India's pharmaceutical industry poised for global leadership: McKinsey report

India’s pharmaceutical sector is at a tipping point and over the next decade it could redefine operational strategies to tap the potential opportunities unlocking the next level of performance as a global leader, says a recent report by the Indian Pharmaceutical Alliance (IPA) and McKinsey & Company.

The Indian industry should adopt initiatives like zero-error quality systems, sentient and miniaturised manufacturing, expanded cost leadership, autonomous planning, and green network initiatives, emerging as an industry reputed for agile, efficient, reliable, and sustainable operations, says the report -'Shaping the future of India’s pharmaceutical operations' - launched at the 10th Global Pharmaceutical Quality Summit held by the IPA in Mumbai.

Growing as a world leader

With a thrust on strong operations over the past decade, Indian pharma production has outpaced global growth by over two times, and Indian exports (at 9 percent) have outpaced global growth (5 percent). If the global average growth rate of exports were 5% (from $424 billion in 2011 to $797 billion in 2023), the Indian pharma exports grew 9% during the same period, from $10 billion to $28 billion, says the report. This was made possible by investment in infrastructure, cost and operational efficiencies and capabilities across the value chain.  

As of 2024, India is the world’s largest supplier of generic drugs, accounting for 20 percent of global volumes,  including 40 percent of generics demand in the United States and 25 percent of all medicine in the United Kingdom. The country is now the third-largest global exporter of pharmaceuticals by volume and ranks eleventh by value. Indian pharmaceuticals is also now the second-highest generator of trade surplus (second only to textiles and related products) to the tune of around $20 billion.

As the world’s largest vaccine producer, India contributes over 60 percent of the global vaccine supply. Additionally, Indian companies have shaped global HIV treatment by enhancing access to affordable antiretroviral therapy (ART)—as of 2024, India provides over 70 percent of the world’s antiretroviral medications. Over the past 10 years, production in India has grown at a rate of about 8 percent, outpacing global production by over two times, and this growth has been broad-based across different modalities and platforms. In API (active pharmaceutical ingredient) production, India now accounts for over 8 percent of global volumes. In biotechnology, India ranks twelfth in the world, commanding 3 to 5 percent of the global market.

India now has a manufacturing infrastructure of 752 Food and Drug Administration (FDA)-approved sites, 2,050 World Health Organisation (WHO) Good Manufacturing Practice (GMP)-certified plants, and 286 European Directorate for the Quality of Medicines and Healthcare (EDQM)-approved plants as of 2024. Global compliance outcomes have improved over the past decade and the industry achieved a step change in its quality excellence trajectory.  Manufacturing costs in India have stayed 30 to 35 percent lower than in the United States and Europe. India has also enhanced its position in the operations value chain by demonstrating broader capabilities across more complex dosages and large molecules. The industry has also worked toward fostering self-reliance and building strong supply-chain networks, observes the report.

The report observes that the country saw a 50 percent reduction in Official Action Indicated (OAI) outcomes from USFDA inspections in the last 10 years and a 27 percent reduction in European Medicines Agency noncompliance between 2013–14 and 2023–24. POBOS (McKinsey’s proprietary pharma benchmark) shows labor productivity has increased by 24 percent from 2014 to 2023 against 20 percent globally, and on-time-in-full (OTIF) delivery has risen by over 40 percent as compared to 1 percent globally.

The biotechnology sector is also establishing itself as a global leader. The industry has now also diversified into complex platforms, including injectables, inhalation, peptides, and biosimilars, and made early strides into antibody-drug conjugates (ADCs), and oligonucleotides. This has enabled India to enhance its position in the pharma production network. The number of biosimilar approvals increased from 14 in 2005 to over 138 in 2023. Similarly, there has been a significant rise in the share of complex dosage forms (e.g., topicals, injectables, nasal, ophthalmic, etc.) among ANDA approvals from Indian companies, from 25 percent in 2013 to 30 percent in 2023. The industry also did pioneering achievements, such as India developing the world’s first FDA-approved biosimilar for insulin glargine.

Challenges ahead

McKinsey says the industry now stands at a crossroads, with internal and external disruptions poised to create a shifting landscape. Within the industry, performance has started plateauing while the bar for quality excellence continues to rise. Disruptions such as the next generation of digital technologies, smart automation, and new modalities or therapies could reshape traditional plant operations.

In the external environment, an even more complex set of forces is shaping the landscape. Geopolitical uncertainties and nearshoring could challenge current operations strategies. Sustainability in operations is fast becoming a critical business enabler for companies. New opportunities could arise and scale up, such as pharma services or contract development and manufacturing organisations (CDMOs) and emerging markets. Purposeful moves that build on the tailwinds and address the headwinds could help companies to remain ahead in this ever-evolving global market.

Themes for the future

McKinsey says over the next decade, companies will need to fundamentally redefine their operational strategies. With a focus on eight core priorities, the pharma industry could build agile, efficient, reliable, and sustainable operations for the future.

1. Zero-error operations enabled by future-shaping smart quality systems: These could effect a fundamental shift from reactively resolving issues to proactively preventing defects, and from merely reducing errors to structurally eliminating them.  

2. Low-touch, sentient plant operations driving high-performance manufacturing: Intelligent systems could autonomously manage and optimise manufacturing operations to eliminate human error and enhance overall quality, over and above a potential, repeatable step-change in efficiency.

3. Miniaturisation of manufacturing footprint through advanced technologies: New possibilities of continuous manufacturing, modular “plant-in-plant” setups, and small-scale operation/microreactors for higher reliability especially in biopharma manufacturing could all contribute to

modular but high-performance delivery.

4. Customer-centric operations to support the growth of services: With purposeful shifts, emerging companies could fully unlock the CDMO opportunity, such as by broadening their portfolio and capabilities, cultivating a customer-centric operations excellence model, streamlining operations

for cost efficiency, attracting and retaining top operations talent, and continuing a focus on capacity expansion.

5. The next horizon of expanded enterprise-wide cost leadership: In the face of operational plateaus, companies could target the next S-curve of cost leadership through a focus on four themes: attaining the same level of cost leadership in large molecules as in small molecules, exploring deep de novo scientific optimization for API/KSM (active pharmaceutical ingredient/

key starting material) manufacturing, attaining a last-man standing position in their hero product, and unlocking the next wave of procurement excellence.

6. Distributed pharma networks of the future: As part of their network strategy, companies could think about establishing centres of excellence (or CoEs) and distributing their manufacturing footprint. These COEs could help to navigate both the increasing complexity of global pipelines and emerging pockets of regionalisation.

7. All-time autonomous planning across the supply network: “Planning by exception”, where companies will need to embed AI/ML (artificial intelligence/machine learning) or digital principles in day-to-day supply chains to unlock new levels of performance, such as more than 30 percent lower costs on planning and inventory, service levels above 98 percent across the network, and lead times shortened by around 25 to 40 percent.

8. Green network to unlock a net zero vision for operations: Organisations could start adopting an integrated dual mission approach, to drive cost optimization across spend items while optimizing their Scope 3 footprint.  

The Indian pharmaceutical industry can further accelerate its global leadership even with significant disruptions on the horizon. On the

brink of a path-breaking S-curve, it could boost growth and profitability, achieve industry-leading quality and sustainability, and drive greater innovation, says McKinsey.