India's Domestic Drug Formulations Market Likely To Hit Rs 5.5 Trillion Mark By 2034: Report

The report predicted a shift from doctor-branded prescriptions to a more diversified marketing mix driven by strict quality regulations and streamlined supply

The domestic pharmaceutical formulations market is likely to reach Rs 5.5 trillion by 2034, driven by a compound annual growth rate (CAGR) of 10 per cent, according to a report stating projection by Investment banker Avendus Capital. The report was released on Wednesday. The report anticipated transitioning from physician-branded prescriptions to a diversified marketing approach influenced by stringent quality regulations and optimised supply chains.

It predicted a shift from doctor-branded prescriptions to a more diversified marketing mix driven by strict quality regulations and streamlined supply. 

"Despite India's reputation as the pharmacy of the world, there is significant under-penetration in the domestic market, especially in Tier II/III+ towns and rural areas," said Anshul Gupta, managing director and head of health care investment banking at Avendus Capital.

“The government of India’s Pharma Vision 2047 aims at making medicines more equitable, accessible, and affordable while ensuring high quality and more sustainable manufacturing practices," added Gupta.

As life expectancy rises in the country, lifestyle-related diseases are on the rise. Increased awareness of these conditions and better access to treatment are expected to fuel growth in the sector. Therapies focusing on chronic conditions like cardiovascular diseases, neurology, diabetes management, and dermatology are anticipated to experience accelerated growth rates.

As per the report, over the next decade, Trade Generics (TGx) and Jan Aushadhi Kendra, government-operated stores, are expected to account for around 30 per cent of pharmaceutical volume. Despite this shift, branded generics (BGx) are projected to maintain 65-70 per cent of the market value, growing at a compound annual growth rate (CAGR) exceeding 8 per cent. The transition in channels may lead to a modest contraction in EBITDA margins, which could be offset by cost-saving initiatives such as rationalising medical representatives and reducing expenses related to free samples and doctor engagements, as indicated in the report concerning earnings before interest, taxes, depreciation, and amortisation (EBITDA).

Prasshanth Hari, director of healthcare investment banking at Avendus Capital, said, "Domform (domestic formulations market) has attracted large strategic and private equity investments worth over $14 billion in the last six years. We estimate the market will continue growing at a 9-10 per cent CAGR over the next decade."

According to the report, Indian companies are likely to redirect their attention towards the domestic market as the healthcare market in the United States stabilises and enters a "patent cliff," where patents for branded products expire, allowing competitors to introduce generic versions at reduced prices.