The pharmaceutical industry in India was valued at US$33 billion in 2017 and generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally. According to the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, domestic pharmaceutical market turnover reached Rs 129,015 crore (US$18.12 billion) in 2018, growing 9.4 per cent year-on-year and exports revenue was US$17.28 billion in FY18 and US$19.14 billion in FY19.Pune, Hyderabad, Mumbai, Baddi, Himachal Pradesh, Chennai, Bangalore, Ahmedabad, Vadodara, Ankleshwar, Vapi and Sikkim Kolkata are the major pharmaceutical hubs of India.
The Government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970.
Indian companies carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs which became the advantage for industry.
India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act, multinationals represent[when?] only 35% of the market, down from 70% thirty years ago.
Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise.
In terms of the global market, India currently holds an accountable share and is known as pharmacy of the world and biggest generic supplier. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$70–80 billion US generics market. Growth in other fields notwithstanding, generics are still a large part of the picture. India is the largest provider of generic drugs globally. Indian pharmaceutical sector industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicine in UK. India is the largest contributor in UNESC with over 50-60% share 
Between 2015 and 2017, there were 31 FDA warning letters to Indian pharmaceutical companies citing serious Data Integrity issues, including data deletion, manipulation or fabrication of test results, see “An Analysis Of 2017 FDA Warning Letters On Data Integrity” By Barbara Unger, Unger Consulting Inc. According to Outsourcing Pharma in 2012 75% of counterfeit drugs supplied world over had some origins in India, followed by 7% from Egypt and 6% from China.
The Central Drug Standards Control Organisation (CDSCO), the drug regulatory authority of India conducted a nationwide survey in 2009 and announced that of "24,000 samples [that] were collected from all over India and tested. It was found that only 11 samples or 0.046% were spurious." In 2017 a similar survey found 3.16% of the medicines sampled were substandard and 0.0245% were fake. Those more commonly prescribed are probably more often faked.
India exported $11.7 billion worth of pharmaceuticals in 2014. Pharmaceutical export from India stood at US$17.27 billion in 2017-18, and is expected to grow by 30 per cent to reach US$20 billion by the year 2020.And India Share in This 40%  The 10 countries below imported 56.5% of that total:
|1||United States||$3.8 billion||32.9%|
|2||South Africa||$461.1 million||3.9%|
|4||United Kingdom||$444.9 million||3.8%|
In 1970, Indira Gandhi enacted legislation which barred medical products from being patented in the country. In 1994, 162 countries including India signed the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which stipulated that patents had to be given to all inventions including medicines. India and other developing countries were provided an extra ten years to comply fully with the conditions mandated by TRIPS. India succeeded in including a crucial clause to the agreement in the form of the right to grant compulsory licenses (CLs) to others to manufacture drugs in cases where the government felt that the patent holder was not serving the public health interest. This right was used in 2012, when Natco was granted a CL to produce Nexavar, a cancer drug. In 2005, a provision was added to the new legislation as section 3(d) which stipulated that a medicine could not be patented if it did not result in “the enhancement of the known efficacy of that substance.”
A significant change in intellectual property protection in India was the 1 January 2005 enactment of an amendment to India's patent law that reinstated product patents for the first time since 1972. The legislation took effect on the deadline set by the WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on both products and processes for a period of 20 years. Under this new law, India will be forced to recognise not only new patents but also any patents filed after 1 January 1995. In December 2005, the TRIPS pact was amended to incorporate specific safeguards to ensure that the public health concerns of affordability and accessibility for a large section of people in developing countries was not compromised. These amendments came into force only in January 2017, however, after two-thirds of the member countries ratified them. In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The multinationals narrowed their focus onto high-end patents who make up only 12% of the market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms have chosen to take their existing product portfolios and target semi-urban and rural populations.
Indian companies are also starting to adapt their product development processes to the new environment. For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and thus a legitimate competitor in the global industry. Local firms have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities.
As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is not as bright. The excise structure changed[when?] so that companies now have to pay a 16% tax on the maximum retail price (MRP) of their products, as opposed to on the ex-factory price. Consequently, larger companies cut back on outsourcing and what business is left shifted to companies with facilities in the four tax-free states – Himachal Pradesh, Jammu and Kashmir, Uttarakhand, and Jharkhand. Consequently, a large number of pharmaceutical manufacturers shifted their plant to these states, as it became almost impossible to continue operating in non-tax free zones. But in a matter of a couple of years the excise duty was revised on two occasions,[when?] first it was reduced to 8% and then to 4%. As a result, the benefits of shifting to a tax free zone was negated. This resulted in, factories in the tax free zones, to start up third-party manufacturing. Under this these factories produced goods under the brand names of other parties on job work basis.
As SMEs wrestled with the tax structure, they were also scrambling to meet the 1 July deadline[when?] for compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this should be beneficial to consumers and the industry at large, SMEs have been finding it difficult to find the funds to upgrade their manufacturing plants, resulting in the closure of many facilities. Others invested the money to bring their facilities to compliance, but these operations were located in non-tax-free states, making it difficult to compete in the wake of the new excise tax.
|Rank||Company||Market Capitalization June 2020 (INR crores)|
|2||Dr. Reddy's Laboratories||66,596|
|8||Zydus Cadila Healthcare||37,422|
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India, with biotech a much smaller part of the economy. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 13th in the world in number of biotech. In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1 billion. The Indian biotech market is dominated by biopharmaceuticals; 76% of 2004–5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep the market in bio-generics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities.
Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. At last count there were 265 firms registered in India, over 92% of which were incorporated in the last five years. The newness of the companies explains the industry's high consolidation in both physical and financial terms. Almost 30% of all biotech are in or around Bangalore, and the top ten companies capture 47% of the market. The top five companies were homegrown; Indian firms account for 72% of the bio-pharma sector and 52% of the industry as a whole.[4,46] The Association of Biotechnology-Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible.
The Indian biotech sector parallels that of the US in many ways. Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies. Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable for years. Pharmaceutical companies in both countries see growth potential in biotechnology and have either invested in existing start-ups or ventured into the field themselves.
The Indian government established the Department of Biotechnology in 1986 under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. India's science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large animals as part of the minister's initiative. States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities.
The biotechnology sector faces some major challenges in its quest for growth. Chief among them is a lack of funding, particularly for firms that are just starting out. The most likely sources of funds are government grants and venture capital, which is a relatively young industry in India. Government grants are difficult to secure, and due to the expensive and uncertain nature of biotech research, venture capitalists are reluctant to invest in firms that have not yet developed a commercially viable product.
The government has addressed the problem of educated but unqualified candidates in its Draft National Biotech Development Strategy. This plan included a proposal to create a National Task Force that will work with the biotech industry to revise the curriculum for undergraduate and graduate study in life sciences and biotechnology. The government's strategy also stated intentions to increase the number of PhD Fellowships awarded by the Department of Biotechnology to 200 per year. These human resources will be further leveraged with a "Bio-Edu-Grid" that will knit together the resources of the academic and scientific industrial communities, much as they are in the US.
In 2019 the Department of Pharmaceuticals announced that as part of the Made in India initiative, drugs for local use must have 75% of local content, and drugs for export 10%. A bill of material must be produced for checking.
It has been pointed out that the pharma industry is not scrutinised enough when it comes to withdrawing patent challenges. For example, in the case of the patent application filed by Gilead Sciences for the Hepatitis C medicine sofosbuvir in 2014, Natco initially filed challenges to this application in Delhi. However, a month after signing a voluntary licensing agreement with Gilead, Natco withdrew the patent challenge. It has been argued that Mylan (an influential pharmaceutical company which was Natco's client) exerted pressure on the latter and 'brokered' a deal, though the term 'brokered' has been refuted by Mylan. Many activists argue that such agreements in effect deny patients in some countries the right to affordable drugs. It has also been pointed out that without the patent, voluntary licensing would imply charging rent on property not even owned by the company. The Competition Commission of India ought to carefully look at every withdrawal of patent challenges, as well as such private agreements, since these impact both public health and the competitive environment of the market.