A Structural Analysis of Quality, Supply Chain, Workforce, and Governance in Indian Pharmaceutical Industry

The Indian pharmaceutical industry is growing rapidly and supplying affordable medicines to the world. However, behind this growth, there are serious weaknesses that are putting the future sustainability of many pharma companies at risk. While demand is increasing, internal systems, quality control, skilled manpower, and governance structures are not developing at the same pace.

Most pharmaceutical companies have focused on expanding production capacity, increasing distribution reach, and building external partnerships. But they have not invested enough in building strong internal controls, reliable procurement systems, trained employees, and secure distribution networks. As a result, the current growth model is becoming unstable.

The industry is not facing temporary problems. It is facing structural problems that affect quality, safety, compliance, and business continuity. These challenges cannot be solved by small changes. They require a complete shift in how pharma companies manage procurement, quality, people, and supply chains.

This situation creates long-term opportunities for consulting firms to help pharma companies move from weak, dependency-driven models to strong, internally controlled and sustainable business models.

Industry Context and Operating Reality

India is one of the world’s largest producers of medicines. It supplies generic drugs, vaccines, and APIs to both developing and regulated markets. The industry includes:

• Large multinational manufacturers
• Mid-sized pharma companies
• Trading-led pharma firms
• Contract manufacturers
• Digital health and e-pharmacy platforms

Large pharma companies have invested heavily in quality systems, regulatory teams, and supply chain governance. However, most mid-sized and growing companies still operate with weak internal controls. They depend on:

• External vendors for APIs
• Third parties for regulatory work
• Consultants for compliance readiness
• Price-based procurement decisions

This creates a dangerous imbalance:
Strong physical infrastructure, but weak internal capability.
Good production facilities, but poor control over quality and distribution.

As companies expand into regulated markets, this weakness becomes more visible. Regulators now check whether companies truly control their operations, not just whether they have documents. Companies that cannot prove internal ownership face audits, delays, and regulatory actions.

Core Challenges in the Pharmaceutical Industry

1. Procurement Risk – Poor Quality Raw Materials

Procurement has become a major operational risk, with declining raw material quality leading to higher batch failures, frequent production delays, and rising rejection rates. Heavy reliance on a limited supplier base and cost-driven vendor selection weakens quality assurance, increases regulatory exposure, and disrupts manufacturing continuity.

2. Weak and Unequipped Distribution Network

India’s pharmaceutical distribution system is highly decentralized and poorly controlled. Many warehouses and distributors lack medical-grade storage, cold-chain infrastructure, reliable inventory systems, and safe transport practices. As medicines are sensitive to handling conditions, these gaps result in product damage, stock shortages, delayed deliveries, and unstable supply chains.

3. Quality Issues and Counterfeit Medicines

The presence of counterfeit, spurious, diverted, and adulterated medicines remains a serious industry risk. Weak traceability systems and the widespread sale of loose tablets allow fake products to enter the supply chain, posing significant threats to patient safety, brand credibility, regulatory compliance, and overall trust in the healthcare system.

4. Lack of Expert Workforce

Industry growth has outpaced the availability of skilled professionals in quality, regulatory affairs, supply chain management, and compliance leadership. Although infrastructure has expanded, the lack of experienced personnel leads to reactive compliance, operational inefficiencies, weak governance, and slow organizational maturity.

5. Lack of Training and Knowledge Sharing

Training is often treated as a formality rather than a strategic priority. Many organizations lack structured learning programs, regular GMP refreshers, and performance-based knowledge systems. Poor SOP adherence and undertrained staff result in repeated compliance deviations, inventory losses, weak audit performance, and an underdeveloped quality culture.

Structural and Business Model Limitations

Many pharma business models increase growth but reduce control:

• Trading-led models face margin pressure and supplier dependency
• Outsourced manufacturing reduces capital investment but increases quality risk
• Digital health companies grow fast but struggle with profitability and regulation

Regulatory responsibility is often scattered across departments. No one has a full view of risk. When regulatory action happens, it feels sudden, but the problems have existed for years.

Strategic Transformation Framework

1. Strong Procurement Governance

Pharma companies must move away from price-driven purchasing and focus on quality and risk. Supplier selection should be based on reliability, compliance history, and material quality. Depending on only one vendor increases risk, so multi-vendor sourcing is essential. Regular supplier audits and a risk-based procurement approach help reduce batch failures, production delays, and quality deviations.

2. Controlled Distribution Systems

Medicines must be handled in medical-grade conditions from factory to patient. Companies need proper warehouses, strong cold-chain facilities, and regular audits of distributors. Product traceability systems should be used to track medicines through the supply chain. This protects product quality and prevents damage, misuse, or diversion during transportation and storage.

3. Quality Ownership

Quality should be owned by the company at every stage, not outsourced to vendors or partners. From raw material sourcing to final delivery, companies must ensure full control. Strong systems are needed to block counterfeit medicines and to monitor the market continuously. This builds trust, protects patients, and strengthens brand reputation.

4. Workforce Capability Building

Sustainable growth depends on skilled people. Companies must plan hiring for quality, regulatory, and leadership roles. Regular GMP training, leadership development programs, and clear accountability structures ensure employees understand their responsibilities and perform at regulatory standards.

5. Training-Driven Culture

Training should be practical, continuous, and meaningful. SOPs must be understood, not just written. Employees need hands-on training, regular refreshers, and skill certification for key roles. A strong training culture reduces errors, improves compliance, and increases operational efficiency.

6. Regulatory Intelligence

Companies should manage regulatory risk proactively, not reactively. This means creating a centralized system to track regulatory risks, planning compliance in advance, and aligning regulatory strategy with business growth. Predictive compliance helps avoid penalties and supports stable expansion.

Industry-Wide Impact

Companies that ignore these problems will face:

• Batch failures
• Regulatory actions
• Product recalls
• Supply chain breakdowns
• Falling margins
• Loss of trust

Companies that invest in internal control, skilled people, secure procurement, and distribution systems will gain:

• Strong regulatory confidence
• Stable growth
• Better market reputation
• Higher enterprise value

Conclusion

The Indian pharmaceutical industry is not constrained by market demand or growth potential. Instead, its most pressing challenge lies in building deeper control over quality, compliance, and core operational capabilities.

As regulatory research intensifies and global supply chains become more interconnected, sustainable growth will increasingly depend on strong internal systems rather than external dependencies or ad-hoc fixes. Companies that invest in governance-led procurement, resilient supply chains, robust quality frameworks, and skilled regulatory and technical talent will be better positioned to meet evolving global standards.

The next phase of Indian pharma’s evolution will be defined not by expansion alone, but by the ability to institutionalize discipline, accountability, and consistency across operations. Organizations that make this transition will strengthen global trust, reduce execution risk, and secure long-term competitiveness in an increasingly regulated environment.

About the Author and LawCrust Global Consulting

This analysis was authored by Gurjas, a Research Associate at Solvencis, in association with the Editorial Team led by Mahendran Konar.
Currently engaged in pharmaceutical and healthcare research, Gurjas focuses on applied industry analysis at the intersection of regulatory frameworks, supply chain systems, and operational strategy. His work tracks how pharmaceutical companies can move beyond dependency-driven models toward scalable, compliant, and resilient operating structures across manufacturing, sourcing, and market expansion.

At Solvencis, he focuses on the MSME pharmaceutical segment, contributing market and regulatory research on compliance readiness, supply chain independence, contract manufacturing models, and regional expansion strategies, supporting data-driven decision-making in the evolving pharmaceutical landscape of 2030.

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