Nilesh Shah, Managing Director of Kotak Mutual Fund, recently emphasized that the Indian healthcare sector is on the verge of robust long-term growth. This growth is fueled by domestic demand, escalating exports, and the transition from unorganized to organized healthcare services. Changing demographics and lifestyles are anticipated to further drive the demand for healthcare services.
Let’s delve into the Indian medical industry and explore its promising prospects.
India is a dominant player in global pharma industry:
3rd largest in pharma production by volume
200+ countries served
60% of global vaccine supply
20% of the global supply of generics.
40% of generic supply in the U.S.
25% of all medicine in the UK
50% of Africa’s requirement for generics
US FDA: 2nd highest approved sites
Foreign Medical tourists grew 30% CAGR during 2014-19 and are expected to grow 4x from pre-pandemic levels by 2030 (0.7mn to 3mn). Affordable and quality treatment makes India a Favored Destination:
Out of 75,000 Indian trained doctors working in OECD Countries :
~2/3rds are settled in the United States
19,000 are in the UK.
Further, India has the highest number of medical colleges in the world.
API: backbone of successful pharma growth:
Active Pharmaceutical Ingredient (API) serves as the biologically active component of a drug, akin to its raw material. India proudly stands as the world’s 3rd largest API producer, boasting over 500 API manufacturers and commanding an 8% share in the global API industry.
Several key factors are expected to drive the growth of API further:
Reduced Dependence on China
PLI Incentives Offered by the Government
Rising Demand for Formulations
Global Contract Manufacturing Opportunities
CDMO (Contract Development and Manufacturing Organization): Outsourcing as an opportunity has a large Total Addressable/Available Market:
Drug lifecycle entails a long drawn process of discovery and development stages, followed by commercial manufacturing
Above involves high failure probabilities, forcing global Big Pharma to outsource (in part or full) drug lifecycle stages to CDMOs
Indian pharma companies are now playing pivotal role in driving global innovation through the CDMO route
Biosimilars is still an untapped long term growth lever for Indian companies:
Biologics adoption in global pharma is progressing rapidly as such drugs address unmet needs (e.g., oncology) and are less toxic
Half of today’s top selling drugs are biologics
Various Indian companies are investing to develop biosimilars, which are generic equivalents of biologic drugs
Rising longevity, rise in chronic diseases and growing elderly population will lead to increased healthcare spend over the long term
The world is experiencing an aging demographic shift:
In 2021, 1 in 10 people were aged above 65 years.
By 2030 (expected), 1 in 6 people will be aged above 65 years.
It has been observed that medical expenses increase rapidly with age, with per capita spending rising from $16,977 to $32,903 as a person ages from 60 years to 85 years.
The boom in the Healthcare Sector parallels that of the IT Sector:
The initial wave of the IT boom was propelled by the low cost of software and manpower, akin to the current situation in the healthcare sector where the affordability of medicines and medical solutions is driven by the process patents held by Indian companies.
The growth of the IT industry in the 2000s was fueled by the export of IT products and the establishment of India as an outsourcing hub. This mirrors the present state of the healthcare sector, which is experiencing growth through the export of generic medicines.
Scalability played a crucial role in the expansion of the IT sector, and similarly, there is significant potential for scalability in healthcare products, particularly in specialized care and hospital services.
In conclusion, it is reasonable to assert that the Indian healthcare system in the immediate and medium term is undergoing a significant transformation from its historical norms. Fundamentally, it will embrace greater technological innovation, extending healthcare services directly to people in their homes or clinics, resulting in a more personalized and affordable experience. For consumers, this shift promises enhanced access to healthcare and improved service quality. In summary, the Indian healthcare system is poised for a promising and bright future.
