When real-time economics and business shifts shake the ground, forecasts do little to keep things standing. Even if the forecaster is a blue-blooded consulting firm such as McKinsey & Company. Out with its 2030 projection for the Indian pharmaceutical industry in late June, McKinsey says the industry could grow to $120-130 billion by 2030. Once again, an aspirational, feel-good number is hurled into the public sphere. Time, therefore, to ask how McKinsey’s 2020 forecast has held up.

In 2009, McKinsey’s 10-year forecast said Indian pharma would grow to $55 billion by 2020. This was the base case forecast; the aggressive case vaulted it to $70 billion. However, by many estimates today, the best case scenario is that the industry would grow to $41.9 billion by 2020, given that leading companies don’t have many irons in the fire. That makes the McKinsey 2020 forecast off by nearly 25%, way more than the ±10% error that forecasters usually get away with.

Now, the domestic market, which accounts for 47% of the $38 billion industry, has been clocking slower growth, month-on-month, up until June 2019. Exports, too, have slowed.

The industry is at a juncture where seismic shifts and structural challenges are rampant,” says Dr Reddy’s Laboratories, India’s fourth largest pharma company by sales, in its just-released annual report. What then should one make of McKinsey’s projection, which, 1) doesn’t take into account its earlier forecast; 2) sidesteps the details of its 2030 modelling exercise, and 3) hangs its rosy numbers on an elaborate to-do list for the government?

Perhaps the forecast is as accurate as a dart-throwing chimpanzee. 

The (US) ball will not bounce your way

Over the last few years, the US market has been a key driver of double-digit growth for top Indian pharmaceutical companies. That run is slowing down, partly due to price erosion. The prices of generics declined by about 8% annually between 2015 and 2018. There’s also been a buyer consolidation—from about 80% of the sales by five-six buyers in 2013 to only three buyers in 2018. The US regulator, Food and Drug Administration (FDA), has hastened its approval rate for generics, drawing more companies and competition in key molecules.

It may be easier for Indian companies to shovel some of the blame on the Donald Trump administration. Last week, Trump said his administration was working on an “executive order to reduce US drug prices to match the lowest in the world”. But the fact is that wholesalers, which control 90% of the US market, have already squeezed Indian suppliers as much as they could. Trump’s threat hangs heavy over the Pharmacy Benefit Managers (PBMs) and American wholesalers rather than Indian companies.