How India Is Rebuilding Its Pharmaceutical Innovation Engine

Over the past two decades, India’s pharmaceutical industry has evolved from a largely generic-focused manufacturing sector into a far more complex ecosystem that now includes biologics, vaccines, biosimilars, complex APIs, contract research and manufacturing (CRAMS), and an emerging medtech and digital health scene. Innovation in Indian pharma today is driven by domestic policy shifts, strategic public investments, rapidly maturing private R&D, and an expanding start-up and academic translational ecosystem. This article traces the drivers and domains of innovation, illustrates successes and structural barriers, and proposes how India can sustain and scale its innovation advantage globally. Key government schemes, industry case studies and data points are discussed.

Historical background

India’s modern pharmaceutical emergence began with patent law reforms (1970s–2005) that encouraged reverse engineering and generic competition—building capabilities in process chemistry for API, formulation development for finished product, and low-cost high-volume generic drug production. That capability produced the “pharmacy of the world” reputation: high volumes of affordable generics and vaccines exported globally. However, being a low-cost producer did not automatically translate into broad-based R&D leadership. Over the 2010s and early 2020s, companies and policymakers acknowledged that the next phase required deliberate innovation—both incremental and novel—across biologics, advanced APIs, and medical devices. Recent policy pushes and private investments are accelerating that transition.

Three Strategic Reasons make Innovation a National Priority for India Now

1. Economic upgrading and export competitiveness. Due to extreme prize pressure and changing geopolitical scenario, Indian pharma needs to focus on diversification. One option is to move up the value chain—from generics to complex biologics, biosimilars and high-value APIs—captures higher margins and reduces exposure to low-cost competition. Indian Brand Equity Foundation projects strong industry growth and forecasts sizable expansion by 2030, pointing to a structural incentive for innovation.
2. Supply security and strategic self-reliance. The COVID-19 pandemic and subsequent geopolitical disruptions exposed vulnerabilities in global API and other raw material supply chains. India’s policy response has emphasized domestic API capacity (bulk drug parks, PLI incentives) to reduce import dependence and protect public health.
3. Public health needs & access. India’s large disease burden and health programmes (vaccination drives, national health insurance) create strong domestic demand for affordable innovations—especially vaccines, biosimilars, and diagnostics that can be scaled at low cost. Domestic innovation which delivers affordability multiplies public health impact.

Policy Interventions and Public Investment DosteringF Innovation

Innovation does not occur in a vacuum; it needs strong policy intervention and investment—policy instruments have become active and sizable in recent years:

• PRIP (Promotion of Research and Innovation in Pharma-MedTech). Launched with a substantial outlay, PRIP targets translational R&D, support for incubators, clinical trials and technology commercialization to shift the sector from cost-focused to innovation-focused growth. This is among the most consequential recent policy moves positively reshaping incentives for industry and startups.
• Production-Linked Incentive (PLI) and Bulk Drug Parks. PLI schemes for pharmaceuticals and dedicated bulk drug parks are designed to incentivize domestic API manufacturing and attract CAPEX for complex drug intermediates—critical to reducing import exposure and enabling upstream innovation. Several state-level policies add local incentives and R&D support.
• Biotech parks and incubation (DBT/BIRAC). The Department of Biotechnology’s Biotech Parks and BIRAC programmes provide infrastructure, translational support, and grants for startups and SMEs—creating fed-in capacities that connect academic discovery with industry adoption. Events like Global Bio-India and several such state level events have also helped showcase startups and attract international collaboration.

These policy measures create a clustered, layered support system—R&D grants and incubators at the front end, manufacturing incentives and parks at the midstream, and regulatory/market access measures at the downstream end.

Domains of Innovation: Where India is Making Strides

1.New drug discovery

Nafithromycin (Miqnaf) launched in November 2024 by Wockhardt is India’s first indigenously developed macrolide antibiotic targeting Community-Acquired Bacterial Pneumonia (CABP) caused by resistant bacteria. It has strength over older antibiotics and can reduce treatment durations.

Enmetazobactam, developed by Indian scientists at Orchid Pharma, is a novel β-lactamase inhibitor. It represents a major development, as it's one of the first antibiotics (or antibiotic combinations) invented (new chemical entity) in India to get regulatory approvals abroad and at home.

Increasing numbers of biotech startups; incubators and government agencies like BIRAC supporting novel drug research producing a conducive environment for drug discovery. Collaboration is recognized by pharma heads as crucial; efforts are on to build a collaborative innovation ecosystem combining academia, industry, regulatory authorities.

2. Biosimilars and biologics

The global demand for biologics (monoclonal antibodies, recombinant proteins, etc.) and their more affordable versions—biosimilars—is rising sharply. Indian companies have started investing in biologics manufacturing, development, and global approval compliance. Biocon’s pivot from fermentation-based enzyme products to a fully integrated biologics and biosimilars developer exemplifies India’s biologics ambitions. The company’s investments in manufacturing, global regulatory strategy and integrated biologics platforms show a corporate pathway from generics to high-value biologics. Recent U.S. FDA approval for denosumab biosimilars from an Indian biologics manufacturer—an indicator that Indian biosimilars can compete on stringent regulatory stages. Few other Indian companies have already got approval for their products in Europe and now preparing for US submission.

Indian companies like ImmunoAct and Immuneal have shown success in the Advanced Biologics area of Cell and Gene Therapy, which attracted big companies to invest in this area.

3. Vaccines

India’s vaccine ecosystem—built over decades—supplies a significant share of global vaccine volumes. Firms like Bharat Biotech and Serum Institute have illustrated rapid product development and scale manufacturing capacities. This manufacturing and clinical trial competence means India is well-placed to innovate in vaccine platforms, thermostable formulations, and regional disease targets. Bharat Biotech’s trajectory—from routine vaccine manufacturing to developing novel platforms—illustrates the spin-out of R&D from operational manufacturing. The firm’s sustained R&D investments and global clinical trial networks have placed it among the leading vaccine innovators from emerging markets

4. Manufacturing Innovations, Supply Chain, and API Self-Reliance

To reduce dependence on foreign sources (especially China) for APIs & KSMs, India has undertaken initiatives under schemes like PLI (Production Linked Incentive) to encourage domestic manufacturing. Efforts are being pursued to upgrade API capabilities including green chemistry, complex synthetic routes and continuous manufacturing. Usage of advanced equipment, automation, quality systems, regulatory compliant plants (e.g., US FDA / EMA compliant) to produce APIs of global standard is growing.

5. MedTech and diagnostics

Historically underdeveloped compared to pharmaceuticals, India’s medtech segment is catching up. Government schemes for medical device promotion and private investment are encouraging indigenous design, regulatory harmonization and prototyping—areas ripe for frugal innovation (affordable point-of-care diagnostics, portable imaging, low-cost prosthetics).

6. Digital Health, Artificial Intelligence (AI)/Machine Learning (ML)

AI/ML are increasingly being used across drug discovery, clinical trials, manufacturing, supply chain management, and patient care.

According to EY-Parthenon & OPPI (2024), 79% of pharma industry leaders believe AI/ML in drug discovery and clinical development can improve efficiency & productivity. Generative AI (GenAI) is emerging as a transformative tool—from molecule design to optimizing clinical trials, predicting toxicity, and repurposing existing drugs. IoMT (Internet of Medical Things), blockchain for supply chain transparency, digital tracking of patients, remote monitoring are also being adopted.

Challenges to Innovation

While progress is real, several systemic challenges remain:

1. R&D funding and risk capital. Drug discovery and biologics development are capital-intensive with long cycles and high attrition rates. India still lacks the depth of venture capital and structured private-equity funding seen in mature biotech hubs. Public grants alleviate early risk, but later-stage financing and de-risking instruments are limited.
2. Regulatory alignment and capacity. Indian regulatory frameworks historically designed for generic drug approval may not fully align with the requirements of novel therapeutics, biologics, or complex clinical trials. Although Indian regulators have grown more robust, harmonizing frameworks with global regulators for novel modalities (cell/gene therapies, advanced biologics) and streamlining clinical trial approvals remain priorities. Ensuring GCP-compliant trial networks and data quality is essential for global approvals. Besides, multiple regulatory authorities (DCGI, RCGM etc.), overlapping approvals, lack of trained reviewers, and bureaucratic processes make the system in efficient.
3.  Talent and Industry-academia collaboration. While India produces many life-science graduates, there is a scarcity of skilled scientists in specialized domains: biopharma, molecular biology, big data/AI in drug discovery, regulatory science. Training, retaining talent, and brain drain are major concerns.

Globally basic research happens in academics, then they are picked up by industry to develop as a product and market it. In India, converting academic discoveries into commercial products are not efficient, requires translational training, IP awareness, and industry-academic linkages that are still maturing.

1. Global quality compliance. Global competitiveness depends on sustained GMP and quality systems. Past regulatory citations (in some plants) have reminded stakeholders that scaling volume must not compromise regulatory standards.
2. Fragmented innovation ecosystem. Innovation requires co-location of talent, capital, clinical networks and manufacturing. India has pockets of excellence, but wider coordination is needed to create dense innovation clusters comparable to global biotech hubs.

These structural constraints are solvable but require coordinated policy, capital infusion and institutional reforms.

Lessons from Recent Successes

Several enabling features are helping India move up the innovation ladder:

• Modular policy design. Combining upstream (incubation grants, incubators at academia, Biotech Parks) and downstream (PLI, bulk drug parks) interventions creates an end-to-end corridor—allowing an idea born in a lab to access manufacturing and market routes domestically.
• Export-driven commercial incentives. Serving global generic and vaccine markets has created commercial scale at low margins; this profit can be reallocated toward higher-value R&D when paired with policy support.
• Strong contract and CDMO base. A mature CRAMS/CDMO sector allows smaller innovators to access world-class manufacturing without huge capital investment.

These strengths have supported recent successes and create a roadmap for future innovation.

A Few Recommendations to Accelerate and Sustain Innovation

To convert momentum into sustained global leadership, coordinated action across public, private and academic sectors are necessary. Below are targeted recommendations -

1. Build strong innovation finance instruments

Create blended-finance vehicles that combine government grants, concessional loans, and private venture capital to finance mid to late stage clinical development and scale-up. De-risking instruments (matching funds, milestone guarantees) will attract institutional investors to higher-risk projects.

2. Enhance regulatory convergence and expedited pathways

Work with global regulators on mutual recognition and fast-track pathways for innovations that address unmet needs. Increase regulatory capacity for new modalities (gene-cell therapies, complex biologics) through training and technical partnerships.

3. Incentivize industry-academia partnerships

Create outcome-oriented grants that require industry co-funding and commercialization milestones. Encourage university technology transfer offices and incubators to take equity in spin-outs, aligning incentives.

4. Nurture talent with industrial training

Introduce industry-embedded PhD and post-doctoral programmes, entrepreneurship curricula in life sciences, and short-term industry fellowships for academic scientists.

5. Introduction of modern technology and sustainability in manufacturing

Support R&D in green chemistry, continuous manufacturing to reduce costs, environmental impact and improve process reliability. This will also make Indian APIs more attractive to global buyers with ESG requirements. Introduction of AI and digitalisation will make the system efficient and ensure quality.

6.Enhance the role of private sector and startups

Private industry must continue to invest in platform technologies (mammalian cell lines, process platforms, mRNA and viral vectors), AI-driven discovery tools, and advanced analytics. Startups, backed by translational grants and incubators, bring agility and focus on niche unmet needs. Public-private co-investment models (where government assumption of early translational risk is coupled with private scale-up capital) will be decisive.

7. Risk management

Innovation is accompanied by risk—scientific, regulatory and commercial. Key mitigation strategies include diversified portfolios (both platform and product bets), staged funding tied to milestones, international partnerships to share regulatory burden, and transparent governance around clinical data and ethics. Building a robust IP ecosystem—balanced to preserve access while enabling returns—is also essential.

Conclusion

India’s pharmaceutical sector is in the midst of an important transformation: from being the world’s low-cost generic manufacturer to becoming a global innovator in biologics, vaccines, biosimilars and frugal medtech. This is not an inevitable shift but the result of deliberate policy choices, maturing private R&D, stronger translational infrastructures, and a vibrant start-up ecosystem. Recent policy interventions—such as PRIP, PLI, BioE3 —along with investments in bulk drug parks, incubators and clinical networks provide the scaffolding to scale innovation. To fully realize this potential, India must strengthen capital markets for biotech, deepen regulatory and clinical capacities, nurture translational talent, and sustain industry-academia linkages.

If policy, private capital and scientific talent continue to converge, India can not only serve its domestic health needs at scale but also emerge as a global center for affordable, high-quality pharmaceutical innovation—delivering both economic value and public health impact to the world.