Introduction to pharma sector

Today in India, Pharma Industry rank's first of India's science-

based industries with wide ranges of capabilities in the complex
field of drug manufacture and technology. The industry is
estimated to be worth $4.5 billion, Indian Crafts Indian Cuisine
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Calendar Shopping Tell a Friend Contact Us in the complex field of
drug manufacture and technology. The industry is estimated to be
worth $4.5 billion, which is growing at 8-9% annually. It is one of
the best and highly organized sectors. The sector specializes in
term of technology, quality and range of medicines manufactured.
The product of the industry ranges from simple headache pills to
sophisticated antibiotics and also complex cardiac compounds.

REASONS BEHIND THE SUCCESS STORY OF INDIAN PHARMA

SECTOR
Generic drugs: For those who do not know what generic drugs mean, these
drugs are comparable to the ones coming from big brands, in terms of
performance and quality; however, the prices of these drugs remain a lot
lower in comparison to the ones sold by the big brands. The efficiency of
generic drugs is also quite excellent. This is the reason why India has
turned out to be the third biggest drugs manufacturers in the world.
Export to the western world: It would not be wrong to say that the pharma
industry of India is comparable to the IT sector. Both IT sector and pharma
sector of India are doing really great. Owing to the easy availability of low
price as well as high quality manpower in India, the smaller size pharma
companies are able produce drugs at low prices. Now, a significant amount
of the drugs manufactured is exported to the United States. In fact, the
USA is the biggest market for the pharma sector of India. So, this is another
reason that has made the Indian Pharma sector a successful one.
Backing by the government: the strong support provided by the Indian
government also proves to be an encouraging factor for the pcd pharma
companies in India. At present, more than 70 percent of FDI or Foreign
Direct Investment is allowed in this sector. For this reason, it is easier for
the businessmen in India to set up a new pharma company by finding a
foreign source of funding. In addition, the patent system (Patent Act of
1970) associated with the pharma sector of India is also quite flexible and
agile. This encourages the pharma companies to develop their business in
a hassle free way.
It would not be wrong to say that the IT sector of India is also proving to be
a supporting factor for the pharma franchise companies in India. The strong
IT backup is definitely helping the pharma companies to grow their
business. So, those were some of the major reasons behind the success
story of the pharma companies in India.
Demonetization

What is Demonetization?
 Demonetization is an act of stripping a currency unit of its status as legal tender.
Demonetization means when a country bans or replace its own currency to new
currency of any value to fight against corruption and black money.

Effects of demonetization
1. Immediate impact: is expected to be negative all round.
In the short term it will be a logistical nightmare to manage the cashreplacement
in banks and smooth functioning of the banking systemb. slowdown in consumer
spending due to limited cash availabilityc. severe liquidity issues in cash based
sectors like Real Estate and Jewelleryd. GDP will decline in the next 2 quarters
due to reduction in overall spending
2. Over the next 4-5 months:Those having legitimate income will deposit it
inbanks and apart from the initial hassles associated with the banking
system,they will have nothing to worry about.However, those having
unaccounted money will face several problems asfollows:a. Those who choose
to do nothing with the money, their notes will expireworthless. Every note is a
liability of the Government (RBI) and thus notesbecoming worthless will benefit
the Government by extinguishing its liability.b. Those who declare their
unaccounted money, approx 60- 70% of the moneywill go to the Govt in the form
of taxes and penalties.c. There will be a third category who will try to launder
their money, but whichwill entail severe risks including penalties and prosecution.
However, the moneysought to be laundered will anyway enter into circulation and
remain therein.It is expected that even if 50% of the around 14 lakh crores of old
notes arelegitimate, the remaining 50% or around Rs 7 lakh crores of
unaccountedmoney will see around 60 to 80 % thereof or approx Rs 5 lakh
crores coming to

the government in the form of extinguished RBI liability (point a above) andtaxes and
penalties. This Rs 5 lakh crore is enough to take care of India's entirefiscal deficit for
one year or more.3. Overall Economic Impact:a. GDP growth is expected to be negative
for around 6 months. However,subsequent 2 years will see sharp "hockey stick" revival
in growth.b. Inflation is expected to fall sharply with fall in Real Estate prices
andtransaction costs thereof.c. Government Deficit will see a huge windfall in the next 2
years.d. Currency is expected to strengthen as inflation drops and economy gets
aboost.e. Banking System will get a boost, as around Rs 7-8 lakh crores base
money(new legal money) will enter the system, which will further create around 3-
4times more money due to re-circulation.f. Real Estate and Jewellery sectors, though
battered initially will stabilize in thenext 6 months.4. Effect on various Asset classes:a.
Bond prices will rise as interest rates drop.b. Real Estate is expected to fall by around
20 -25 % and stabilize thereafter.c. Effect on Gold is a bit uncertain and may be neutral/
negative. The lowerblack money will depress demand, but at the same time, Gold is a
hedgeagainst uncertainty and those still wanting to park black money may prefer toput it
into Gold instead of cash.d. Equity is expected to benefit the most due to three reasons.
One, there willbe a gradual shift from physical assets (real estate/ Gold) to financial
assets.

Two, the organized sector (corporates, especially listed ones) will benefit due tofewer
cash transactions. Lastly, lower inflation and interest rates will benefitlisted corporates
through lower borrowing costs, thereby increasing theirprofitability and valuations.Thus
Asset Allocation and re balancing thereof will now play an even moreimportant role,
making proper financial planning imperative.Lastly, the question may arise as to
whether the new Rs 2000 Rupee notes willcreate a black money or not. While that is
always a possibility, it should benoted that this demonetization would have created a
psychological impactespecially on large scale evaders who will definitely think twice
before takingsuch action

What will the effect of Demonetization at Pharmaceutical Sector?

First we talk about effect of Demonetization at new and upcoming Entrepreneurs in

pharmaceutical Sector. Every Pharma sales and marketing professional know how
to sell into pharmaceutical sector? A new entrepreneur faces much type of
difficulties during his start-up journey. One of main problem that are faced by them
is cash bribe donated by big pharma companies in pharma ocean. You may be best
idea for selling your product but you aren't able to stand against cash transactions
and money power. After demonetization, big pharma companies may have better
resources than new comers but all entrepreneurs will have same cash strength
irrespective to resources. It will be huge advantage for all new entrepreneurs. Not
only in Pharma sector, but also in all sectors it will be applicable

Cash is going to be out for a small period of time but it will leave long term affect
at our habits. Business is going to be easy with legal money but is going to be
dif cult with illegal money.

Cash strength of big and small pharma companies has been equalized. Big
pharma companies that were willing to bribe to grab the market have lost
their cash strength. By this, small and big pharmaceutical companies are able
to play in the markets with competitive spirits. With legal money, pharma
companies will find business easier. Due to cash flow impact, all transaction is
strictly through online and banks. This will help in earning accurate profits
and the same will be taxable. This will help in stabilizing the rates of
medicines.

Pharma companies can pay as cash invoice only Rs. 20,000. Through this it
means, if no cash, no transaction. The drug department will be more
regulated and each medicine that is brought and sold will be reflecting in the
book of accounts of the pharma company and in banks. In case if the
government wants to implement new rules and regulations on the
pharmaceutical sector, it will be easier and quickly effective. Pharma
companies will come with innovative ideas to offer better medication to
public in order to attract the market. Innovation and knowledge will be given
more important than cash and bribe.
Other Effects at Pharmaceutical Sector:

Rates of Medicines: As cash flow is going to diminish, all transaction will be done
through banks and online. There will be accurate pro t earning report at all steps.
No one can take much pro t as he has to show it in his ITR. It will indirectly cause
cheaper medicines followed by legal invoicing & billing habits.

Prescribe for Cash: Prior ethic codes in pharmaceutical market have banned benets
taken by doctor from pharmaceutical companies in form of tours, conferences, gifts
etc. Now demonetization will directly affect prescribe for cash habit. No cash, No
Prescription is going to change forever. It will not only cause loss to big pharma
companies but also for small entrepreneurs who were used to of this habit of
generating prescriptions for them.

More regulated market: Only bank transaction will regulate pharmaceutical market
at higher extent. Only twenty thousand rupees transactions are allowed to pay as
cash against invoice. If no one will have cash then who will transact in cash. Every
retailer and distributor transactions could be regulated by Government. There will
be more control of drug department at every purchase and sale you conduct. Most
of Retail and distribution transaction will be done through banks only

Implementation of New Rules and Regulations: It will become easy for

government to implementation of new rules and regulation as market is going to be
more regulated. Without bill medicine availability were major concern for
government to implement banning of illegal drugs and medicines.
Knowledge and Innovation based market: With removal of cash from industry, new
innovations in pharmaceutical sector will be initiated. There will be requirement of
new study and scienti c proofs to convince doctors to prescribe medicines.

After ban of 500 & 1000 rupees currency notes, who will be the major suffer in
pharmaceutical industry and who will be major gainer in sector?

For knowing the answers of above questions, we have to find who can have more
black money in pharmaceutical sector. Pharmaceutical sector is operated through a
chain of distribution channel such as Company C&F (carrying & forwarding agent)
Stockiest Distributor Retailer/Chemist/Pharmacies Doctor Consumer

Pharmaceutical sector is one of the most pro table business and we have a good
amount of black money possessing in lockers or bed or bags. Everyone in this
chain will have some amount of black money. How to guess who will have more
money in this circle? Companys owners will have definitely great amount of
money but they have highly paid CA and accounts, they can manage its some part
though some transactions. C&F/Distributors/Stockiest will also have money with
them. They can also adjust with some minor transactions. Now we come to
retailers/chemists/pharmacies. Small chemist earn only as much as he can survive
but big retailers earn huge money and without providing any bill to consumers.
Most of chemists dont even have sale tax number. They dont have proof of any
income. How they will manage? Thats the matter of thinking. They sell generic
medicines at mrp getting hundred to thousand times pro t. If talk about doctors,
then we have many logics to explain many things. More than 80% doctors write
prescription against cash. Now what happen to that deposited cash because you
cant exceed income from your last year income tax return.

What is the problem in depositing excessive cash in your account?

At every currency change and depositing, Income Tax Department and

Government will have strict attention. Be sure before depositing money in your rm
current account that you have enough cash in your account books. You can deposit
cash in hand in your account as per your last sale tax return. Income you have
shown in your return will be the basis of cash you can deposit in your account.

What to learn from this Demonetization by new Entrepreneurs?

Most important thing is Honesty is Best Policy. Businesses and persons who pay
tax at time and declare their incomes accurately will not face any effect. Only
persons who accumulate money by not paying tax and wrong means are only
facing problems. Also remember, Change is only true in this World. Life and
Business are also changeable. Sudden setbacks and surprises will be common
things in entrepreneur journey. Prepare yourself for all unexpected things.
IMPACT: Negative for now, neutral over the long term

Pharmaceutical product sales likely fell 8-10% month-on-month in November with

sales of medicines for acute diseases feeling the adverse impact of demonetization
due to lower patient turnout, although retail sales of medicines for chronic diseases
rose in the first fortnight, as patients stocked up medicines by using old notes at
pharmacies, which were among the few outlets accepting old banknotes. Off take
from wholesalers and stockiest was sluggish and companies have extended the
credit period by 7-21 days.

OUTLOOK: Owing to advanced buying of medicines for chronic diseases and

seasonally weak December-March period for the industry, sales of drugs are
expected to remain subdued. The impact of demonetization on the sector is likely
to be temporary as demand for drugs is largely inelastic but the growth rate in the
coming months may be slower than the 9-10% witnessed in the first 6-7 months.