Pharmaceutical Sector

India ranks third in the world in terms of pharmaceutical production volume and 14th in
terms of pharmaceutical production value.
By 2030, the Indian pharmaceutical sector is anticipated to be worth roughly US $ 130
billion.
In the near future, the Indian pharmaceutical industry is predicted to increase at a CAGR of
22.4 percent, and the medical device market is expected to rise by US $ 25 billion by 2025.

Porter’s Five Force Analysis:

The analysis focuses on five competing dynamics that impact an industry.

1. Bargaining Power of Buyers: Pharmaceuticals are unique among industries because the
medical patient has no pricing power. The only entities with bargaining power are
pharmacies and medical institutions that fill medical patients' prescriptions. In
developed markets, first-to-market generics and biosimilars offer considerable cost
savings to insurance companies. Patients/pharmacists cannot generally swap between
brands in branded marketplaces.
As a result, buyers have a HIGH of bargaining power.

2. Bargaining Power of Suppliers: Suppliers have very little power in the pharmaceutical
sector. The raw materials used to make medicines are often commodity items from the
chemical industry that may be obtained from a variety of sources. The majority of the
equipment used in manufacturing and research is readily accessible from a variety of
vendors. Suppliers typically supply many items to the producer, which helps to
moderate pricing on rarer materials and unique equipment. API firms with difficult-to-
manufacture products have a lot of negotiating leverage. These supply firms charge high
pricing. However, because their goods are simple to make or commoditized, the bulk of
API suppliers have little bargaining strength.
Therefore, power of suppliers as a whole is Medium.

3. Rivalry among existing competitors: With over $1 trillion in global sales, the
pharmaceutical industry can be brutal. Because intellectual property is so important,
there is big rivalry for top-level employees and prominent researchers. Even strict
nondisclosure and non-compete provisions cannot prevent competitive information from
being leaked.
Any possible new drug's public information is reviewed to see if a similar medicine may
be developed and marketed as a replacement. The industry is characterised by a pattern
of corporate mergers with larger corporations purchasing smaller enterprises with
promising research or new drugs.
As a result, the competitive competition is high.

4. Threat of Substitutes Products: The threat of substitute is greater in unbranded

marketplaces, because pharmacists can replace one generic with another. The doctor or
physician can replace one medicine for another in branded markets and for biosimilars.
 The impact of replacements varies according to the substance. A new FDA-approved
blockbuster treatment that has patent protection, solves a major health issue, and is the
first to market in its category has the potential to generate billions of dollars, but it may
necessitate a significant investment in research and development. Overall, there is a first
mover/creator advantage, but as time passes, the likelihood of a substitute grows rapidly.
As a result, the threat of replacement is moderately high.

5. Threat of New Entrants: Because of the high payoffs offered in the pharmaceutical
sector, a continual supply of new enterprises is formed. A team of scientists with a
trendy concept or recently granted patents can find venture capital groups prepared to
give start-up investment in the millions of dollars. These small firms offer no significant
danger to big pharma. In fact, when new drugs are in the early stages of development,
one of the primary exit routes for a start-up investor is to sell out to a large pharma
business.