Indian Pharma Under Pressure: Lessons for Every Industry

Executive Summary India's pharmaceutical industry is worth close to $60 bn once exports are factored in.

A heavy dependence on China for key starting materials traces back to price controls India imposed in 1995.

The industry ranks 3 rd globally by volume but 12 th -14 th by value , a gap that reflects a business built around bioequivalence rather than original molecules.

Domestic capital markets reward predictable, asset-light earnings over R&D risk, which is why contract research companies trade at 70-80x earnings . This keeps innovation pipelines thin.

A Wipro-incubated biologic now valued above $100 bn on Nasdaq shows that Indian-origin innovation can draw global capital .

A generational shift in management may decide how much risk capital the industry deploys over the next 5 years.

. Global pharmaceutical supply chains are being redrawn around geopolitics as much as around efficiency, and India's place in the industry is being tested in the process. The country supplies close to two-thirds of the world's WHO-approved vaccines and ranks third globally by pharmaceutical volume, yet captures only a fraction of that scale in value. At a recent online session, Sanjiv Navangul and Kedar Upadhye examined what holds Indian pharma back from capturing greater value-add in this critically-important sector, and what other industries can learn from its struggles.

Policy Mistakes India's dependence on China for key starting materials traces back to a policy mistake three decades old. The Drug Price Control Order of 1995 fixed prices on formulations and active pharmaceutical ingredients (APIs) at a time when India was among the world's most efficient API producers. As global manufacturers of bulk drugs such as Penicillin G moved their sourcing to China, India did not step in as an alternative supplier, and its own capacity gradually disappeared . Rebuilding a bulk-drugs base, such as through fermentation and API incentive schemes is underway, but closing the gap will take 8-10 years.

Scaling Volume, Not Value Including exports, India’s pharmaceutical industry is worth closer to $60 bn than the $30 bn figure that is generally cited, and India ranks third worldwide in pharmaceutical volumes. Its position by value is far lower, sitting between 12 th and 14 th place globally. In the United States, generics account for 86% of prescriptions but only 20% of market value; the remaining 8% belongs to a handful of innovator products. A single oncology drug, Keytruda, will generate turnover of roughly $32 bn for Merck this year, more than India's entire domestic pharmaceutical market. Its manufacturing model runs on bioequivalence and biosimilar (imitating and optimising pre-existing designs) routes rather than new molecule origination, which keeps it outside the global value pool by design.

The Predictability Premium Perhaps the biggest barrier to growth is the deep reluctance among Indian companies to fund innovation. Contract research and manufacturing (CRAMS) companies trade at 70-80 times earnings, but this is a premium built on multi-year, predictable contracts rather than exposure to R&D risk. When listed pharmaceutical companies have allocated meaningful capital toward exploratory research, their share prices have typically fallen by 10-15%. The problem is that patient capital (no pun intended) of the kind available in San Francisco, New York or Amsterdam has no real domestic equivalent. Meanwhile, China's more permissive early-stage regulatory pathway allows Chinese biotechs to enter human trials faster than Indian companies can. This reality may start to change in the next few years as professional managers – who may be more willing to invest in R&D – start to replace owner-promoters at the top.

Early Signs of a Value Chain Shift Some forward movement is becoming visible. Contract research and manufacturing has taught Indian companies execution discipline, even if the intellectual property belongs to the foreign customer, not to the company doing the work. A handful of bets have gone further. A bispecific compound developed in Wipro's Bangalore laboratories now trades on Nasdaq through a company valued above $100 bn. Biocon's founder is backing Immunil , a CAR-T venture built in collaboration with the well-regarded oncologist, Dr Siddhartha Mukherjee. An Indian company has developed a recombinant immunoglobulin for Rh-negative pregnancies, and the drug is registered in 35-40 countries, despite resistance from European groups defending the older, plasma-derived version. These examples show that Indian-origin innovation attracts capital once it stops competing only for Indian funding.

Indian pharma has spent the last three decades building trust through volume, reach and low prices. Ironically, that very base of reliability is what makes capital markets reluctant to fund the uncertainty/risk required to move the sector up the value chain. Businesses now have a clear choice ahead: showcase a few visible wins in the ‘danger zone’ and climb the ladder, or stay valued only for what they already do well.