NCPA - National Center for Policy Analysis


January 5, 2007

For decades, India's drugmakers have been the pharmacy for the world's destitute, finding ways to copy the best medicines at the lowest prices.  By some estimates, India's generic medicines treat half the AIDS patients in the developing world.

Yet this picture has begun to change since India decided to comply with global patent standards last year.  Now as never before, Indian pharmaceutical companies are looking to expand business in rich countries.  The intent is to follow the footsteps of India's information technology (IT) sector, which parlayed lower costs and improved innovation into India's greatest modern success story.

The timing could be fortuitous. As the cost of healthcare rises worldwide, Indian pharmaceuticals have positioned themselves to take advantage:

  • For instance, Indian drugmakers now have 75 plants approved to make drugs for the American market - the most of any nation except the United States itself.
  • Also, like Indian IT a decade ago, pharmaceuticals are on the cusp of an outsourcing trend that could become a $3-billion-a-year industry by 2010.

From a purely economic standpoint the change in the patent law has been positive.  Foreign firms are no longer afraid to come here; in the past, they knew that their patents would not be respected, so they stayed away.  Now, foreign pharmaceutical firms are entering the market to target India's growing middle class, and they are considering outsourcing some research, which could cut costs as much as 60 percent, by some estimates.

The Indian pharmaceutical industry is fast becoming an integral part of the global pharmaceutical market, says Hitesh Gajaria, an industry analyst at KPMG consultants.

India's inherent strengths, such as low development cost, skilled and efficient manpower, and easy availability of raw materials, give it a competitive cost advantage.

Source: Mark Sappenfield, "India poised for pharmaceutical boom; India is revamping its drug industry, hoping to duplicate success of IT sector," Christian Science Monitor, January 2, 2007.


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