For the past quarter of a century, multinational pharmaceutical companies have shown limited interest in India. Protectionist policies introduced by the Indian government in 1970 hit profits hard, and companies have been further deterred by the lack of intellectual property rights. As a result, MNCs have just 30 percent of India’s pharmaceutical market, compared with 80 percent 25 years ago (Exhibit 1 and Exhibit 2). Yet the climate is changing. As part of government efforts to liberalize the economy, regulations governing the industry are being abolished or simplified, and price levels are rising. At the same time, increased personal spending, fuelled by economic growth and greater access to medical care, is helping to expand the market.

These changes make it an appropriate time for multinationals to reconsider India. Opportunities exist not only to expand market share rapidly in the country itself, but also to use it as a base for sourcing bulk actives and intermediates,¹ for sourcing formulations for export to other developing nations, and for research and development. Together, these four areas of opportunity could represent from $300 million to $800 million of net present value to a leading multinational. To capture this value, however, MNCs will...