalization of the medical dealership and reduction of free samples and physician-related expenses, the report said, referring to earnings before interest, taxes, depreciation and amortization.

Emerging markets such as Latin America, Africa, Russia and the Commonwealth of Independent States, and Southeast Asia are growing 1.5-2 times faster than regulated markets, making them attractive to Indian pharma giants.

“Over the last six years, Domform (domestic formula market) has attracted over $14 billion in major strategic and private equity investments. We estimate that the market will continue to grow at a CAGR of 9-10 percent over the next decade,” said Prasshanth Hari, director of healthcare investment banking at Avendus Capital.

Pharmaceutical companies will expand their portfolios by focusing on new chronic and lifestyle therapies or expanding into adjacent sectors such as over-the-counter (OTC) medicines, point-of-care diagnostics, health technologies and nutraceuticals. Increasing competition in the OTC segment, dominated by multinational corporations, has prompted Indian pharmaceutical companies to become more aggressive in this space.

Indian companies may refocus on the domestic market as the US healthcare market stabilizes and a “patent cliff” emerges, the report said, referring to the expiration of patents on branded products opening the door for competitors to introduce generic versions at lower prices. Emerging markets in Latin America, Africa, Russia and Southeast Asia are also attracting Indian pharmaceutical giants due to their faster growth rates.