Japan Desk

June 16, 2015

Indian pharmaceutical industry and its growth

Dear All,

In the last 15 years, Japan has invested around USD 18 Billion in Indian companies.1 Unsurprisingly, around 27.5% of the investment has been made into pharmaceutical companies2 as the industry presents tremendous opportunities. In 2014, Rohto Pharmaceuticals Japan acquired 40% equity stake in Deep Care Health Private Limited and was one of the major Japanese deals of the year.

Brief background of the Indian Pharmaceutical Industry

India is among the top five emerging pharmaceutical markets, with sales expected to reach USD 27 billion by 2016.3 The industry is typically involved in four types of businesses - production of branded medicines, production of branded generic medicines, production of unbranded generic medicines and production of active pharmaceutical ingredients which are used as ingredients in medicines. India has also become a popular destination for outsourced contract research and manufacturing service. The contract manufacturing and research Industry has grown immensely and is currently estimated to be worth around USD 7.8 billion.4

Important Trends in the Pharma Industry

  • The Indian Pharmaceutical industry is witnessing healthy foreign direct investment, amalgamations and collaborations (such as licensing, co-development, joint distribution and joint ventures).
  • Domestic manufacturers are looking to tap into international generic markets with high margins and a healthy export growth is likely, with a large proportion of Abbreviated New Drug Application (ANDA) approvals being received by Indian manufacturers.
  • The Industry is witnessing a paradigm change as the focus is shifting from manufacturing of generic drugs to drug discovery and development. Indian companies are moving from manufacturing raw materials and APIs for supply to other companies who make finished medicines, to becoming full-fledged producers of finished products.
  • The industry is expected to undergo major reforms as well as favourable tax and policy structures under the new government.

Investing in Indian Pharma Companies

Doing business in India is a challenge as well as an opportunity.

Foreign Direct Investment (FDI) is now permitted in almost all the sectors in India without obtaining prior regulatory approvals (i.e. under the “automatic route”) barring some exceptional cases like defense, housing and real estate, print media, etc. (referred to as the “negative list”). If the FDI is not in accordance with the prescribed guidelines or if the activity falls under the negative list, prior approval has to be obtained from the Foreign Investment Promotion Board (“FIPB”) (this route is also referred to as the “approval route”).

In the case of the pharmaceutical sector, FDI is permitted to the extent of 100% under the automatic route for a greenfield company (i.e. an undertaking that was not pre-existing). FDI in a brownfield company (i.e. an undertaking that is already in existence) is also permitted up to 100% but it has to come under the approval route. However, there has been a recent government clarification to reflect that any additional foreign investment into the same entity (within an approved foreign equity percentage) or into a wholly owned subsidiary will not require fresh governmental approval.

Moreover, in case of investment into existing companies, a non-compete condition with the existing shareholders is not permissible except in special circumstances with the approval of the FIPB.

Legal Framework

To be aware of the legal framework is another must. Specifically, investors must keep an eye on the exchange control laws as they govern how profits made by the company can be realized out of India. Also, if a multi-national company is operating a wholly owned subsidiary in India, it must be make sure that the subsidiary is compliant with the regulatory framework and other product liability related laws to avoid any unpleasant legal proceedings.

The laws enumerated below are some of the most important laws that concern the Industry.

  • The Drugs and Cosmetics Act, 1940 and Rules, 1945: It regulates manufacturing, import, distribution and sale of pharmaceuticals (includes certain medical devices) and cosmetics.
  • The Drugs & Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules, 1955: It Regulates advertisements of drugs relating to diagnosis / cure / mitigation / treatment / prevent of certain prescribed diseases and conditions.
  • The Indian Patents Act, 1970: It provides the framework for grant of process and product patents. The patent term for a product and process patent is 20 years.
  • The Drugs Price Control Order, 2013 (DPCO): It lays down the framework for price control of drugs identified as essential under the National List of Essential Medicines, 2011.
  • The Uniform Code for Pharmaceutical Marketing Practices (UCPMP): It regulates the marketing practices of the pharmaceutical industry.
  • The Income Tax Act, 1961: Income tax is a tax on income imposed by the Central Government. Residents in India are taxed on their worldwide income. Non-residents are taxed on the Indian source of income. The Indian tax rates applicable to non-residents could be up to 40% (excluding applicable surcharge). If the tax payable by any company, including a foreign company taxable in India, is less than 18.5% of its book profits, it will be required to pay Minimum Alternate Tax. The payments towards royalty and fees for technical services are subject to withholding taxes.
  • The Customs Act, 1963: It imposes import duty on all imported goods. Import of pharmaceuticals is liable to basic customs duty, additional customs duty and countervailing duty.
  • Central and State-specific Sales Tax / Value Added Tax (VAT) legislations: It imposes sales tax. Sales tax is a tax levied on the sale of pharmaceuticals.
  • The Excise Act, 1944: It imposes a duty on the manufacture of goods called Excise Duty. Excise duty is also referred to as CENVAT. It is payable on the manufacture of pharmaceuticals in India.
  • The Finance Act, 1994: It imposes a tax on all services unless a service qualifies as an exempt service. All contract research organizations have to pay service tax.


The Indian Pharmaceutical Industry has shown great potential and continues to grow consistently. Though, since health is an important subject, the industry continues to be regulated. Multiple Ministries continue to regulate the pharmaceutical industry such as the Health Ministry, Chemicals and Fertilizers Ministry, Science and Technology Ministry, Food Ministry etc.

However, the Indian generic drug sector is robust and is establishing its presence in foreign markets. Given that the regulatory framework has been streamlined further in the last couple of years, Indian generic companies have been seeing an increasing number of foreign investments. The new drug sector is also expected to record a healthy growth owing to significant industry wise increase in R&D expenditure and proposed new drug launches. Thus, the Indian pharmaceutical sector continues to be an attractive destination for multinational pharmaceutical companies and investors.


You can direct your queries or comments to


1‘Fact Sheet on Foreign Direct Investment (FDI)’, Department of Industrial Policy and Promotion, http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_February2015.pdf (last checked June 2, 2015)

2 ‘FDI Synopsis on Japan’, Department of Industrial Policy and Promotion, http://dipp.nic.in/English/Investor/Japan_Desk/FDI_Synopsis_Japan.pdf (last checked June 2, 2015).

3 ‘Pharma sales in India to touch $27 billion by 2016: Deloitte’, The Economic Times, February 16, 2014, available at http://articles.economictimes.indiatimes.com/2014-02-16/news/47379629_1_chronic-therapies-health-awareness-life-sciences (last checked October 16, 2014)

4 ‘CRAMS Industry’, CARE Research, available at https://researchreports.careratings.com/industries/crams-industry.html (Last checked October 16, 2014)



過去15年間において、日本は約180億米ドルをインドの企業に投資してきた。1 製薬産業が著しく有益な機会を提供していることから、投資の約27.5%が製薬会社2 への投資となっていることは驚くべきことではない。2014年、日本のロート製薬は有限会社ディープケア・ヘルスの株式の40%を取得し、これはその年の最大規模の日本企業による取引の一つとなった。


インドは最も成長している製薬市場の上位5位に入っており、その売上高は2016年までに約270億米ドルにも及ぶことが予想されている。3 この産業には通常、ブランド医薬品の生産、ブランドジェネリック医薬品の生産、ノーブランドのジェネリック医薬品の生産、そして医薬品の原薬として使用される医薬品有効成分(API)の生産という4種のビジネスがある。インドは外部委託研究や製造サービスもよく行われるようになった。委託製造業と研究産業は著しく成長しており、その規模は現在約78億米ドルと推定されている。4


o インドの製薬産業において、堅調な外国直接投資、合併、提携(ライセンス、共同開発、共同配送、ジョイントベンチャーなど)が行われている。

o 国内製造業者は、利益率が高く、堅調な輸出成長率が望め、インドの製造業者が高い割合で医薬品簡略承認申請(ANDA)の承認を受けている国際ジェネリック市場への参入を狙っている。

o 当産業は、ジェネリック医薬品の製造から創薬・医薬品開発へと焦点が移行することに伴うパラダイム転換に直面している。インドの企業は製剤企業に提供する原材料とAPIの製造から脱却し、成熟した製剤の生産元になろうとしている。

o 当産業では新たな政府の統率のもと、大幅な改革が起こると共に好ましい税政策構造が確立されることが期待されている。









a) 1940年薬品と化粧品法と1945年規則:医薬品(一部の医療機器を含む)と化粧品の製造、輸入、流通、販売を規制する。

b) 1954年薬品と魔法の救済(好ましくない広告)法と1955年規則:特定の疾病や疾患の診断、治癒、緩和、治療、予防に医薬品を関連付ける広告を規制する。

c)  1970年インド特許法:製法特許と製品特許の体制を規定する。製品と製法特許の期間は20年である。

d)  2013年医薬品価格管理令(DPCO: 2011年発表の基本薬国内リストに基づき、基本的に必要不可欠とみなされる医薬品の価格管理体制を規定する。

e)  医薬品市場活動の統一法典 (UCPMP:製薬産業の市場活動を規制する。

f) 1961年所得税法:所得税は中央政府が所得に課す税である。インド国内に居住する者は、インド国内外問わず、得た所得のすべてが課税対象となる。非居住者はインド国内を源泉とする所得が課税対象となる。非居住者に課せられるインドの税率は最高40%である(適用課徴金を除く)。インド国内の課税対象の外資系企業を含むすべての会社が納めるべき税額が帳簿上の利益の18.5%に満たない場合、最低代替税の納税義務が発生する。ロイヤルティーの支払やテクニカルサービス料は源泉徴収税の対象となる。

g) 1963年税関法:すべての輸入品に輸入関税を課す。医薬品の輸入は基本関税、追加関税、相殺関税の対象となる。

h) 中央及び州付加価値税(VAT)法:売上税を課す。売上税は医薬品の売上として徴収される。

i) 1994年物品税法:物品製造に「物品税(Excise Duty)」と呼ばれる税を課す。物品税はCENVATとも呼ばれる。これはインドで製造される医薬品に課される。

j) 1994年財源法:除外されるサービスとみなされない限り、すべてのサービスに税金を課す。すべての受託研究機関はサービス税を収めねばならない。







1 外国直接投資(FDI)についての概況報告書」、産業政策振興庁、http://dipp.nic.in/English/Publications/FDI_Statistics/2015/india_FDI_February2015.pdf (2015年6月2日に最終確認)

2「日本のFDIの概要」、産業政策振興庁、http://dipp.nic.in/English/Investor/Japan_Desk/FDI_Synopsis_Japan.pdf (2015年6月2日に最終確認)

3「インドの医薬品売上が2016年までに270億ドルへ: デロイト」、 エコノミック・タイムズ、2014年2月16日、 以下のリンクよりアクセス可能http://articles.economictimes.indiatimes.com/2014-02-16/news/47379629_1_chronic-therapies-health-awareness-life-sciences (2014年10月16日に最終確認)

4「研究製造業務受託サービス (CRAMS)業界」、 CARE リサーチ、以下のリンクよりアクセス可能 https://researchreports.careratings.com/industries/crams-industry.html (2014年10月16日に最終確認)

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