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Indian Pharmaceutical IndustryPEST Analysis
Ankush Gupta MBA- Pharmtech 4th year 01/B
Soaring costs of R&D and administration are persuading drug manufacturers to move more and more of their research and clinical trials activities to the subcontinent or to establish administrative centers there. more and more governments worldwide are seeking to curb their soaring prescription drug costs through greater use of generics. while even greater opportunities may be presented by the rise of the new Indian consumer. In addition. Untapped rural sector is also highly attractive to the pharmaceutical MNCs. India's long-established position as a preferred manufacturing location for multinational drug manufacturers is quickly spreading into other areas of outsourcing activities. which recently have started to focus in India.Indian Pharmaceutical industry Indian domestic pharmaceutical industry has been growing at record levels in recent years but now has unprecedented opportunities to expand in a number of fields. In addition. These opportunities are presenting it not only in developed markets such as the U. Latin America. capitalizing on India's high levels of scientific expertise as well as low wag. There have been various collaboration between MNCs and domestic companies to work together. The Indian pharmaceutical industry industry's position as a world leader in the production of high-quality generic medicines is set to reap significant new benefits as the patents on a number of blockbuster drugs are scheduled to expire over the next few years. an area in which the country is currently underdeveloped. A large market will likely open up as the result of a projected boom in health insurance. Brazil & Russia. For the . and European Union nations but also in emerging economies with vast populations such as Africa. to utilize each other's strengths for their mutual benefit.S. New government initiatives seek to enable the majority of the population to access the life-saving drugs they need.
there are number of uncertainties about new patent regime which was introduced on January 1. Recently S&P has downgraded India’s status to BBB-. Political Factors Currently India is lacking a central leadership and power is divided into several regional parties. affordable generics. but also comprehensive marketing and distribution networks operating throughout India's vast territories. The acronym stands for the Political. The Ministry has been threatening to impose even more stringent Price Control on the industry than before. Identifying PEST influences is a useful way of summarizing the external environment in which a business operates. The new product patent regime may spell the end for the domestic sector's smaller players. There is no definite policy for development. Previously. only process patents were granted. while for others it could represent unprecedented opportunities. 2005. This is throwing many investment plan into the doldrums. a situation that led to India's current role as a world leader in the production of high quality. lowest in investment categeory. However.foreign firms. it continues to change. this includes not only the Indian companies' research and manufacturing capabilities and their much lower operational cost levels. DPCO nullifies the market . Economic. There are ideological contradictions which led to India to be weak investment designation. Pest analysis A PEST analysis is concerned with the environmental influences on a business. Social and Technological issues that could affect the strategic development of a business.
Now the pricing is determined by the Government based on the approved costs irrespective of the real costs. Government has shifted from charging the Excise Duty on the cost of manufacturing to the MRP thereby making the finished products more costly. Indian companies exploited this law and used the reverse-engineering route to invent a lot of alternate manufacturing methods. This is the biggest change the environment is going to impose on the industry. The Government puts the surpluses generated by efficient units into the price equalization account of inefficient units thereby unduly subsidizing them. Thus far an Indian company could escape paying a patent fee to the inventor of a drug by manufacturing it using a different chemical route. . providing them with subsidies that are unfair to the rest of the industry. extra-ingredient innovations and of course pricing In pharma industry there is a huge PSU segment which is chronically sick and highly inefficient. Government provides extra drawbacks to some units located in specified area. A lot of money was saved this way. The marketing effort would be now focused on logistics. From January 2005 Indian patent amendment act. On along term basis this has made practically everybody inefficient. As a results Pharma units have come up at place unsuitable for a best cost manufacturing activity. and economy of operation. communications. Just for a few extra bucks the current government has made many a life saving drugs unaffordable to the poor.. bringing in a skewed development of the industry.This Act will impact the Pharmaceutical Industry the most.forces from encouraging competitive pricing of goods dictated by the market.
This calls for higher inventory carrying costs and longer delivery time. A study had indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration facilities and store drugs under sub-optimal conditions. There is Excise Duty (State and Central Custom Duty. The incidence of Taxes is very high. It’s only during the last couple of years that good quality highways have been constructed. Therefore the transportation time is higher. License Fees. income tax. Stamp Duty and a host of other levies and charges to be paid.Economic Factors India spends a very minimal portion of its GDP on healthcare (1%). Again this affects adversely the distribution of medicines and also adds to the distribution costs. Adequate storage and transportation facilities for special drugs are lacking. This affects the quality of the drugs administered and of course adds to the costs. Royalty. The number of registered medical practitioners is low w h i c h h a v e negatively impacted pharma industry. There are only 50. Per capita income of an average Indian is low thus spending o n the healthcare takes a low priority. this adds to the cost of goods. Service Tax. and Profession Tax. India is a high interest rate regime. An Indian would visit a doctor only when there is an emergency. .000 Medical shops. All this adds to the invisible costs. On an average it amounts to no less than 40-45% of the costs. Hazardous substance (Storage & Handling) license. Therefore the cost of funds is double that in America. 00. Pollution Clearance Tax. T h i s has stunted the demand and therefore the growth of the industry.
Socio-cultural Factors Poverty and associated malnutrition dramatically exacerbate the incidence of malaria and TB. mumps and measles.000 substances for patenting. Newer medication. . molecules and active ingredients are being discovered. People don’t go in for vaccination due superstitious beliefs and any sort of ailment is considered as a curse from God for sins committed. preventable diseases that continue to play havoc in India decades after they were eradicated in other countries. Advanced research infrastructure to provide research and clinical trial activities. drinking and poor oral hygiene is adding to the healthcare problem Early child bearing affects the heath standards of women and children. The Government of India has more than 10. Smoking. Technological Factors Advanced automated machines have increased the output and reduced the cost. chickenpox. Poor sanitation and polluted water sources prematurely end the life of about 1 million children under the age of five every year. In India people prefer using household treatments handed down for generations for common ailments. Increasing pollution is adding to the heathcare problem Igno ran ce of in oculation and vaccination h as p rev ented th e erad ication of d iseases like polio. 42 % of children in India are undernourished. The use of magic/ tantrics/ /hakims is prevalent in India.
tourism and insurance. hepatitis B vaccine. Changes in temperature can impact on many industries including farming. Human insulin. an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively . With growing awareness and strict regulation to protect the environment is having an impact on manufacturing facilities ( stringent control over pollution control and waste management issues) and the general move towards more environmentally friendly products. The huge unemployment in India prevents from going fully automatic as the Government as well as the Labor Unions voice complains against such establishments There are some other factors are here which also seems important when considering impact of external factors on industry. AIDS drugs and many such molecules have given the industry a pioneering status Newer drug innovations. These areEnvironmental factors: Environmental factors include the weather and climate change across India from one place to another. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for manufacturing firms to consider. stem cell research have given a step forward. Legal factors: These are related to the legal environment in which firms operate. Advances in Bio technology. The introduction of age discrimination and disability discrimination legislation.
if the law affects the likelihood of customers buying the good or using the service).g. if new systems and procedures have to be developed) and demand (e. It will spell the end of local small domestic players . Legal changes can affect a firm's costs (e. MNCs are focusing on Indian market and involved in aggressive marketing. Recently product patent regime comes into existence before process patent was there. this causes a significant change in overall structure of Indian pharmaceutical industry.recent laws that affect an organisation's actions. MNCs are also trying to capture the market through inorganic growthby M&A activities.g. It will push Indian pharma industry into back era of 1970 when MNCs were dominating in Indian market.
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