Following a series of reforms beginning in the early asses, India has enjoyed over a aced of strong growth and a rise in the spending power of its citizens. Real average household income in India has roughly doubled over the past two decades. In the meantime, disease patterns in India have undergone a shift. Increasingly stressful lifestyles have led to significant increases in the incidence of chronic diseases. While government interventions have brought some acute ailments under control, a sizeable part of the population remains susceptible to a wide range of acute diseases.
Driven by increasing affordability, shifting disease patterns and modest healthcare forms, the total consumer spending on healthcare products and services in the country grew at a compounded annual rate of 14 per cent from 2000 to 2005. The pharmaceuticals industry, which accounts for 1 5 to 20 per cent of total healthcare spend, grew at a compounded annual rate of 9 per cent during this period. Spending on healthcare will continue to be robust.
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According to a recently published report by the McKinney Global Institute, The ‘Bird of Gold’: The Rise of Indian’s Consumer Markets, spending on healthcare will witness the highest growth rate among all spending categories over the next two decades. Healthcare grew from 4 per cent of average household income in 1995 to 7 per cent in 2005, and is expected to grow to 13 per cent by 2025. 9 I Nils blew AT ten unaltered sector NAS resulted In growing Interest among Dustless leaders and policy makers in the pharmaceuticals industry.
Yet much remains unknown about the long-term potential and evolution of the Indian pharmaceuticals market. How is the market likely to grow? To what extent will increasing incomes and spending power drive this growth? What role will health insurance and medical infrastructure play? How is the spending on pharmaceutical products likely to differ teen urban and rural regions? What share of the market is likely to be captured by patent-protected products? What are the implications for domestic players, multinational companies and policy makers?
In response to these questions, McKinney & Company’s Pharmaceuticals & Medical Products Practice launched a year-long research project to study the future of the Indian pharmaceuticals market. We built a demand model that projects the market potential based on the impact of five fundamental growth drivers: income demographics, medical infrastructure build-up, health insurance penetration, incidence of diseases and likely competitive intensity. Using the output from this model, we distributed the market forecast across therapy and geographic segments.
In addition, we built a model that translates several supply factors into estimates of the share of patent-protected products by 2015. Finally, we complemented the results of the modeling with on-the-ground insights from an extensive field study. Our analysis shows that if the Indian economy continues on its current high growth path, then the Indian pharmaceuticals market will undergo a major transformation in he next decade. The market will triple to IIS$20 billion by 201 5 and move into the world’s top-10 pharmaceuticals markets.
The absolute growth of IIS$14 billion will be next to the growth potential of the US and China, and in the same league as the growth in Japan, Canada and the I-J. While the therapy mix will gradually move in favor of specialty and super-specialty therapies, mass therapies such as anti- infective and Castro-intestinal drugs will continue to comprise half of the market by 2015. Generics will continue to dominate, while patent-protected products are likely o constitute 10 per cent of the market within this timeshare. Leveraging the strong distribution infrastructure in the Tier 1 markets,2 I. . , metros, Class I and Class IA towns, these markets 1 We define specialty therapies as those where products are prescribed primarily by specialist physicians and consulting physicians; super- specialty therapies as those where specialist and super-specialist physicians account for 80 per cent of prescriptions; and mass therapies as those where products are prescribed mainly by general practitioners. 2 We define Tier 1 markets as metros population 1 million), Class I towns (0. 5 million to 1 million) and Class IA towns (0. 1 million to 0. 5 million).
Tier 2 markets are the remaining urban markets (Class II, Ill and IV towns) and rural areas. 10 will account for half of the growth potential. Tier 2 markets, I. E. , remaining urban markets and rural areas, will grow in importance and account for the remaining half. These changes in the market will have important implications for Indian companies, multinational firms and policy makers. We briefly outline these findings below. Readers interested in the detailed results an analysis snouts see ten mall snappers AT ten report, Wendell tense Interested our methodology and assumptions are directed to the appendices.