Drugs and Pharmaceuticals Industry

Let us begin with a simple question: What does the pharmaceutical industry do?

At its core, this industry is responsible for developing, manufacturing, and supplying medicines—an essential commodity without which no society can function. Just as food nourishes the body, medicines protect it from internal harm.

And in this realm, India plays a major role. In fact, India is proudly referred to as the “Pharmacy of the World.”

Historical Background: How Did It Begin?

Imagine India before independence. It was like a dependent patient—most medicines were imported, and India only did the final steps like packaging or making tablets from imported raw materials (called formulations).

But post-independence, a silent revolution began. India gradually moved from importing drugs to manufacturing them on its own, step by step.

Today, over 95% of India’s bulk drug needs are met domestically. India is also self-sufficient in formulations and has emerged as a major exporter of affordable drugs, especially to developing (3rd world) countries.

Structure and Scope of the Industry

Let’s look at the size and structure. The pharmaceutical sector is not just another industry—it is one of India’s most science-driven and organized sectors.

✦ Why is India successful in pharma?

• Low-cost manufacturing (important for price-sensitive markets).
• Skilled and educated workforce (we have doctors, chemists, engineers).
• Cheap labour (cost-effective operations).

✦ Statistics to note:

The pharmaceutical industry in India was valued at an estimated US$50 billion in FY 2023-24 and is estimated to reach $130 billion by 2030.

🏭 Industry Composition

• Over 3,000 major pharmaceutical companies operate actively in India.
• There are more than 10,000 manufacturing units across the country.
• Of these, 650+ units are US FDA-approved—the highest number for any country outside the United States. This speaks volumes about the global credibility of Indian pharma manufacturing. Source

📈 Market Share Distribution

• The top 10 pharma giants—like Sun Pharma, Dr. Reddy’s, Cipla—contribute a significant chunk to industry revenues. Sun Pharma alone reported sales of over ₹20,000 crore in 2024.
• The organized sector, though comprising just a few hundred companies, dominates the space with a majority share in national production and exports.

🧬 Overall Industry Size

• The industry is made up of a vast, decentralized ecosystem of small, medium, and large firms.
• There are thousands of MSMEs (Micro, Small & Medium Enterprises) that serve regional and niche markets alongside major export players.

What Drugs Dominate the Market?

Let’s understand what medicines are selling the most:

• Top-selling drugs: Antibiotics (like Amoxicillin, Penicillin).
• Fastest-growing segments:
  • Diabetes treatments
  • Cardiovascular drugs (heart-related)
  • Central Nervous System treatments (mental health, neurology)

Think about it this way: as lifestyle diseases increase due to modern living, the demand for such medicines is rising fast.

Geographical Spread: Where is the Industry Based?

The pharma industry has regional clusters in India—just like certain cities become famous for textiles or IT.

Gujarat (Ahmedabad, Vadodara, Bharuch, Surat)

• Contributes to 33% of India’s total drug manufacturing.
• Accounts for 28% of India’s pharmaceutical exports.
• Major companies: Sun Pharma, Cadila Healthcare, Torrent Pharmaceuticals.

🔹 Maharashtra (Mumbai, Pune)

• A core pharma zone, especially for formulation development and R&D.
• Hosts both MNCs and Indian pharma giants.

🔹 Telangana (Hyderabad)

• Known as the “Bulk Drug Capital of India”.
• Over 40% of India’s bulk drug production happens here.
• Home to Hyderabad Pharma City—world’s largest integrated pharma cluster.

🔹 Tamil Nadu (Chennai, Hosur, Coimbatore)

• A growing hub with expanding production and R&D facilities.

🔹 Karnataka (Bengaluru)

• A leader in biotechnology and pharma R&D.
• Base for global clinical trials and contract research.

🔹 Delhi-NCR (Noida, Gurugram)

• Major base for policy, regulation, logistics, and pharma marketing.

🔹 Madhya Pradesh (Indore, Gwalior)

• A rising destination for formulation plants due to central location and skilled workforce.

🔹 Uttar Pradesh (Lucknow, Kanpur)

• Houses public sector pharma units and emerging private investments.

🔹 West Bengal (Kolkata, Hooghly)

• Historical pharma base, with PSUs like Bengal Chemicals still active.

💡 These clusters offer advantages like SEZs, tax incentives, logistical connectivity, and biotech parks, which make India a pharma manufacturing powerhouse.

Role of the Public Sector

Initially, the public sector led the charge, especially when private capital was limited. Let’s look at some key public sector undertakings (PSUs):

🔹 Indian Drugs and Pharmaceuticals Ltd (IDPL)

Founded: 1961

Major plants:

• Rishikesh (synthetic drugs)
• Chennai (surgical instruments)
• Gurgaon (formulations)
• Muzaffarpur (chemical intermediates)

It has three subsidiaries with states:

• RDPL (Jaipur)
• UPDPL (Lucknow)
• ODCL (Bhubaneswar)

🔹 Hindustan Antibiotics Ltd (HAL)

Founded: 1954, with French collaboration
Products: Penicillin, Streptomycin, Amoxicillin, etc.

Subsidiaries:

• MAPL (Nagpur)
• KAPL (Bangalore)
• MSDPL (Imphal)

🔹 Other PSUs:

• Smith Stanistreet Pharmaceuticals Ltd (SSPL) – Based in Kolkata.
• Bengal Chemicals and Pharmaceuticals Ltd (BCPL) – Units in WB, Kanpur, Mumbai.
• Bengal Immunity Ltd – Focus on anti-malarial drugs and vaccines.

🎯 While PSUs now play a smaller role than private firms, their historic contributions laid the groundwork for India’s pharma independence.

Rise of the Private Sector: Patent Law & Liberalization

The game-changer for private pharma was the Patent Act of 1970. It allowed only process patents, not product patents.

➤ Analogy time:

Imagine two chefs. One invents a new dish (drug), but only gets rights to the cooking method, not the dish itself. Another chef can make the same dish using a different recipe. That’s exactly what Indian companies did—reverse-engineering MNC drugs with different processes.

This allowed firms like Cipla and Ranbaxy to:

• Manufacture drugs at a fraction of the cost
• Supply them to developing countries (esp. for diseases like HIV/AIDS)

Later, India had to accept the TRIPS Agreement (WTO), and passed the Patent (Amendment) Act, 2005, allowing product patents—aligning India with global rules.

But this also made Indian companies more competitive globally.

New Industrial Policy and Its Impact

The liberalization of 1991 brought a wave of reforms:

• Licensing abolished for most sectors
• FDI up to 74% allowed in pharma
• Price control exemptions for new drugs developed through in-house R&D

As a result:

• Companies like Dr. Reddy’s built world-class R&D centers
• NRIs began investing
• A new generation of export-oriented pharma units emerged

Mumbai, Pune, Ahmedabad, Hyderabad became home to hundreds of such companies.

Current Scenario: A Sunrise Industry

India’s pharmaceutical sector today is a $65 billion industry, expected to grow to $130 billion by 2030.

🔥 Key Features:

• Largest supplier of generics globally (~20% of global volume).
• Third-largest pharma industry by volume, 13th by value.
• Exports medicines to 200+ countries, including the US, UK, and Africa.
• Growing focus on R&D, biologics, biosimilars, and vaccines.
• Contract research and manufacturing services (CRAMS) are booming.
• Backed by biotech parks, pharma SEZs, and streamlined drug approval pathways.

🚀 The sector is rightly called a “sunrise industry”—marked by rapid innovation, rising demand (domestic and global), and strong government support through schemes like PLI (Production-Linked Incentive) and Pharma 2020 Vision.

Location Factors: Why are pharma industries where they are?

To understand why pharmaceutical industries are located in certain regions of India, we need to think like a smart entrepreneur:

“Where should I set up my pharma company so it thrives?”

Here are the key factors:

1. Market Access

• India has a huge domestic market, with rising demand due to diseases like diabetes, cardiovascular issues, etc.
• The government’s push for generic medicines (affordable alternatives to branded drugs) boosts internal demand.
• Globally, Africa is a major market for India’s generic drugs.
• That’s why industries near the western coast (e.g., Mumbai, Gujarat) benefit—shorter shipping routes to Africa and Europe = lower costs.

2. Government Policy

India’s pharma growth is not accidental—it’s policy-driven.

• 100% FDI allowed in pharma = massive foreign investment.
• Patent law (1970) encouraged Indian firms by allowing process patents, which we discussed earlier.
• But two legal cases strengthened domestic industry even more:

📌 Case 1: Novartis v. Union of India(2013)

The Supreme Court rejected “evergreening”—a tactic where big MNCs make minor changes in drugs to extend patents. This protected affordability.

📌 Case 2: Bayer v. Union of India

India allowed compulsory licensing under Section 84—if a life-saving drug is too expensive, other companies can make it at lower cost. A win for public health.

Also, the government gives tax incentives to encourage R&D investment, e.g., Ranbaxy’s facilities in Mumbai.

3. Infrastructure

Pharma needs uninterrupted power, clean water, logistics, and connectivity.
This is why clusters are concentrated in infrastructure-rich regions like:

• Gujarat (largest pharma manufacturing state)
• Maharashtra
• Telangana (Hyderabad is India’s “Vaccine Capital”)
• Andhra Pradesh and Tamil Nadu

4. Labour Skills

India’s strong talent pool in chemistry, biotechnology, and pharmaceutical sciences fuels this industry.

• Institutes like NIPER, IITs, AIIMS, and BITS Pilani provide high-quality pharma and biotech education.
• This skilled workforce has allowed regional decentralization, with pharma hubs across Telangana, Himachal Pradesh, Uttarakhand, and Goa—not just western India.

5. Raw Material Access

Modern drugs often begin with petrochemical inputs and intermediates.
Hence, pharma units prefer proximity to:

• Jamnagar, Gujarat (Asia’s largest refinery hub)
• Mumbai and Pune (near Bombay High and petrochemical clusters)
• Bulk drug parks being set up in Andhra Pradesh, Himachal Pradesh, and Telangana to boost API production.

India is also ramping up domestic production to cut reliance on Chinese APIs, which currently account for ~65% of imports (down from 70–80%).

6. Capital Availability

The western region, especially Mumbai, is the financial capital of India.

• Home to major pharma HQs (Sun Pharma, Cipla, Lupin, Glenmark)
• Access to capital markets, venture funds, and export-import finance
• Ahmedabad and Hyderabad also attract heavy pharma investment due to their industrial ecosystem and policy support.

Problems of the Pharma Industry in India

Despite its success, the pharma industry faces several hurdles. Let’s decode them:

1. Weak R&D (Research & Development)

India is a global leader in generics, but still lags in New Chemical Entity (NCE) and innovative drug discovery.

• Less than 1.5% of revenue is spent on R&D (vs. 15–20% by global MNCs).
• Few truly novel drugs originate in India. Most research is incremental or process-based.
• Talent drain and limited high-risk venture capital discourage innovation.

🔍 Result: We remain more of a manufacturing hub than an innovation center.

2. API Dependency on China

PIs (Active Pharmaceutical Ingredients) are the backbone of drug manufacturing.
India imports ~65% of its APIs from China (down from 70–80% pre-2020), which still poses strategic risks.

• During COVID-19, supply chain disruptions exposed this dependency.
• While the PLI (Production Linked Incentive) scheme for APIs is helping (with bulk drug parks coming up), domestic production is still ramping up.

🔍 Concern: National drug security is at risk without full API independence.

3. Global Competition and Patent Tensions

• India faces stiff competition from China, Israel, South Korea, and Eastern Europe in both generics and biosimilars.
• Indian firms often face non-tariff barriers, trade disputes, or allegations of IP violations—especially in the US and EU markets.
• Some global pharma lobbies pressure regulators to make Indian generics seem non-compliant or unsafe.
• 🔍 Example: Ongoing WTO disputes and pressure to change Section 3(d) of the Indian Patent Act (which blocks evergreening).

4. Adulteration and Piracy

• The problem of spurious or substandard drugs still affects parts of India’s pharma ecosystem, especially among unregulated smaller players.
• USFDA and EU regulators have flagged several Indian plants for GMP (Good Manufacturing Practice) violations.

Recent examples (2023–24):

• WHO warnings on Indian-made cough syrups exported to Africa and Southeast Asia led to stricter international scrutiny.

🔍 Impact: Damages India’s reputation and risks export bans.

5. IP Pressure and Global Perception

India remains on the USTR’s Priority Watch List (2024 Special 301 Report) for alleged weaknesses in IP (Intellectual Property) enforcement.

Key points of contention:

• Compulsory licensing provisions
• Section 3(d) of the Patent Act
• Limited patent term extensions and data exclusivity

🔍 Effect: This perception discourages FDI and bilateral trade agreements with Western nations

Bright Prospects: Why India’s Pharma Future is Promising

1. Cost Advantage

India has one of the lowest manufacturing costs globally—even lower than the US and half that of Europe.

2. Skilled Labour & Decentralization

As discussed, India’s large pool of educated, skilled professionals allows pharma industries to flourish in multiple regions.

3. Traditional Medicine Integration

India is reviving and integrating Ayurveda and traditional systems, opening new avenues for the pharmaceutical and wellness market.

4. High Demand for Life-Saving Drugs

Locally and globally, the demand for affordable life-saving drugs is booming. India’s generics fill that gap—high impact, low cost.

5. Role in Global Generics

India is the largest provider of generic drugs worldwide—an undisputed leader in affordable medicine supply chains.

6. Biotech Parks & R&D Support

Government is promoting Biotech parks, R&D labs, and Contract Research Organisations (CROs).

What are CROs?

They are like research service providers—Indian companies’ partner with global pharma giants to conduct:

• Clinical trials
• Lab research
• Testing of new drugs

This outsourcing model is growing fast.

Conclusion: Where Is Indian Pharma Headed?

• The 2005 patent regime brought foreign MNCs back to India—they now view India as:
  • A manufacturing base
  • A research hub
  • A clinical trials center
• Simultaneously, Indian companies are going global, acquiring brands, and outcompeting global pharma in several areas.
• Healthcare awareness is increasing. With the right policy, investment, and education, India can become a true global pharma leader.

✅ Final Thought:

To maintain momentum, India must:

• Strengthen research capabilities
• Reduce dependency on China for APIs
• Combat counterfeit drug manufacturing
• Promote pharma education through institutions like NIPER (National Institute of Pharmaceutical Education and Research)

If this is done, India won’t just be the Pharmacy of the World—it will also become its Research Lab.