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India’s pharma industry is well-known for its mass-production capability, export readiness, and ability to deliver cost-effective drugs in international markets. However, the future growth may depend less on manufacturing and more on how efficiently medicines reach end-users.
The industry is going through a shift in structure. While distribution systems used to depend upon bulk deliveries to hospitals, wholesalers and pharmacies, it is now moving towards a fragmented delivery system. The growth of e-pharmacies, the increase in speciality drugs, the higher use of biologicals, and clinical trials have changed the way drugs get delivered.
This transition has created unprecedented stress on India's logistics sector, especially temperature-sensitive logistics and last-mile delivery. Despite substantial advancements in producing pharmaceutical products, the corresponding logistics sector has not expanded in proportion to its capabilities. This mismatch can be a limiting factor in the coming years.
Indian pharma logistics sector earned revenues exceeding USD 4 billion in 2024 and is expected to reach USD 10.4 billion by 2033, with an average annual growth rate of close to 11%. Crucially, cold chain logistics is expected to be the fastest-growing segment of the pharmaceutical logistics market.
However, this is not just about logistics. It has now become a matter of competitiveness for the whole pharma industry.
Bulk distribution versus precision delivery
In the past, the drug delivery system in India was quite simple. Manufacturers would distribute in bulk quantities to either central distributors or institutional buyers, with long inventory cycles and known delivery schedules.
With the advent of healthcare apps and e-pharmacies, there is a change in consumer behaviour. Consumers demand prompt, precise, and efficient delivery of medications, including home deliveries. Moreover, there is an increased use of specialized drugs like biologics and others in medical treatments, especially in the areas of oncology, immunology, and chronic conditions. Specialized medications must be handled with greater caution and precision as well.
Clinical trial logistics have added further complexity. As per the estimates provided by the industry, the biologics segment in India has been witnessing an annual growth of almost 18%, which has been far higher than the growth rates observed across other segments in the overall pharma industry.
It must be noted that while the newer distribution channels do not necessarily focus on size, they focus on being responsive and compliant. Essentially, logistics in the pharmaceuticals sector is moving away from the “warehouse to wholesaler” model.
Why last-mile delivery is becoming a major bottleneck?
The problem is magnified greatly when it comes to the last mile. The healthcare sector of India is growing beyond its metropolitan cities. Higher income levels, higher insurance coverage, increased use of technology in accessing healthcare services, and the rise of telemedicine have resulted in higher pharmaceutical consumption in Tier 2 and Tier 3 locations. But there still exist issues relating to logistics in this regard.
According to several reports in the industry, the lack of cold chain, power supply, transportation, and temperature monitoring facilities persists as a barrier in pharmaceutical logistics in non-metro zones. The issue is particularly alarming considering that slight variations in temperature could damage the effectiveness of vaccines, biological medicines, insulin, and speciality medicines.
The problem is no longer a theoretical one. Disruptions in global transport lanes and shipping logistics, experienced recently, clearly indicate how exposed supply lines for pharmaceuticals can be potential problems related to transport logistics. According to reports from the media, earlier this year, exports of pharmaceutical products from India experienced the sharpest drop in more than five years because of the disruption caused by geopolitical factors, raising prices on freight significantly.
The importance of the event does not lie solely in export operations; it demonstrates the extent to which pharmaceutical development has become dependent on logistic performance.
Furthermore, the fragmented nature of the retail pharmacy system in India makes things more difficult. In contrast to well-consolidated economies, where there are very few players in the pharmaceutical supply chain, India has a large number of players scattered around different geographic locations.
This results in difficulty ensuring end-to-end visibility and compliance during the final phase of delivery.
What will define the next phase of pharma growth?
Among the major changes taking place is the increase in reliance on cold chain logistics.
Historically, cold chain infrastructure in India has been used mainly for transporting vaccines or other critically essential medicines. However, the need has significantly increased owing to the use of biologics, cellular therapy products, specialized drugs, and personalized medicines.
Analysts within the industry point out that temperature-sensitive drugs have become a much bigger part of the drug basket than before.
This development is significant because such treatments do not have room for any transit time, logistical shortcomings, or lack of temperature-controlled conditions. The slightest deviation could be detrimental to the efficacy of the products.
Clinical trials also contribute to the growing challenges. India continues to promote itself as a top destination for conducting clinical trials, thus necessitating sophisticated logistics for moving trial materials, biological specimens, and investigational treatments.
Pharmaceutical logistics is now becoming less about moving goods but rather more about ensuring compliance in terms of transport speed, traceability, and environmental controls.
Such developments will undoubtedly put immense strain on the current logistics infrastructure of India, especially in secondary cities that still lack cold storage facilities.
Why are decentralised micro-fulfilment hubs needed?
In order to respond to these changing challenges, the pharma sector would increasingly need decentralised micro-fulfilment facilities. Centralised warehousing operations would be inadequate to meet modern demands in pharma supply chains. Warehouses located distant from demand centres prolong shipment times and raise the chances of variations in temperature control while in transit.
That is why there is an ongoing shift to smaller and decentralised fulfilment centres closer to demand centres.
The emergence of the concept of e-pharmacy and fast medication delivery services is driving businesses towards adopting a strategy of city or near-city warehousing. The significance of this phenomenon cannot be underestimated.
Micro-fulfilment centres can help shorten delivery times, respond quickly to inventory changes, and avoid long-distance transportation for temperature-sensitive goods. More importantly, they enable pharmaceutical manufacturers to keep better control over their supply chains close to where their products will be used.
These facilities should not mimic conventional warehouses.
Future-proofed pharma logistics operations need GDP-approved settings, cold-chain management systems, power backups, temperature zoning processes, monitoring technologies, and fast dispatching capabilities in one system.
In essence, warehousing is transitioning from mere storage facilities to health-care-enabling platforms.
Structural changes are happening silently in logistics real estate
The aforementioned operational changes are also changing the way logistics real estate works in India.
The logistics real estate properties are now being designed not only to act as storage units, but also as mixed use facilities that will be able to store, process, pack, chill, and ship. It is quite a major shift in operations, considering that the pharma logistics business is becoming highly dynamic.
The logistical demands could mean that one single location would have to handle stock storage, direct shipment to patients, clinical trials shipment, and fast regional shipment of specialized products.
Significantly, logistics facilities are starting to come closer to urban demand centres and not just being located near manufacturing centres alone. It represents a greater recognition in the sector that proximity is as critical as scale when it comes to pharma logistics.
The logistics industry is already responding to these needs by adopting automation technologies, Internet of Things-based monitoring systems, refrigerated transport capabilities, and compliance-friendly warehousing facilities.
However, the rate of change must pick up pace for India to enjoy sustainable growth in its pharmaceuticals industry.
The growth of pharma sector will depend on supply chain reliability
The Indian pharma sector has already developed its reputation as a manufacturer for the world. But continued growth will depend as much on developing logistics capabilities that can support decentralisation, temperature sensitivity, and time-sensitive delivery processes.
As the pharma sector evolves into biologicals, speciality medicines, and patient care-centric approaches, last mile logistics will become essential for the delivery process.
This implies that the growth of the pharma sector will no longer depend only on manufacturing capabilities. Cold chain logistics, warehousing facilities, decentralised logistics hubs, and quick distribution will be essential for the safe and timely delivery of medicines.
(Author is Head - Product Innovation, Welspun one)
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