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COVID-19 impact on the Indian Pharma Sector in FY 2020-21


Overview


The Indian pharma industry is the third-largest in the world. The Indian pharmaceutical sector is a knowledge-driven industry and is severely dependent on Research and Development for new products and growth. It produces almost 60% of the vaccines used worldwide. Some of the significant ones are those against diphtheria, tetanus, and pertussis required by the World Health Organisation (WHO). Leading Indian Pharmaceutical Companies like Ranbaxy, DRL, CIPLA, and Dabur have already established their presence in this sector.




Source:OnlineConnexion


Due to the outbreak of the novel coronavirus, the Indian pharmaceutical market has been affected drastically. Since the beginning of the lockdown period, demand for women healthcare, dental care, and orthopedic was impacted as a treatment for these segments was on hold. On the other hand, the pharma industry witnessed a rise in demand for antibiotics, cold and cough, and other low immunity segments.




Source: Visiongain


How COVID-19 has impacted the Indian Pharma Sector


  • COVID-19 has reduced the growth of the Indian Pharma market by 0.2%. The Indian Pharmaceutical Market (IPM) grew by 0.2% in July 2020.


  • As per an analysis done by Motilal Oswal, the overall volumes of IPM declined by 6.5% in the fiscal year 2020. The pandemic has caused majorly transformed the needs of the consumers impacting the production and operation of the Indian Pharmaceutical Sector.


  • As the COVID-19 adversely impacts chronic heart, lung, and diabetics severely people are buying more medicines for these segments. Pharmaceuticals dealing with respiratory, anti-diabetic, and cardiac therapies are performing much better than others having anti-infective, gastro, vitamin, or pain therapies in their portfolio.


  • The COVID–19 pandemic has interrupted supply chains across the world. With the rising price of raw materials, projects being delayed, and factories being shut down, the Indian Pharma industry has been disrupted. Pharmaceuticals are unable to launch products or conduct clinical trials due to the lockdown period.


  • While product launches and clinical trials by large global pharma companies in India are delayed, the drug companies face low sales and suffer financial loss.


  • At present, generic drugs are playing a crucial role in fighting against COVID–19. India has been meeting more than 20% of the world and almost 50% of the US’s generic drug requirements. Indian manufacturers depend heavily on China for raw materials and intermediate and APIs with China catering to nearly 70% of Indian pharma companies’ requirements. Few of the Indian pharma facilities had to be shut as the employees tested positive for COVID–19.




Source:timesofindia


  • By 2020, India’s active pharmaceutical ingredient (API) industry is expected to grow at $6 billion in revenues.


Indian Pharma-Exports


  • The Pharma industry has played a significant role in the betterment of health across the world through its affordable and efficient generics drugs. India is the world’s largest supplier of generics, accounting for 20% of exports globally. Along with the increased accessibility to generic drugs India has lowered the risk of disease. The Pharma industry in India has been persistent irrespective of the economic slowdown due to the outbreak of COVID-19. Globally Indian pharmaceuticals supply over 50% of the global demand for various vaccines and 40% of the demand for generic products in the US.


  • The domestic pharmaceutical market offers 2% of the global manufacturing rate and 10% in volume terms. From 2019-20, pharmaceutical exports from India grew from 7.57% to $20.58 billion. Pharma exports from India progressed at a gradual pace of 8% y-o-y to USD 20.7 billion in 2020 opposed to the growth of 10.9% during 2019. A firm 22.8% reduction in pharma outbound shipments in March 2020 was the principal cause for a slower rise in exports during 2020. The domestic pharmaceutical industry has gained foreign direct investment (FDI) of US$ 16 billion from April 2000 to June 2018.




Source: Marketingsmalltalk


  • Due to the lockdown, it has become challenging to approach retailers and distributors are also facing supplying issues to other states. Exportation in January 2020 improved by 11.72%.


  • However, in February and March, growth rates were 7.7% and minus 23.24% respectively, resulting in negative growth of 2.97% in Q4.


  • Other drug formulations and biologicals, offering nearly 72% of exportation, have recorded 9.5% growth. Exportation of bulk drugs and drug intermediates weakened 0.73% taking down the overall production. Vaccines and surgical recorded a 22% and 10.5% increase, respectively.


  • In March 2020, due to the imposition of the export ban by the government on 26 drugs affected exports this year. Had it not been for this, the pharma exports would have risen by a higher 11.7%.


  • In April 2020, Covid-19 disturbances have affected the pharma outbound shipments in the as it increased only by 1.6%. Later the export ban on 24 drugs imposed by the government was lifted. As the lockdown easies, exports were up by a stronger 17.3% along with demand for antivirals, antimalarials, and antibiotics in the global market for the treatment of COVID-19.


  • The current entrance of Rs 10,000 crore bulk drugs park and production linked incentives for API manufacturers by the Government of India will begin to overcome the dependency for the domestic formulators on imports from China.


  • There is a lot of medicine stock that comes from Goa, Baddi, and Sikkim. Exports to North America – the most extensive market for Indian pharmaceuticals and committing to 34% of entire exports – were 15.11% higher. Exports to the U.S. market grew by 15.8% to $6.7 billion, which was nearly one-third of the total exports.


Indian Pharma-Imports


  • During the fiscal year 2020, pharma imports by India stood at USD 6.5 billion. Within this, bulk drugs and drug intermediates endure the highest percentage of pharma imports. In 2020, they estimated nearly 53% of the entire pharma inbound shipments. These bulk drugs and drug intermediates can be recognized as inputs utilized in the production of formulations which appear in the desired therapeutic outcome in the human body.


  • In the case of API or bulk drugs, the dependency of India on imports is noteworthy. Roughly 60% of bulk drugs are sourced from different countries, out of which the dependency of India on China is vital as India imports more than 65% of the entire bulk drugs and drug intermediates are imported from China.




Source: IndiaToday


  • Throughout 2020 the imports of bulk drugs and drug intermediates weakened by 4.1% to USD 3,416 million. From June 2019 to March 2020, this was essentially due to the substantial fall in imports.


  • Due to the closure of several departments and operations in China, the initial months of 2020 impacted the supply chain of bulk drugs to India which led to a decline in imports of bulk drugs and drug intermediates.


  • Intending to provide some respite to the importers, the Central Drugs Standard Control Organisation (CDSCO) approved the import of drugs with residual shelf life less than 60% under the special conditions on 17 April 2020 which has been extended up to 31 October 2020.


  • During the month of April-May 2020, imports of bulk drugs and drug intermediates from China dropped by 5.5% as opposed to a 9.9% decline from countries other than China. This indicates a higher dependency on India on China in bulk drugs and drug intermediates.




Source: IndiaToday


  • Analyzing the dependency on China, the cabinet approved schemes concerning the promotion of domestic manufacturing of critical Key Starting Materials (KSMs)/drug Intermediates and Active Pharmaceutical Ingredients (APIs).


The following schemes were approved by the cabinet on 21 March 2020:


• The scheme on the promotion of bulk drug parks for financing Common Infrastructure Facilities in 3 bulk drug parks with financial implication of Rs. 3,000 crore for the next 5 years.


• Production Linked Incentive (PLI) Scheme for promotion of domestic manufacturing of critical KSMs/drug intermediates and APIs in the country with financial implications of Rs.6,940 crore for the next 8 years. At this stage, India must be more self-sufficient with their imports.


Summary


The forecast for 2020 of the Indian pharmaceutical industry's steady growth of 8% is followed by a rebound in domestic growth in Q2 2020 to 14.2 %.

During the COVID-19, the domestic pharma enterprise is anticipated to rise at a 4-6 % in 2021. Various Indian pharma companies like Aurobindo and Dr. Reddy, Glenmark have acquired US ANDA (abbreviated new drug application) portfolios which will support growth performing ahead.

According to ICRA, Indian companies are unlikely to modify prevailing spend on R&D advancement which will encourage long-term growth prospects.




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