The Indian pharmaceutical industry has bettered the global market growth by 3 per cent during the first half of 2006. The country's drug sector had shown a growth of 10 per cent compared with 7 per cent for the global industry.

Securing 22 per cent of the $65 billion global generic market, the country has now shown promising trends of being a regional hub of global research and development activities in the pharmaceutical space, according to a report launched by KPMG on Thursday.

Commenting on the report's findings, John Morris, global head of KPMG's pharmaceuticals practice, said: "The Indian pharmaceutical industry is worth $6 billion -- in a global industry worth $650 billion -- but is growing at 10 per cent compared with the global industry rate of 7 per cent. The generics business remains at the heart of everything India does well and so it should, considering that India accounts for 22 per cent of the global generics market."

Bearing in mind that $65 billion of prescription medicines in Europe and the US are to lose their patents in 2007-08, India is ideally positioned to sweep up much of that new business, he adds.

However, the opportunity now exists for India to become so much more than just a generics player.

The report points out that the pharmaceutical industry seems set to emerge from the confines of the generics market in which it has largely positioned itself and could soon become a major player on the global scene.

Apart from this, it suggests that India now has the potential to become the region's hub for research and development, manufacturing and exporting.

The report said much of the impetus behind India's fresh challenge for a greater share of the global industry is driven by last year's introduction of product patents.

For the previous 25 years, patents were only granted on processes -- a decision which saw many multinational companies abandon the sub-continent, but which resulted in India becoming a leading player in the market for generic medicines.

"The expansion of India's patent system to cover products as well as processes has already started to bring MNCs back into the fold," Morris adds.

"There was never much point in Indian manufacturers spending too much on R&D of their own when their new product discoveries could not be patent-protected.

"R&D spending should now be ratcheted up -- significantly and rapidly. With protection in place and with foreign investors eagerly eyeing India 's wealth of human resources, and its massive domestic market, significant growth opportunities abound for Indian companies.

"However, as is so often the case with Indian industry, many other challenges must be addressed as a matter of some urgency if this is to be achieved."

According to Sanjay Aggarwal, pharmaceutical sector leader for KPMG in India, the partnerships will also be key for Indian firms' development in their home market. Multinationals that have re-entered the market since the new product patent system seek out the domestic Industry's skills and infrastructures to boost their research and manufacturing activities in the subcontinent and also open up this vast, virtually untapped market.

"Within the report, one industry figure states that, despite the recent improvements to the Indian market infrastructure, many people still "talk about India but invest in China ".

Much of this is attributed to shortcomings in the current Indian regulatory environment -- India still offers no data protection for example whereas China does -- and domestic pricing issues.

In fact, drug prices in the Indian domestic market are the lowest in the world. Further government legislation is expected on the latter point at the end of the year and the industry will be hoping that it continues the trend of reducing the number of price-controlled products.

The report suggests that the interaction between industry and government will be one of the keys in the coming years.

"The comparison with China is a fair one as the Chinese government's strong commitment to pro-industry policies has created a positive environment with a strong patent regime and data protection; admittedly with issues still remaining over how these are enforced. The aims of the Indian industry -- and of the government -- are ambitious but will require a strong pricing environment if the Indian people are to access the life-saving and innovative medicines they need. Industry leaders will have to work with government on issues of affordability to point out that price controls are limited in their ability to increase access to new and effective treatments," the report stated.

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