Changes in Growth & Demand-Supply in Indian Pharma

Sector Through COVID-19 Pandemic

Economics Research Paper: Assignment 2

Sunidhi Gupta, 20010489
ABSTRACT
Pharmaceutical Industry has been an ever-growing industry but the focus on understanding its growth has
always been by medical professionals and not a common man. This paper aims to throw light the effects
of COVID-19 on the demand and growth aspect of pharmaceutical industry. The paper questions whether
pharmaceutical industry was a booming and developing industry in pre-COVID-19 times or COVID-19
has been the cause of boom or negative impacts on the pharma sector of India. Under this we also try and
understand cost of a medical essential determines its demand in various situations and how the demand is
affected in normal as well as pandemic-stricken times.

INTRODUCTION
India’s Pharmaceutical sector is placed at an important position globally and has a number of scientists
and engineers who work to take the pharma industry to achieve heights. It has been ranked 3rd globally
for pharma production by volume and 14th in pharma production by value. The pharma sector of India at
a domestic level, has been formed of a network of almost 3000 drug companies and a huge number of
manufacturing units and it has had its own set of contribution in exports and other parameters also.
( IBEF, 2021) Thus, pharmaceutical industry of India ahs had its own way to work and contribute to the
country. But, the month of March 2020 brought with it a medical emergency by the name of COVID-19.
While it is not hidden Corona virus and the subsequent lockdowns have had caused a havoc in the
financial stability of various industries but the impact on the pharma sector has been a mixture.
Moreover, healthcare essentials which were previously not given much attention by a layman are now
center of attention because it has suddenly become relevant to their life. The objective of the paper is to
understand if this development in the pharma industry has been prevalent before the pandemic and how
the pandemic has brought changes in this process of development. Since, cost also plays an important
role in various situations of demand the paper will also try an understand how cost affected people’s
utilization of healthcare services and essentials during normal and pandemic times.

METHOD
The research to understand the growth of pharmaceutical sector in pre- and post-COVID-19 times and the
changes and price and demand of various medical essentials has been done using data accumulated by
government organization, health journals and research articles, news forums which have been reporting
of hikes impacts of COVID-19. The bases of this study are how the pharma sector was growing in the
years prior to 2020 ad what shift has COVID-19 brought in last two years. The data in the paper has also
been referred to very old survey undertaken by RAND Corporation which is being used to understand
how the costs healthcare services only effect the use of these services till a certain extent and cost almost
plays a negligible role when a person is in grave health crises. A comparison has been made between
demand-side growth drivers and investments by consumers in pharma sector in 2018-19 and in 2020-21.
(IBEF) Also, the sale of important antibiotics and other medicines is studied in the period of 2018, 2019
and 2020 to decipher if COVID-19 actually created difference in the demand or there was no actual
change in the demand. (Sulis, 2021)
STUDY & FINDINGS
Pre-pandemic Period (2018-2019)
The financial year of 2018, precisely July-Sept period, the medical spending by people in India increased
by a 9.7 percent with the turnover reaching 18.06 billion USD. The investment in the pharma industry
for research and development increased to 8.5 percent of the sales. There was huge penetration of health
insurance in the middle-class household with gross direct premiums of non-life insurance increasing to
23.38 billion USD. Health insurance itself made up to 25.20% of all the non-life insurance with it being
increasingly adopted by the people of the country. The bio-pharma segment of pharmaceutical industry
accounted the largest revenue with a share of 64 percent and India was becoming a leading destination
for clinical trials of various drugs and contracts of research and manufacturing activities was also given to
India. Apart from that on the demand side, it was recorded that the demand of medicines had increased
because of change in lifestyle and new diseases. Patient pool was increasing in the country because of
increase in population. There had been introduction of product patent with a number of Multinational
Companies were expected to launch patented drugs. This was the growth according to reports in 2018.
(IBEF, 2018) The data from 2019 also states that the turnover reached to 18.12 billion USD and the
growth of pharma sales increased by 11.5 %. The expenditure on research and development was also
increased to almost 8.6 % of the sales because of the growth in introduction of product patents and
development of new drugs from various companies. In 2019 also there was an increase in the investment
of people in health insurance to 26 % out of the non-life insurance market and the non-life insurance
market also had its investment raised to 24.32 billion USD. The government spending on health and
pharma in India was 34.91 billion USD in 2018 which increased to 41.42 billion USD in 2019. Moreover,
over all India had been growing in this industry on the supply side as well through this period because of
being a hub to manufacture generic medicines. (IBEF, 2019)
Now, in terms of medicines which includes antibiotics and particularly hydroxychloroquine since it has
been a very important medicine in the first wave of pandemic during 2020. The sales of all antibiotics in
2018 and 2019 had been 18,002 million and 18,167 million doses respectively. Out of these, doses of
Child-Appropriate Formulation (CAF) have been 4,934 million and 4,998 million doses respectively in
2018 and 2019 while non-Child Appropriate Formulation (non-CAF) doses have been 13,068 million and
13,169 million in 2018 and 2019 respectively. The doses of non-Child Appropriate Formulation
antibiotics were on a high from 1200-1500 million doses in the months of October 2018 as well as 2019
considering the amount of viral infection in weather change. The sales of Hydroxychloroquine weren’t
much in the pre-pandemic period and the sales lied low between 20-25 million doses.(Sulis, 2021)
Studying different pre and post pandemic also includes having a look at the demand of resources such as
Oxygen cylinder and Remdesivir drug which were essential in the second wave of COVID-19 in 2021.
There usual prices before dire requirement in wave were 80 USD for 50 litres of Oxygen and 12-53 USD
for 100 grams of Remdesivir drug. (Pandey, 2021)

Post-pandemic Period (2020-2021)

In the post-pandemic the period 2020 and 2021 is being considered from when the pandemic started
through its first and second waves both the years respectively. In 2020, the annual turnover of pharma
sector had increased to 20.3 billion USD but the growth from the previous year was less because it was
9% while in the previous financial year it was 11.5%. The investment of various companies in the
research and development was 8.4% of the sales. So, though there was increase in sales and turnover of
the pharmaceutical industry the contribution to research and development reduced. The financial year of
2020 also saw the approval of the first fully indigenous developed Pneumonia vaccine for Streptococcal
pneumonia in infants by the Drug Control General of India. In the post-pandemic period, the incline
towards non-life insurance increased to 26.80 billion USD in 2020 out of which 27% was health
insurance and similarly in 2021 also the trend of increase in gross direct premiums to non-life insurance
continued with the premium paid increasing to 27.15 billion USD out of which 29.5 % were health
insurance. This was an expected trend in the COVID-19 period with the increase in the morbidity rate. In
the period 0f 2020-21 the government expenditure on healthcare also continued to increase like 2019 to
45.96 billion USD. So, the government expenditure dropped on from 2017 to 2018 because after that
there has been a trend of continuous increase only every year. (IBEF, 2020-21)
The COVID also brought with it negative impacts as well on the manufacturing front. Indian pharma
industry, for generic medicines has been leader at global as well as domestic level contributing to the
demands but there was seen increasing competition from China in the COVID period who manufactured
Active Pharmaceutical Ingredients (API) and intermediaries at a lower cost which had led to a lot of
import from China for these APIs. There has been a lot of dependence on China which negatively
impacted India’s disease burden due to need of some these critical APIs. Supply chain was disrupted
because of various regulatory policies and less support form government causing delays and there was a
cut in the earnings also from about 10-15%. But, with all these impacts pharma sector had been a tough
contender with stocks rising up in this period. It was seen that with all these pressures the pharma
companies were trying hard to perform well and it was claimed that pharma sector remained resilient in
the this COVID period. (Saikia, 2020)
On the front of demands of medicines, the sales of antibiotics over all reduced to 16,290 million doses
out of which Child Appropriate Formulation were 3,779 million doses and non-Child Appropriate
Formulation had 12,512 million doses in the 2020. The sales and demand of antibiotics experienced an
all time low in the months of April-May 2020 almost reach 800 million doses of the non-Child
Appropriate Formulation while the sales of CAFs was already low in the pandemic period. The reason of
this all-time low was considered to be the lockdown in the April-May period of 2020 while the peak of
sales was seen as the June to September 2020 period with 216 million doses of non-Child Appropriate
Formulation in this period. This increase in sales was anticipated due to surge in the patients of COVID-
19 in this period due to opening of lockdown. But after the peak in September 2020 again there was a
decline in the sales of non-CAF antibiotics though not much significant. On the other hand,
hydroxychloroquine saw a sudden surge in sales during the span of March-April 2020 which was exactly
the time of lockdown and with time its sales reduced returning back to normal by October 2020. This
decrease was more prominent after the peak of September 2020.( Sulis, 2021) Also, the Oxygen cylinder
and Remdesivir drug whose usual prices have been quoted above were sold for USD 660-1330 and $
330-1000 respectively for the same quantity. This was black marketing because of absence of regulations
in the demand and supply of market and people taking advantage of loopholes and vulnerability of
people. (Pandey, 2021)
(Source: Sulis. Sales of Antibiotics. July 2021)

ANALYSIS & RESULT

The analysis of all the data which has been categorized in the form of pre- and post- pandemic has led to
some key results on the growth of pharmaceutical industry and demand of medicines.
Firstly, the pharma sector has been a growing sector even before COVID-19. The investment from the
consumer side into health and other services like insurance saw in increase from 2018 to 2019 when
COVID-19 had not come and with the pandemic also there was an upsurge. The turnover of the pharma
industry was on a hike with rather the growth percent in sales being more from 2018 to 2019 than from
2019 to 2020-21. Also, there was an expectation that the coming of a new disease would shift the
resources to research and development but even after increase in sales, the percent investment in R&D in
2020-21 was less than what was there is 2019. Also, COVID did not hinder on the trials and development
of other drugs.(IBEF)
Secondly, the demand of medicines like antibiotics was seen to be more in the years of 2018 and 2019
than 2020 when COVID came though some of the major symptoms of the viral were fever and cough.
Though antibiotics which were non-Child Appropriate Formulation were consumed more in number but
over all consumption was less, the only increase by some amounts were a few months from June to
September when lockdown opened otherwise during lockdown and after September the sales were less
than what were there in the same months in years of 2018 and 2019. Hydroxychloroquine also saw a
sudden upsurge with the COVID-19 and the sales relaxed to its usual level with the realization of its
effectiveness’.( Sulis, 2021)
Lastly, the cost of medicines and medical services for which reference to the survey which RAND
Corporation did in the past but is being used as a standard for a long time will be taken. Under this
survey, the organization tried to understand how people tend to use medical services and resources in in
free and costing care. The results of this survey showed that costing though reduces the use of medical
services and resources even if there is maximum effectiveness but there is no change in the cost it is just
the choices of people while of course in free services people approach healthcare services more.(Brook,
2006) But this difference is not much and since the cost also does not differ the cost and other factors
play a very small role in people deciding to utilize medical facilities and resources. This was what was
observed in both the waves of COVID-19 where circumstances led to increase in the costing of the
demanded good but people still bought it because of choices and cost has a very negligible impact while
lifestyle and circumstances dominate the demand of a medicine or healthcare service, at least in India.

CONCLUSION
To conclude this research paper, the most important pointer is that COVID-19 did not have completely
positive or negative implications on the pharma sector and consumption and demand of medicine or
healthcare facilities. Neither was the demand of medicines completely dominated by the peaks of
COVID-19 nor were the short comings of the pharma sector staggering its growth. There were certain
circumstances did bring changes in the functioning of demand and supply of market and trends came in
because of COVID-19 but overall, the pharma sector’s growth including demand of medicines had other
factors impacting its changes and not just COVID-19 and the data in this paper is reflective of the fact
through changes in growth percentage and dose consumptions and it is just dire situations which have led
to exploitations of loopholes in the market.

BIBLIOGRAPHY
1. Brook, Robert H., Emmett B. Keeler, Kathleen N. Lohr, Joseph P. Newhouse, John E. Ware, William H. Rogers,
Allyson Ross Davies, Cathy D. Sherbourne, George A. Goldberg, Patricia Camp, Caren Kamberg, Arleen Leibowitz,
Joan Keesey, and David Reboussin. ”The Health Insurance Experiment: A Classic RAND Study Speaks to the
Current Health Care Reform Debate.” Santa Monica, CA: RAND Corporation, 2006.
https://www.rand.org/pubs/research_briefs/RB9174.html.
2. IBEF. “Indian Pharmaceuticals Industry Analysis”. Oct 2018.
https://www.ibef.org/download/Pharmaceuticals_Oct_2018.pdf
3. IBEF. “Indian Pharmaceuticals Industry Analysis”. Oct 2019.
https://www.ibef.org/download/Pharmaceuticals-October-2019.pdf
4. IBEF. “Indian Pharmaceuticals Industry Analysis”. August 2020.
https://www.ibef.org/download/Pharmaceuticals-August-2020.pdf
5. IBEF. “Indian Pharmaceuticals Industry Analysis”. July 2021.
https://www.ibef.org/download/Pharmaceuticals-July-2021.pdf
6. Pandey, Vikas. “COVID-19 in India: Patients struggle at home as hospitals choke.” BBC Delhi News. April 26, 2021
https://www.bbc.com/news/world-asia-india-56882167
7. Saikia, Bijoy.“ Coronavirus impact on India’s pharma sector.” The Economic Times. April 14, 2020.
https://economictimes.indiatimes.com/markets/stocks/news/coronavirus-impact-on-indias-pharma-sector/
articleshow/75136862.cms?from=mdr
8. Sulis, Georgia, Brice Batomen, Anita Kotwani, Madhukar Pai and Sumanth Gandra. “ Sale of antibiotics and
hydroxychloroquine in India during the COVID-19 epidemic; An interrupted time series analysis.” PLOS Global
Public Health (July 2021)
https://doi.org/10.1371/journal.pmed.1003682