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Indian Pharmaceutical IndustryPEST Analysis

Ankush Gupta MBA- Pharmtech 4th year 01/B

which recently have started to focus in India.S. an area in which the country is currently underdeveloped. while even greater opportunities may be presented by the rise of the new Indian consumer. These opportunities are presenting it not only in developed markets such as the U. 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. In addition. more and more governments worldwide are seeking to curb their soaring prescription drug costs through greater use of generics. and European Union nations but also in emerging economies with vast populations such as Africa. There have been various collaboration between MNCs and domestic companies to work together. Untapped rural sector is also highly attractive to the pharmaceutical MNCs. to utilize each other's strengths for their mutual benefit. India's long-established position as a preferred manufacturing location for multinational drug manufacturers is quickly spreading into other areas of outsourcing activities. New government initiatives seek to enable the majority of the population to access the life-saving drugs they need. Brazil & Russia. 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. For the . Latin America. capitalizing on India's high levels of scientific expertise as well as low wag. In addition.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. A large market will likely open up as the result of a projected boom in health insurance.

while for others it could represent unprecedented opportunities. there are number of uncertainties about new patent regime which was introduced on January 1. This is throwing many investment plan into the doldrums. Pest analysis A PEST analysis is concerned with the environmental influences on a business. DPCO nullifies the market . Identifying PEST influences is a useful way of summarizing the external environment in which a business operates. this includes not only the Indian companies' research and manufacturing capabilities and their much lower operational cost levels. Economic. only process patents were granted. However. Previously. There are ideological contradictions which led to India to be weak investment designation. 2005. The acronym stands for the Political. but also comprehensive marketing and distribution networks operating throughout India's vast territories. Recently S&P has downgraded India’s status to BBB-. Social and Technological issues that could affect the strategic development of a business. lowest in investment categeory. it continues to change. There is no definite policy for development. Political Factors  Currently India is lacking a central leadership and power is divided into several regional parties. The new product patent regime may spell the end for the domestic sector's smaller players. affordable generics.foreign firms. a situation that led to India's current role as a world leader in the production of high quality.  The Ministry has been threatening to impose even more stringent Price Control on the industry than before.

extra-ingredient innovations and of course pricing  In pharma industry there is a huge PSU segment which is chronically sick and highly inefficient. 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. The marketing effort would be now focused on logistics. 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. A lot of money was saved this way. Indian companies exploited this law and used the reverse-engineering route to invent a lot of alternate manufacturing methods. The Government puts the surpluses generated by efficient units into the price equalization account of inefficient units thereby unduly subsidizing them.forces from encouraging competitive pricing of goods dictated by the market.  From January 2005 Indian patent amendment act. . Now the pricing is determined by the Government based on the approved costs irrespective of the real costs. providing them with subsidies that are unfair to the rest of the industry. bringing in a skewed development of the industry. Government has shifted from charging the Excise Duty on the cost of manufacturing to the MRP thereby making the finished products more costly. Just for a few extra bucks the current government has made many a life saving drugs unaffordable to the poor.  Government provides extra drawbacks to some units located in specified area.This Act will impact the Pharmaceutical Industry the most. communications. This is the biggest change the environment is going to impose on the industry.

and Profession Tax. The number of registered medical practitioners is low w h i c h h a v e negatively impacted pharma industry. License Fees. Hazardous substance (Storage & Handling) license. 00. There is Excise Duty (State and Central Custom Duty. All this adds to the invisible costs. income tax.  India is a high interest rate regime.000 Medical shops. It’s only during the last couple of years that good quality highways have been constructed. On an average it amounts to no less than 40-45% of the costs. this adds to the cost of goods.  The incidence of Taxes is very high. Pollution Clearance Tax. Royalty. An Indian would visit a doctor only when there is an emergency. Service Tax. .  Per capita income of an average Indian is low thus spending o n the healthcare takes a low priority.  There are only 50. Stamp Duty and a host of other levies and charges to be paid.  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. Again this affects adversely the distribution of medicines and also adds to the distribution costs. Therefore the transportation time is higher.Economic Factors  India spends a very minimal portion of its GDP on healthcare (1%). T h i s has stunted the demand and therefore the growth of the industry. A study had indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration facilities and store drugs under sub-optimal conditions. This calls for higher inventory carrying costs and longer delivery time. Therefore the cost of funds is double that in America.

drinking and poor oral hygiene is adding to the healthcare problem  Early child bearing affects the heath standards of women and children.Socio-cultural Factors  Poverty and associated malnutrition dramatically exacerbate the incidence of malaria and TB.000 substances for patenting. molecules and active ingredients are being discovered. The use of magic/ tantrics/ /hakims is prevalent in India. mumps and measles.  42 % of children in India are undernourished. .  Advanced research infrastructure to provide research and clinical trial activities.  Newer medication.  In India people prefer using household treatments handed down for generations for common ailments. chickenpox. The Government of India has more than 10.  Smoking.  Poor sanitation and polluted water sources prematurely end the life of about 1 million children under the age of five every year.  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. Technological Factors  Advanced automated machines have increased the output and reduced the cost. preventable diseases that continue to play havoc in India decades after they were eradicated in other countries.  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.

These areEnvironmental factors:  Environmental factors include the weather and climate change across India from one place to another.  Human insulin.  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 introduction of age discrimination and disability discrimination legislation. Advances in Bio technology. AIDS drugs and many such molecules have given the industry a pioneering status  Newer drug innovations. stem cell research have given a step forward.  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. an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively . hepatitis B vaccine.  Changes in temperature can impact on many industries including farming. 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. tourism and insurance. Legal factors:  These are related to the legal environment in which firms operate.

g.recent laws that affect an organisation's actions.  Recently product patent regime comes into existence before process patent was there. Legal changes can affect a firm's costs (e.g. if the law affects the likelihood of customers buying the good or using the service). this causes a significant change in overall structure of Indian pharmaceutical industry. MNCs are focusing on Indian market and involved in aggressive marketing. It will spell the end of local small domestic players . if new systems and procedures have to be developed) and demand (e. MNCs are also trying to capture the market through inorganic growthby M&A activities. It will push Indian pharma industry into back era of 1970 when MNCs were dominating in Indian market.