Life Sciences Research & Development in India

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Companies in pharmaceuticals, biotechnology and medical devices are investing in India as a way to increase research & development productivity.

by Gaurav J. Shah, MBA ‘15


Healthcare has become one of the largest sectors of the Indian economy, estimated at about $80B in 2012, and projected to grow at a CAGR of 17% through 2017[1]. Growth in the Indian healthcare industry is spurred by rising income levels, growing insurance coverage, and increasing healthcare spending by both the private sector and the public sector. Broadly speaking, the healthcare industry consists of three segments: payers (i.e. insurance companies), providers (i.e. hospitals, clinics etc.) and products (i.e. pharmaceutical, biotech, and medical device companies). In this article we consider the last of these categories – the companies that develop the products in the form of pharmaceuticals, biotechnology products and medical devices. In particular, we focus on the history, current state, and future of research and development (R&D) within each of these categories in India.

Given the increasing pressures for cost-cutting in the developed markets, R&D expenditure in the Life Sciences has seen a migration towards Asia—largely China, but also India. The major driver of the shift has been the need for increased R&D productivity, which had been declining in the US in the recent past[2], and which could benefit from the lower R&D costs in emerging markets like India. In addition to the cost aspect however, there is now a greater push towards collaborations and partnerships that tap into India’s talent pool, local innovation, as well as the vast patient population, much of which is “treatment-naïve”[3]. This trend is expected to be bolstered by the government’s efforts to improve infrastructure, funding, and intellectual property (IP) protection.

Due to the history of Life Sciences R&D in India, the state of the pharmaceutical, biotech and medical device sectors is quite different from each other, as discussed below.

Pharmaceutical sector

The Indian pharmaceutical industry is the world’s 3rd-largest by volume and 10th-largest by value, accounting for about 1.5% of global revenues, growing at a CAGR of about 17%. Generic manufacturers dominate the Indian pharmaceutical industry and are pivotal in providing essential drugs at low prices, particularly in the lesser developed economies. Patented drugs, while growing, comprise only 1% of India’s pharmaceutical market. The reasons can be traced to the history of India’s pharma industry.

After India’s independence in 1947, its pharmaceutical sector was dominated by multi-national companies like Johnson and Johnson, Pfizer and today’s GlaxoSmithKline. The trend changed in 1970 when India passed the Indian Patent Act, under which substances used in food and pharmaceuticals could no longer be patented (although the manufacturing process could be for up to 7 years from the date of filing). The Act led to the launch of several domestic companies focusing on “process innovation” to produce drugs using a different process from the one patented, and laid the foundation for the synthetic chemistry and chemical engineering capabilities that underpins India’s pharma sector even today. The local companies expanded their scope from bulk APIs to formulations and finished doses of a wide range of products at a much lower price-point due to the lack of royalties on them[4].

However, this “process patent” regime gave way to a “product patent” one in 2005, when India entered into the Trade Related Intellectual Property Rights (TRIPS) Agreement administered by the World Trade Organization, under which new chemical entities could be granted a composition-of-matter patent. The shift has entailed that Indian pharma must transition from a manufacturing process-centric to an innovation-driven discovery-led model, a change that is proving to be quite complex.

Nevertheless, India’s pharma industry has been adapting to the change. The new IP regime has led to an increasing investment in R&D as domestic firms have also increased patenting in India and abroad. The number of patent filings at the Indian Patent Office has almost quadrupled between 2002-03 and 2012-13. There has been a significant increase in the focus on novel drug discovery, although new dosage forms remain dominant among product patents[5]. As global partnerships and alliances grow, it will be interesting to follow their effect on the Indian pharmaceutical industry.

Biotechnology sector

The biotechnology sector is much younger than the pharmaceutical industry, having taken off only in the mid-1980s. But similar to the pharmaceutical sector, the initial growth in the biotechnology sector was also fueled by the lenient IP policy that recognized only process, rather than product, patents. After 2005, while the focus on R&D has grown, the cost-effective manufacturing processes developed in the past as well as the competitive rivalries have driven prices down and enabled Indian firms to be the leading supplier of traditional vaccines worldwide. India’s biotech sector makes up 2% ($4.5B in 2013) of the global revenues, with a CAGR of 22%[6].

Healthcare-related biotechnology (biopharmaceuticals, bioinformatics, and bioservices) by far dominates the overall biotechnology sector, which also includes bioagriculture and bioindustry. The biopharmaceutical segment, comprised of vaccines, biological therapeutics (such as insulin and statins), and diagnostics, is the largest one, contributing about 62% to the total biotechnology sector, followed by bioservices (18%)[7]. India has seen growth in the bioservices sector as well, and is emerging as a leading destination for clinical trials, contract research and manufacturing activities, which accounts for revenue generation worth about US$ 637 million.

Despite initial concerns of the negative effects of the changing IP regime, the overall impact has been positive. Studies examining the effect of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) found that the innovation outcome (as measured by patents of Indian biopharmaceuticals) has sharply increased during the transition to TRIPS-compliant regulation, suggesting that Indian companies have been capable and willing to transition to the innovation-based business model. Another trend has been global alliances — biopharmaceutical firms holding cross-border alliances with foreign partners have proved significantly more successful at enhancing their innovative capability[8]. Alliances between global players and local companies are likely to be very well positioned to leverage India’s strength in the generic biotechnology space.

Medical Devices sector

India’s medical device market, at $3.2B sales in 2013 and an expected CAGR of 15% over the next 5 years[9], is significant but with a large potential to grow. After registering strong growth between 2010 and 2012, the sharp depreciation of the rupee that took hold from May 2013 has dampened growth in US dollar terms, although the market is still set to remain one of the world’s fastest growing over the next five years.

A growing population with increasing purchasing power, unmet disease needs, and saturation in the developed markets, have all made India an attractive market for global medical device companies seeking growth opportunities. But unlike the pharma and biotech sectors, medical device R&D in India did not benefit from a lenient product-IP regime, and as such, does not enjoy the same advantages in manufacturing as the other two sectors. However, the lower cost of labor, availability of educated professionals, and cheaper manufacturing costs are all factors favoring the development of medical device R&D in India.

Recently, several domestic companies have also are also been developing new products designed for the local market, and producing cost-effective solutions for it. A good example is the Aravind Eye Care’s low cost intraocular lenses, producing lenses at about 30% of the cost of similar international products. BigTec Labs’ no-frills PCR machine costs 1/15 the traditional PCR systems [10].

One of the challenges the Indian medical devices market faces is that a vast majority of the population cannot afford the prices. Only 50-60 million of the over 1 billion population are at an income level comparable to the Western world’s “middle-class” for which most medical devices are designed. Health insurance services in India are not nearly as widespread as in the developed world, although this is starting to change as well. As the medical device sector in India matures, it is likely that more technologies would be designed for the local needs and at price points that are affordable to the domestic population.

Final thoughts

In addition to the fast-growing healthcare market in India that is fast-growing, the R&D capabilities and productivity also present an attractive option for global pharma, biotech and medical device companies to invest in. As the Indian government is actively trying to establish an ecosystem that is conducive to innovation and R&D, many of the previous hurdles, such as lack of infrastructure, unclear or unsupportive regulations, and funding shortages, are likely to be mitigated. The Life Sciences R&D sector in India is definitely one to watch in the next few years.


[1] “Healthcare Industry in India”, Mar 2015

[2] “Five-year trend shows U.S. R&D Spending Flowing to Asia”, Jan 2014,

[3] “Life Sciences R&D: Changing the Innovation equation in India”, 2011,

[4] “India’s Healthcare Industry: Innovation in Delivery, Financing and Manufacturing”, Ch. 13, Book by Lawton R. Burns

[5] “Intellectual Property Protection in India and Implications for Health Innovation” April 2015,

[6] “Biotechnology sector in India”, Mar 2015,

[7] India’s Healthcare Industry: Innovation in Delivery, Financing and Manufacturing”, Ch. 14, Book by Lawton R. Burns

[8] “With the help of a foreign ally: biopharmaceutical innovation in India”,

[9] “The medical device market: India”,