Indian Pharmaceutical Industry

Report Submitted on: September 04, 2010

Submitted By: PGP/14/270 Chhavi Anand PGP/14/277 Kritika Gupta PGP/14/286 Pooja Gandhi PGP/14/289 Preetha Subramanian

Indian Pharmaceutical Industry
Contents
EXECUTIVE SUMMARY ......................................................................................................... 3 GLOBAL SCENARIO OF PHARMACEUTICAL INDUSTRY.......................................................... 4 HIGH SALES GROWTH ...................................................................................................... 4 STRONG EMPHASIS ON R&D............................................................................................. 5 GEOGRAPHICAL PERFORMANCE OF THE GLOBAL PHARMACEUTICAL INDUSTRY............... 5 INDIAN SCENARIO ................................................................................................................ 7 CHANGING DISEASE PATTERNS ........................................................................................ 8 INSURANCE SECTOR ......................................................................................................... 8 EMERGING MARKETS ......................................................................................................... 10 KEY SEGMENTS OF INDIAN PHARMACEUTICAL INDUSTRY .................................................. 11 GENERIC DRUGS: ........................................................................................................... 11 CRAMS ......................................................................................................................... 11 VACCINES ...................................................................................................................... 12 API MARKET .................................................................................................................. 12 THE OTC MARKET ......................................................................................................... 13 BIOSIMILARS .................................................................................................................. 14 REGULATORY LAWS AND POLICIES AFFECTING THE PHARMACEUTICAL INDUSTRY............ 16 REGULATORY FRAMEWORK OF INDIA ................................................................................ 17
Indian Pharmaceutical Industry | 9/4/2010

OVERVIEW ..................................................................................................................... 17 THE DRUGS PRICE CONTROL ORDER (DPCO), 1995...................................................... 17 PRICING REGULATIONS .................................................................................................. 17 POST-2005 PERIOD ......................................................................................................... 18 TARIFF STRUCTURE ........................................................................................................ 18 SALES TAX ..................................................................................................................... 18 OTHER POLICIES AFFECTING PHARMACEUTICAL SECTOR ............................................... 18 DRUG REGULATORY ENVIRONMENT IN INDIA IN TRANSITION ......................................... 19 EXISTING DRUG REGULATORY SYSTEM ....................................................................... 19 PROPOSED NEW SYSTEM ............................................................................................. 19 CDA – INDIA‟S NEW DRUG REGULATOR ......................................................................... 20 KEY PLAYERS IN THE INDIAN PHARMACEUTICAL INDUSTRY ............................................. 21

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KEY TRENDS ...................................................................................................................... 25 CHANGING GROWTH FUNDAMENTALS OF DOMESTIC MARKET ........................................ 25 EXPANSION OF PRIVATE SECTOR HEALTHCARE DRIVING ACCESSIBILITY .................... 25 INCREASING PENETRATION OF MEDICAL INSURANCE .................................................. 26 RISING DISPOSABLE INCOME TO DRIVE DRUG CONSUMPTION .......................................... 26 FOCUS OF INDIAN COMPANIES SHIFTING FROM THE US .................................................. 26 INCREASING QUEST FOR NEW CHEMICAL ENTITIES (NCE) ............................................ 26 BIG PHARMA COMPANIES JOIN OUTSOURCING QUEUE ..................................................... 27 INNOVATORS- JOINING HANDS WITH GENERIC COMPANIES ............................................. 27 KEY CONCERNS ................................................................................................................. 29 PRICING PRESSURE – INTERRUPTING THE GROWTH OF KEY ECONOMIES .......................... 29 SWOT ANALYSIS .............................................................................................................. 30 PORTER‟S FIVE FORCE ANALYSIS ....................................................................................... 31 REFERENCES ...................................................................................................................... 32

Indian Pharmaceutical Industry | 9/4/2010

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The mounting ageing population. The alliance and partnerships model will help Indian companies to foray into new markets and geographies as it would help them to capitalize on the on the latter company‟s knowledge as well as understanding of the local market and technical know-how. Shift from process patenting to product patenting regime offers huge opportunity for the pharmaceutical MNCs as it will not only position India as an important market to launch their block buster drugs. A similar trend has been observed in the Indian pharmaceutical sector as well. The Indian pharmaceutical industry is the 3rd largest in the world in terms of volume and 14th in terms of value. but also as a strategic destination for conducting clinical trials. An especially important indicator of its growth is that the industry is expected to double in the next two years. increase in income and a significant demographic shift are expected to be the driving factors for the growth of this sector in the coming decade and making its presence felt globally. The increasing cost dried up research pipelines and increasing pricing pressures have led the companies to outsource the R&D activities.Executive Summary There has been a quantum leap in the global pharmaceutical sector in the last ten years. The increasing outsourcing in the pharmaceutical industry has led the Indian players focus on outsourcing opportunities from their international counterparts. alliances and agreement with big pharmaceutical MNCs. Indian Pharmaceutical Industry | 9/4/2010 3 . The Indian generic players are making their presence felt across regulated and semi regulated market through merger & acquisition.

Johnson & Johnson and Bayer have revenues from sales of pharmaceutical products that are lower than 50% of their total sales. Geographical headquarters of major pharmaceutical companies are approximately evenly distributed between the U. The majority of the largest pharmaceutical companies are not diversified. they still have pharmaceutical divisions as the core of their business that provide more than 50% of their revenues. such as Mexico. showed a 26% sales increase in 2004. At the same time. the United States. many life sciences consulting firms are pointing out. market. the China. the global pharmaceutical market is expected to reach upwards to 1045 Billion in 2012. Other products manufactured by these companies usually include medical devices. Brazil. it could hurt the growth of the North American pharmaceutical market.Global Scenario of Pharmaceutical Industry With a Compound Annual Growth Rate (CAGR) growing at almost 8% per year. nutritional products. followed by Thailand (16% growth) and Egypt (15%). For example. 4 . market alone accounts for about 47% of world sales. Argentina and Venezuela also show much faster sales growth rate than average worldwide. all “Big Pharma” companies to a significant extent concentrate their resources on these markets. the Asia Pacific market like India and China. and Western Europe with only one Asian company in the list. and the U. Coupled with the growing prevalence of generic drugs all over the world. as also the recent growth in Latin American markets. these factors may challenge the growth of the global marketplace in times to come. Not surprisingly. The growth is credited to previously untapped markets. They are either concentrated exclusively on pharmaceutical products (Eli Lilly and AstraZeneca are good examples with virtually 100% of their revenues coming from sales of pharmaceutical products) or. as being key players in the pharmaceutical industry. such as Mexico and Brazil. expanding health coverage. and new developments in drug developing technology.S. Some of these factors include growing market size. although the share of world pharmaceutical sales in developing countries at this point of time is much lower. Therefore. as being one of the most lucrative pharmaceutical markets of the future. Only two out of these 15 major pharmaceutical companies. favorable government policies. although they develop and manufacture other health care products. just to name a few However. as well as dwindling drug pipelines. Some Latin American countries. If the CAGR continues to grow at this pace.S.S. over the next 20 years. that as patents held to key drugs begin to expire in the next ten years. they show much faster growth rate than developed countries do. especially on the U. Indian Pharmaceutical Industry | 9/4/2010 High Sales Growth According to IMS Health as restated in the 2004 AstraZeneca Annual Report. the European Union and Japan comprise the three major pharmaceutical markets which together represent 88% of world sales. 9th largest world market. Many pharmaceutical consulting firms are suggesting many other global trends that are factoring into this large boost in the pharmaceutical industry. the pharmaceutical industry is one of the fastest growing industries in the global marketplace. consumer healthcare products and products for animal health. and the development of less blockbuster drugs and less and less economic cooperation.

.  Access to healthcare: Moreover. Fast growing economies in Asia. The pharmaceutical industry showed high sales growth rates in the recent past. a significant portion of elderly population does not receive proper treatment. and a number of factors suggest that this trend will continue in the future. Geographical performance of the global Pharmaceutical Industry 5 .S. growing proportion of elderly people promises further growth of demand for healthcare products. these countries also have a significant potential for the pharmaceutical industry in the future. even in the U. especially regarding patent protection issues. only about one in ten thousand chemical compounds discovered by pharmaceutical industry researchers proves to be both medically effective and safe enough to become an approved medicine. thus increasing pharmaceutical sales. For example. including those in the health care industry. South America and Central & Eastern Europe suggest an increasing solvency of population and make these markets more and more attractive for “Big Pharma” companies. according to “Research and Development in Industry: 2001” report of the National Science Foundation. life expectancy in the developed countries has been steadily growing. As a result. will inevitably result in growing pharmaceutical sales. On average. Further reforms of legislation systems in the countries of these regions. As it is expected. it takes about 10-15 years.  Growing Economies Although developing countries at the moment have a small portion of world pharmaceutical sales. Strong emphasis on R&D Indian Pharmaceutical Industry | 9/4/2010 One of the distinctive characteristics of the “Big Pharma” companies is a very high level of investments in research and development.developing countries contain a significant potential for further expansion of pharmaceutical industry in the future. in 2001 the pharmaceutical industry had one of the highest R&D expenditures as percentage of net sales. the Medicare Prescription Drug Improvement and Modernization Act starting from the beginning of 2006 will increase access of senior citizens to the prescription drug coverage. only about one third of the population who requires medical therapy for high cholesterol is actually receiving adequate treatment.  Increased life expectancy: Advancements in science and technology. and millions of dollars to develop a new medicine. and about half of all new medicines fail in the late stages of clinical trials. according to various studies. Not surprisingly. According to industry statistics.

Indian companies had more than 260 marketing authorisations approved by the UK‟s Medicines and Healthcare Regulatory Agency (MHRA) for a wide range of products. Ranbaxy. Reddy‟s received 54. Europe: Beyond the UK and Germany. is the US. In the first quarter of 2010. Germany. to reach 132 in 2008. the number of ANDAs approved increased dramatically. In 2005. In 2009. UK: Over 80% of prescriptions in the mature UK market are written generically. A number of Indian companies are either monitoring them from the sidelines or have already identified growth potential. Between January 2009 and January 2010. a further 20 were approved. Source: ICRA Report. the number increased to 52 and subsequently increased year-on-year. During this period. significant European markets have been slow to adopt a vigorous generics drugs policy. the total number of ANDA approvals was 125. pressure on governments to cut costs in the face of burgeoning drugs bills and economic recession. Italy and Spain.USA: The largest generic market and the most sought after target for Indian companies involved in the generic business. The UK has always been a focus for Indian companies with 9 companies running 11 manufacturing sites. February 2010 Indian Pharmaceutical Industry | 9/4/2010 6 . are seeing countries such as France. Italy and Spain exploring the increased use of generics. for example is established in France. and. Ranbaxy received 55 approvals. Aurobindo received 39. Lupin received 25. Dr. As more companies gained the expertise to file for FDA approval. However.

The profitability indicators of leading formulations companies have remained fairly stable over the past six quarters except for marginal fluctuation during October-March 2009. In spite of competition. However. many of the innovator companies are now aggressively targeting this segment. rising disposable income levels and growing penetration of health insurance besides regulatory reforms. However. The „organized‟ sector consists of 250-300 companies. which was largely on account of spike in input material prices and foreign currency fluctuations during the same period. the total sector is estimated at nearly 20. profitability in the domestic branded business remains healthy supported by new product launches.000 pharmaceutical firms.000 distributors and 700. with the rest being contributed by a combination of volume and price increase. More significant is the fact that it is expected to grow by over 100% in next two years according to an IBEF report to become a USD 20 billion market by 2015. the leading players continue to retain their market share owing to their strong distribution reach.000 retailers involved. some of which are extremely small. While the domestic branded formulations business continues to offer high gross margin. investments on branding.Indian Scenario The Indian pharmaceutical industry is the 3rd largest in the world in terms of volume and 14th in terms of value. 60.000 to 800.000 businesses. Approximately 75 percent of India's demand for medicines is met by local manufacturing. and are expected to grow much faster than the rest of the country. which is likely to increase the competitive pressures. increasing presence in chronic segments and above all an efficient operating cost structure. Indian Pharmaceutical Industry | 9/4/2010 7 . The current industry CAGR is pegged at 13% driven by increasing expenditure of healthcare. Tier II cities (with population less than 1 lakh) and rural areas currently account for 40% of the market. There are over 20. changing disease profile. the top 10 companies of which control about 30% of the market and the rest control 70% of the market. New product introductions contribute to around 6-8% of the total growth. strong field force and new product launches.

Insurance Sector India currently spends 4. Besides that. putting the nation among the 20 lowest-spending countries worldwide. CNS and oncology have been growing at fairly strong rates owing to changing lifestyle patterns and have been the key drivers of growth.9 percent. Amongst therapeutic areas. the population is ageing. for example. up from about 91 million in 2008. By 2012. with more than 41 million people suffering from the disease. chronic segments such as anti-diabetics. Thanks to greater affluence and better hygiene. Conversely. India is experiencing epidemiological changes. disorders of the central nervous system and other chronic diseases will account for 64% of total sales. an estimated 199 million Indians will be 60 or older. by 2028. while the poorest 20 percent of the population has double the mortality Indian Pharmaceutical Industry | 9/4/2010 8 . up from 50% in 2001. CVS. they are expected to account for just 36%.Changing Disease Patterns It‟s also likely that India will require different types of drugs in the future. anti-infective and gastrointestinal drugs and vitamins accounted for 50% of the domestic market. it has the largest pool of diabetic patients. drugs for cardio-vascular problems. but public spending accounts for just 0. Like almost every other emerging economy. In 2001. The pattern of demand for medicines is shifting accordingly.5 to 5.0 percent of its GDP on health care. The balance of spending is also iniquitous.

000 people in India have none.7 percent social. A 40 percent compound annual growth rate (CAGR) is forecast for the health insurance sector over the coming years. making it a significant driver of the domestic pharmaceutical industry. 1. The remaining 6 percent of spending is provided by insurance -3. since then.7 percent private insurance.rates. The health insurance market was opened up to the private sector in 2000 and. Ninety-four percent of all private health spending is out of pocket. the latter group receives about three rupees for every one rupee spent on the former.000. growth has been fast. an estimated 800. mostly at the time of the incident. Just 15 percent of the population has some form of insurance. and more than 40 percent of hospitalized people borrow money or sell assets in order to cover their expenses. malnutrition and fertility of the richest quintile. Two-thirds of what the government spends on health care goes to secondary and tertiary care rather than basic services. Indian Pharmaceutical Industry | 9/4/2010 9 .6 percent employer-sponsored and 0.

Australia is not yet a major market for generics. In 2008. however. but price competition tends to be muted for off-patent drugs. Indian pharmaceutical exports to Brazil were valued at around US$166 million per year and made up a significant part of all trade between India and Latin America. a number of which have gained approval from the Therapeutic Goods Administration for their manufacturing facilities and a range of products. pharmacy sales of generic medicines increased by 24. According to the Brazilian generic industry association. Indian companies have been present in the Brazilian market for several years. In value terms.5 billion (US$2. The market is beginning to attract Indian companies.4% of the pharmacy sector by volume.Emerging Markets Brazil: Brazil is perhaps the most notable emerging generic market in recent years. they are up to 50% cheaper. A number of leading drugs are due to lose patent protection. 10 Indian Pharmaceutical Industry | 9/4/2010 .0% to R$4. Pró-Genéricos. currently looking at ways to boost generic consumption in an effort to rein in the overall drugs bill.0 million units. prices of generic medicines have to be at least 35% cheaper than prices of original medicines but. generic medicines represented 19. increasing 19. The government is.0% over the previous year to 330. in practice.2 billion). In 2009. Australia: Due to low prices of branded products.

availability of skilled scientific and engineering personnel and the capability to produce raw materials for a wide range of drugs from the basic stage. The European and African countries have been added as new destinations for exports. The MNC pharmaceutical and biotech companies spend significant portion of their R&D budgets on the outsourcing services offered by CRO (Contract Research Organization) industry. India tops the world in exporting generic medicines worth US$ 11 billion and currently the Indian pharmaceutical industry is one of the world‟s largest and most developed. The US and East Asian countries will remain a vital importing destinations for Indian generic products. with the advantage of cost competitiveness. Minister for Trade and Industry. demand for generic drugs has significantly soared due to the low cost factor. around US$70 billion worth of drugs are expected to go off patent in the US over the next three years. CRAMs Indian Pharmaceutical Industry | 9/4/2010 India is a major destination for contract research and manufacturing services. Singapore. API manufacturing. India is conveniently placed. low cost generic drugs. the exports are expected to pick up pace as healthcare reform in the US and other countries will inflate demand for generic drugs. with a number of USFDA-approved plants operating in the country. India now produces more than 20% of the world‟s generics and has a significant market share in the US$80 billion world Generic market and is expected to increase it to 50% by 2010. Moreover. which was approximately $ 15 billion in 2007 and is expected to grow at 15% over the next few years to touch US$20 billion by 2010. which seeks to fast-track the registration process for Indian generic medicines in Singapore. In future. clinical research and basic research are the major facilities currently offered by domestic service providers.Key segments of Indian pharmaceutical industry Generic Drugs: The Indian pharmaceutical industry is a leading producer of high quality. and India is wellpositioned to take a substantial share of the resulting new generics markets. Mr. ability and experience in reverse engineering. have signed a 'Special Scheme for Registration of Generic Medicinal Products from India' in May 2010. The pharmaceutical outsourcing in India is expected to grow to around US$7 billion by 2013. The generic drugs market in India is projected to grow at a CAGR of around 16. India‟s generic houses are now entering into strategic alliances with global pharmaceutical companies to strengthen their generic portfolio and jointly market these drugs globally. owing to its low costs. During 2004-08 the segment has grown at a remarkable rate of 39%. Union Minister of Commerce and Industry and Lim Hng Kiang.3% during FY 2011-FY 2013. Anand Sharma. The growth in this sector is mainly due to the acquisitions and 11 . Crams is the fast growing segment in Indian pharmaceutical sector. (as drug development and manufacturing can be done in India at 40% of the expenses in the US and Europe) skilled manpower and manufacturing capability. After the recession. as global firms seek to leverage advantages related to cost and quality the country possess.

growing at a compounded annual growth rate (CAGR) of 15%. The key API producers include Ranbaxy. satisfying over 90 percent of Indian domestic demand. Cadila Healthcare and Matrix. The API output value of India was $4. API market Indian Pharmaceutical Industry | 9/4/2010 India plays an important part in the global API market as it ranks fourth in the world in terms of API output. The Serum Institute of India is a leading player which produces and supplies low-cost. 12 .75 billion in 2007.1 billion in 2007 and the sector is set to grow at a CAGR of 24. Indian Crams segment is divided into contract research and contract manufacturing.global outsourcing. It also meets around 40-70% of the World Health Organization (WHO) demand for the DPT and the BCG vaccine and almost 90% of its demand for the measles vaccine. India is one of the largest vaccine producers in the world.75 billion in 2012 from $3. Other Services (5%) Contract research (29%) Contract Manufacturing(66%) Vaccines Vaccines are another prominent area of growth. The API industry in India meets around 70 per cent of the country's demand for bulk drugs. with many new vaccines set to be launched in the next five years. lifesaving vaccines for children and adults. The API export of India will enjoy a rapid growth in the coming years and will increase to $12.000 reagent factories.000 types of reagents. Globally. Cipla. Pharmaceutical companies such as Dr Reddy‟s. The vaccines segment was around US$780 million in March 2008. India currently exports vaccines to about 150 countries.000 API factories and 5. Wockhardt and Sun Pharmaceuticals are also producing APIs. These companies produce more than 400 types of APIs and around 10. drug intermediates & chemicals and is registering a growth of around 18-19 per cent annually. Dr Reddy‟s.07 per cent from 2008 to 2020. the outsourcing trends are expected to grow further with the contract manufacturing market size at US$ 45 billion (US$ 29 billion from Dosage Forms and US$ 16 billion from APIs) whereas the Contract research market size is estimated to be at ~ US$ 38 billion (US$ 11 billion from Drug Discovery and US$ 27 billion from Clinical Research). India currently has about 3.

Some of the leading OTC brands in India are registered as „Ayurvedic Medicines‟ because of their plant-based natural active ingredients and there being no price controls on „Ayurvedic Medicines‟. Indian consumers are also placing more emphasis on prevention and wellness. Even though the API units are doing well. The factors that favor India‟s pharmaceutical industry in general include stability of supply. high quality of products and firm governmental policies. Globally. India and China have to work closely for mutual benefits through partnerships and collaborative approaches. Some pharmaceutical players with prominent OTC franchises include Johnson & Johnson and GlaxoSmithKline. 13 Indian Pharmaceutical Industry | 9/4/2010 . This sustainable growth is driven by strong socio-economic drivers.Several factors make India an attractive alternative for sourcing active ingredients. The OTC market The global OTC market over the past eight years has grown rapidly and is expected to continue. In 2009. greater penetration of OTC drugs in rural areas.000 crore Indian pharmaceutical industry turnover. OTC or non-prescription medicines in India continue to grow faster than the global average of approximately 5% despite being perceived as less effective than prescription drugs. which should contribute to continued increases in sales of OTC vitamins and minerals. India ranks 11th in terms of the OTC market size globally. The low-cost innovations and manufacturing coupled with skilled manpower and cutting-edge R&D has helped in the growth of Indian API market. of the total Rs 78. Moreover Indian firms are able to tackle complex synthesis in relatively shorter periods with cost-efficiency. around Rs 18000 crore comes from exports.8 billion with an annual growth rate of 18%. the Indian pharmaceutical industry ranks third in terms of volume and 14th in terms of value. the Indian OTC market was estimated to be worth $1. Pfizer and Merck & Co. The popularity of Ayurvedic therapies should also contribute to the sales of related OTC formulations. they are looking for assistance from the government in terms of environmental protection norms. the widespread prevalence of untreated common ailments. The size of the pharmaceutical chemicals industry is estimated to be around Rs 35000 crore. emergency contraceptive pills and nutritional supplements. The manufacturing of intermediates requires large-scale chemical activities which goes against the current environment norms. Currently. Out of the total API business. increasing medical costs. rising consumer confidence in the ability of OTC drugs to control common ailments and increased advertising by manufacturers. Profitable OTC drugs for some of India‟s largest pharmaceutical companies include artificial sweeteners. At present India relies on China for almost 60 to 70 per cent of its intermediate needs despite the competition between the two countries in API sector. primary drivers being the historically low per capita spend on OTC.

Pfizer has launched Listerine. The 14 Indian Pharmaceutical Industry | 9/4/2010 . The global biosimilars market is expected to be worth $19. Caladryl and Benylin in India. The early commercialization and high absorption rate of biosimilars products has made Asia the dominant market in 2008 occupying 34. who are actively involved in the space. In a short term. OTC proprietary drugs are regulated by the Drugs and Cosmetics Act and the Drugs and Cosmetics Rules.Currently about half of OTC sales come from chemists.1% share of the global biosimilars product market. Novartis India launched Calcium Sandoz as an OTC supplement in 2000 and has now come out with Otrivin nasal drops in a spray form. India may also serve as a manufacturing location for OTC products destined for other markets. Counterfeits of popular OTC drugs are however a major issue. Gradual expiry of patents will create significant market opportunities for developers through to 2016. In India biosimilars spell big opportunities especially for companies like Dr Reddy‟s Labs.g. Biocon. and consumers can buy them without a doctor‟s prescription. Between 2012-19. Biosimilars The global pharmaceutical market is seeing rapid increase in penetration of biologic drugs.1% from 2009 to 2014. biosimilar market growth will be driven by drug classes including erythropoietin. These drugs accounted for more than 10% of the global pharmaceutical market‟s revenues in 2007. e. Pharmaceutical companies are also targeting post offices to sell OTC drugs in rural India. human growth hormone (HGH) and insulin. filgrastim. Ranbaxy. the market will see a patent expiry of a whopping $60 billion of biotech drugs. fall under the current DPCO price control. while grocery stores and general stores account for over a third of the sales. India‟s regulatory framework permits advertising for OTC products. Some global pharmaceutical companies are already launching OTC products in India or buying OTC products.4 billion by 2014. Only a few OTC active ingredients. growing at a CAGR of 89. especially in areas where there are no pharmacies. up from almost nil a decade ago. acetylsalicylic acid and ephedrine and its salts. Shantha Biotech and Intas Biopharmaceuticals. Benadryl. This move could substantially increase the access of OTC drugs. which were later sold to Johnson and Johnson. In the future.

Also there seem to be signs of acceptance of locally manufactured biosimilars among healthcare professionals within the country. pre-1995 product patents were exempted thus granting some biologicals.Indian biosimilars market in 2008 was about $200 million. The interest in biosimilars has been spurred on by multiple factors. Firstly.60 million. Secondly. allowing independence in price setting. under the Trade Related Intellectual Property Rights (TRIPS) agreement. The current size of the Indian oncology market is about $18. biotechnology drugs (besides insulin) are free from the government‟s price control act. which is expected to be over about $50 million by the end of 2010. the rights to continue manufacturing. 15 Indian Pharmaceutical Industry | 9/4/2010 . with an expectation to reach about $580 million by 2012. The upcoming oncology market is one of the prime targeted areas for many companies.

1970 Product Patent. 1995 . 2005 Source: Adapted from Dun & Bradstreet (D&B) 2007 16 Indian Pharmaceutical Industry | 9/4/2010 Essential Commodities Act. 1940 Schedule M Patent Act.1955 DPCO.Regulatory Laws and policies affecting the Pharmaceutical industry Regulatory Control of Pharmaceutical sector Major Pharmaceutical policies Drug Policy 1986 Pharmaceutical Policy 2002 National Pharmaceuticals policy 2006 Quality Control Price Control IPR Control On prices On margin Bulk Drugs GMP Issues Formulations Amended Patent Issues Governing Policies Drugs and Cosmetics Act.

Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post tax return of 14 per cent on net worth or a 22 percent return on capital employed. The country introduced product patents from 2005 onwards. dealers and Government along with NPPA official price notification reference. NPPA fixes the ceiling price of scheduled drugs. Introduction of product patents without relaxing price controls will hurt the competitiveness of the Indian companies in the long term. Now only 74 out of 500 commonly used bulk drugs are under statutory price control. Packages of formulations (the outer container) must bear the retail price (whether fixed by NPPA or not). Manufacturer must file a price list of all the prices fixed with the State Drug Controllers. 17 . A foreign pharmaceutical player can enter Indian market through following ways:  Importing Drugs In To India  Imports constitute only 5 per cent of the total market.  Entry through joint venture/subsidiary  Foreign company is allowed to invest up to 100 per cent in any new or existing pharmaceuticals company in India under automatic approval route. method of implementing prices fixed by Government and penalties for contravening provisions among other things. FDI limit through automatic route has been raised from 51 per cent to 74 per cent in March 2000 and further to 100 per cent in May 2001. India is a signatory to GATT and is committed to the implementation of TRIPS. Indian Pharmaceutical Industry | 9/4/2010   Pricing Regulations      Price Approval is given by NPPA (National Pharmaceutical Pricing Authority). procedures for determining drug prices.  Foreign companies cannot promote subsidiaries for marketing their products in India.Regulatory Framework of India Overview      Over three decades ago. In such cases. RBI needs to be informed only after the capital has been remitted into India. Indian government introduced price controls with the objective of making medicines affordable. 1995  The order lists price controlled drugs. The Drugs Price Control Order (DPCO).

an international treaty mandating minimum standards for trade and intellectual property protection. which had hitherto been levied at 16 per cent. Indian residents are permitted to apply for patent abroad without permission of the Controller. 2000.    Tariff Structure      Life-saving drugs are allowed at zero tariffs. intermediaries and formulation imports attract a basic customs duty of per cent To encourage research. for the first time. patent protection in India for pharmaceutical products. EMR will not be given for items based on Indian system of medicine (Ayurvedic or Unani) or if the items are already in the public domain.Post-2005 Period  In 2005. Patents of outside companies will be protected through EMR in India. Sales Tax   The rate of sales tax is same for both Indian and imported items. These amendments allowed. not for the drug itself. Bulk drug. India amended its patent laws to comply with the World Trade Organization‟s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS). The earlier law provided patent protection only for the process of making the drug. companies were granted Exclusive Marketing Rights (EMRs) for their products that have been patented in any other WTO signatory country. Basic customs tariff rate now ranges from 0 to 40 per cent plus additional duty of 2 per cent. January 1. Business Monitor International 18 . Sales and local taxes vary from 4 to 10 per cent of the price depending on item and location Indian Pharmaceutical Industry | 9/4/2010 Other Policies affecting Pharmaceutical sector     For licensable drugs and pharmaceuticals manufactured by recombinant DNA technology and specific cell/tissue targeted formulations. FDI needs prior government approvals The industry is undergoing consolidation due to recent legislation and policy updates: Manufacturing unit should adhere to good manufacturing practices (GMP) outlined in Schedule M of the Drugs and Cosmetics Act Manufacturing units are required to comply with the WHO and international standards of production Source: “India Pharmaceuticals and Healthcare Report Q2 2008”. the excise duty on drugs and materials for clinical trials has been exempt from excise duty.

Drug regulatory environment in India in transition Existing    drug regulatory system India has a bifurcated drug regulatory system. Proposed new system  The Central Cabinet approved the formation of the Central Drug Authority (CDA) in January 2007  Proposed organizational structure of the CDA would be analogous to the US FDA  It would be a strong. and enforcement and improvement in drug regulations  Efficiency and efficacy of drug administration is expected to be much after this transition 19 Indian Pharmaceutical Industry | 9/4/2010 . empowered. independent and professionally managed body  It is expected to facilitate up-gradation of the national drugs regulator. well equipped. uniformity of licensing. Regulatory functions are divided between the Centre and state authorities Existing infrastructure at the Centre and the state is inadequate to perform the assigned functions of drug administration with efficiency and speed.

CDA – India’s new drug regulator Existing Central Government Drug Controller General India (expert committees) Responsibilities:  Broad policy issues of Proposed Central Drug Administration  Three joint drug controllers  Two deputy drug controllers  Six Assistant drug controllers  50 drug inspectors  5 technical experts  1 administrative officer  1 accounts officer Responsibilities:  Regulatory affairs and environment  New drugs and clinical trials  Biological and biotechnological products  Medical devices and diagnostics  Imports  Organizational services  Training and empowerment  Quality control affairs  Legal and consumer affairs State Government State Drug Authorities (State drug controllers and food and drug inspectors) Responsibilities:  Licensing and monitoring manufacturing  Legal cell  Spurious Drug monitoring  Pharmacies 20 Indian Pharmaceutical Industry | 9/4/2010 .

Jagsonpal Pharma. Some of the major Indian private companies are Alembic Chemicals. Lyka Labs. Ranbaxy Laboratories. Sales revenue/ Turnover Indian Pharmaceutical Industry | 9/4/2010 Future prospects 21 . leveraging its strong brand building skills. Cadila Healthcare. Orchid Chemical and Pharmaceuticals. Pfizer Limited.Key Players in the Indian Pharmaceutical Industry Competition is mainly from the domestic manufacturers and imports from China because of the low manufacturing cost. Kopran. Piramal Healthcare. With the new patent regulations the industry expects to see a major structural shift with the entry of foreign pharmaceutical manufacturers. Burrough-Wellcome. The foreign companies in India include Abott India. Bengal Immunity Limited and Smith Stanistreet Pharmaceuticals Limited. Overseas markets accounted for around 80% of global sales. Aventis Pharma India. Company Name Company Profile Ranbaxy Ranbaxy is among the top 100 pharmaceuticals in the world and that it is the 15th fastest growing company. Hindustan Antibiotics Limited. These companies are the Indian Drugs and Pharmaceuticals.B. It keeps a dedicated research facility staffed with over 1100 scientists. Novartis. Russia. Sun Pharmaceuticals. Ranbaxy hopes to be one of the top 5 generics producers in the world. China. Bengal Chemicals and Pharmaceuticals Limited. Unichem Labs. Reddy‟s. Matrix Laboratories. Europe. and Wockhardt. Chemicals. TTK Healthcare. The Company‟s largest market. It is consolidating its position to become the top 5 generics producer in the World. J. Company‟s Global Sales were at USD 1. BRICS and Japan through organic and inorganic routes. Aurobindo Pharma. Biocon. India. GlaxosmithKline. Lupin Labs. Dr. South Africa) countries contributed USD 194 Million and USD 477 Million to global sales By 2012. Torrent Pharma. IPCA Laboratories. There are five government-owned companies the Indian public sector. Cipla. Merck India. Comprehensive analysis of some of these companies is tabulated below. They currently have two molecules in Phase II trials and 3-5 in pre-clinical testing. with the purchase of French firm RGP Aventis in 2003. USA with the sales of USD 380 Million. while Europe and BRICS (Brazil.340 Million. and Wyeth Ledele India. The Company will focus on increasing its momentum in the generics business in its key markets of US. The Company is aggressively pursuing its internationalization strategy it has also gained market leadership in India. Astra Zeneca India.

Dr. acquisitions and alliances. It had set up a New Drug Development Research (NDDR) in 1993 and outlicensed its first compound just four years later. The company has formed a name for itself in the field of custom manufacturing. Reddy‟s revenues come from generic drugs. Bulk prices haven‟t bottomed out as yet Nicholas Piramal Nicholas Piramal started its existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of mergers. Dr. Open to brand acquisitions. Reddy‟s has since out licensed two more molecules and currently has three others in clinical trials. global pharmaceutical company with proven research capabilities and presence across the pharmaceutical value chain. cardiovascular. Reddy‟s is a vertically integrated. Reddy’s The company was Founded in 1984 with USD 160. Reddy‟s has long been a research-oriented firm. 58 per cent of Dr. It cites its 1700-person global sales force as core strength. They manufacture Active Pharmaceutical Ingredients (API) and Finished Dosage forms. Company Name Company Profile Sales Revenue/Turnover Future Prospects 22 Indian Pharmaceutical Industry | 9/4/2010 .000. Dr.000 Dr. Reddy‟s was the first Asia-Pacific pharmaceutical outside of Japan and the sixth Indian company to be listed on the New York Stock Exchange.Company Name Company Profile Sales Revenue/Turnover Future Prospects Dr. The company has respected intellectual property rights since its inception. inflammation and bacterial infection. Revenues for fiscal 2007 were USD 1. In addition. the drug discovery arm of the company conducts basic research in the areas of diabetes. It is well-poised for the challenge of surviving in the aftermath of product patent protection.51 billion. It decided to make its own intellectual property and opened a research facility in Mumbai with hopes of launching its first drug in 2010 at a cost of USD 100. The company grossing USD 350 million per year Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent protection.

It was officially opened on September 22. which came to be popularly known as Cipla. Biocon Limited and its two subsidiary companies. custom research and clinical research. of Ireland and an Indian entrepreneur. Biocon strategically focuses its activities on its bio-pharma business verticals that include APIs. medical devices.Company Name Company Profile Sales Revenue/ Turnover Future Prospects Cipla In 1935. lyophilized injections. They will continue to bring a smile on as many faces as they can to heal the world as much as they can. everything from metered-dose inhalers. 1937 when the first products were ready for the market. with dedicated plants for Oncology products. among others. Hormones. such as that of US FDA. Syngene International Limited and Clinigene International Limited form a fully integrated biotechnology enterprise specializing in biopharmaceuticals. focused on healthcare. Kiran Mazumdar-Shaw in 1978. they could contribute to making the world a healthier place. the mission is always to make the life of the patient better. and thermolabile foams. Carbapenems. Today they have 31 world-class manufacturing facilities spread across the country. Cipla produces one of the widest range of products and dosage forms in the world today. and Cephlosporins. 23 Indian Pharmaceutical Industry | 9/4/2010 Company Name Company Profile Biocon India Biocon India is incorporated as a joint venture between Biocon Biochemicals Ltd. Headquartered in Bangalore Biocon has evolved from an enzyme company to a fully integrated biopharmaceutical enterprise. MHRA-UK. nasal sprays. And along the way realized.472 = USD1) about 75 per cent of which was derived in India. Cipla started with a vision to build a healthy India. WHO. pre-filled syringes. Revenue in 2004 totaled USD 552 million (using Rs 43. TGA Australia. Industrial & Pharmaceutical Laboratories was set up. TPDCanada. Whether it is constantly extending our product range or consistently introducing innovations. Inhalers. Bfarm-Germany MCC-South Africa. Biocon is India‟s premier biotechnology company. that in their own small way. trans-dermal spray patches. biologicals and proprietary molecules. . They more than meet the stringent international standards. The Chemical.

9 billion. Sales Turnover 4500 4000 3500 3000 2500 2000 1500 1000 500 0 24 Indian Pharmaceutical Industry | 9/4/2010 . To further enhance their IP and technology platforms. Turnover of some of the major companies has been graphically represented below.Sales Revenue/Turnover Future Prospects Total Revenues are Rs 9. 764 million in R&D. Biocon remains committed to building biotherapeutics franchise through their own R&D efforts. Consistent with their long-term growth strategy. which is a 76% increase over the previous fiscal. they have made an investment of Rs.

Key Trends Changing growth fundamentals of domestic market Expansion of private sector healthcare driving accessibility  Medical value travel has led to an investment spurt in the private healthcare services in the country  There has been accelerated investment from the private sector in healthcare facilities across tier-I and tier-II cities in the country  Estimated one million beds would be added by 2012 taking the total beds available in the country to over two million**  Estimated US$ 69.7 billion would be invested by private sector in healthcare infrastructure by 2012  Number of patients visiting Indian hospitals is expected to rise by 30 per cent to 22 million by 2015 ** Source: E&Y FICCI Healthcare Report 25 Indian Pharmaceutical Industry | 9/4/2010 .

 Indian middle class with its increasing purchasing potential is expected to become a major buyer segment  Increasing penetration of customized insurance plans would drive the affordability. influencing the consumption of medical and healthcare products Rising disposable income to drive drug consumption  High purchasing potential of the burgeoning Focus of Indian companies shifting from the US   Pricing pressures and shrinking margins in the generics space and the increasing litigation instances in the US are compelling Indian companies to consider opportunities beyond US Indian companies have invested more than US$ 1. Reddy‟s Laboratories‟ NCE Balaglitazone is India‟s the first indigenously developed molecule to enter the Phase III trial.2 billion in the European markets Increasing quest for New Chemical Entities (NCE)    Indian pharmaceutical companies striving to move up the value chain and make place for themselves in the innovator league Enhanced level of investment in R&D capabilities and infrastructure by the industry and the Government Dr.Increasing penetration of medical insurance  Penetration of medical insurance would grow at a higher pace due to increasing influx of foreign players  Favorable regulatory changes such as permitting Foreign Direct Investment (FDI) of 51 per cent in the stand-alone health insurance companies and setting the minimum capital requirement at US$ 5. 26 Indian Pharmaceutical Industry | 9/4/2010 .4 million would drive growth in this segment.

the largest after the US Drug production outsourcing industry to grow over 43 per cent annually. with potential savings of over 60 per cent as compared to the US. thrice the global growth rate Diminishing numbers of new drugs. Big pharma companies join outsourcing queue  India emerging as a big global destination for contract manufacturing.joining hands with generic companies  Over the last few years the global pharmaceutical industry has witnessed innovator company entering into alliances with generic companies thus clearly signaling their plans of venturing in the generic space. Some of the reasons why India is emerging as an inviting destination for outsourcing drug production Over 80 per cent of the 38 big and medium-sized pharma companies across the world rated India higher than China. high research and development costs. and pressure to reduce healthcare costs are forcing Big Pharma to rope in strategic partners to contain manufacturing and drug development expenses      Innovators. Growing R&D pipeline of Indian companies presents significant in-licensing opportunities for global companies.unlike R&D outsourcing. coupled with a strong supply of skilled manpower and capital efficiency Has close to 100 manufacturing facilities approved by the US Food and Drug Administration (FDA). Eastern Europe. 27 Indian Pharmaceutical Industry | 9/4/2010 . Puerto Rico. Singapore and Ireland. Offers a significant cost-quality proposition in end-to-end research and development. as against existing drugs going off-patent.

*Acquisition is yet to complete. E. A$ means Australia dollar. 28 Indian Pharmaceutical Industry | 9/4/2010 .Estimated value.

and relationships with referral sources (i. physicians). heavy advertising.e. The low entry barrier of the segment has led to an increase in the number of players resulting in an increase in the level of competition. Because these companies do not rely on sales representatives. some of the most stringent compliance concerns in the pharmaceutical industry publicized over the past 10 years do not impact the generic pharmaceutical companies to the same extent as their proprietary competitors.Key Concerns Pricing pressure – interrupting the growth of key economies  The main concern for the global generic market is the increased pricing pressure.   29 Indian Pharmaceutical Industry | 9/4/2010 .. Generic pharmaceutical companies compete based on their comparatively low cost and therefore do not mount sizable sales campaigns.

With globalization.Strict registration process .Low share of India in world pharmaceutical industry .Excellent clinical trial centers Weakness .Non tariff barriers imposed by developed countries .SWOT Analysis Strengths .Increasing liberalization of government policies .Counterfeit drug industry 30 Indian Pharmaceutical Industry | 9/4/2010 .Low investment in R & D .Non infringing process of Acive Pharmaceutical ingredients (API) . export potential is increasing .New markets opening Threats .Large number of patent expiry .Growing health awareness .Fragmentation of installed capacities .Low cost manpower in science and technology .Non availability of intermediaries for bulk drugs Opportunities .Competition from other generic drug manufacturers .Increasing income levels .

Advent of product patent regime supportive for entry of pharmaceutical MNCs -.End consumers do not have much bargaining power as practitioners act as gatekeepers -.Buyers are less price sensitive -.High number of domestic and international players in the market -.Highly fragmented market so buyer concentration v/s industry is low Threat of Substitutes -.Generics are the biggest threats to propreitary drugs -.Economies of scale exist -.Companies tend to establish facilities in lower labor cost areas. leading to increased competition -.High fixed and exit costs add to the competition -.Porter’s five force Analysis Bargaining power of suppliers: -.Highly competitive industries with top 10 companies controlling about 30 % of the Indian market -.Numerous suppliers lead to low switching costs -.Volume benefits occur -.Biotechnology is a threat to synthetic pharma products -.Raw material costs consist major portion of total expenses Threat of new entrants: -.High degree of development cost involved Competitors -.Increased popularity of alternative medicinal techniques poses a threat for the OTC market 31 Indian Pharmaceutical Industry | 9/4/2010 .Major players are large multinationals with huge working capital Bargaining power of buyer -.Suppliers can go for forward integration -.

in/files/PDF/SpecialComments/2010-February-%20Pharma.World‟s Destination !!. report by IIFL 2010 India Pharma 2015-A Mckinsey Report http://www.edu/web/soc142/team2/segments. report by KRChoksey.com/pillscribe/indian-pharmaceuticals-market-will-grow10-14-to-touch-40-billion-by-2015-mckinsey/ Indian Pharmaceutical Industry.aspx http://www.org www.ibef.pdf http://www.kpmg.ibef.duke.aspx?Section=174&Item=2888 http://www.net 32 Indian Pharmaceutical Industry | 9/4/2010 .com/world-industries/pharmaceutical/ S&T Industry www.economywatch.fi/Binary.dancewithshadows.com/blog/articles/emerging-trends-in-thepharmaceutical-industry http://www.pharmainfo.com/1292062/2010/01/04/2009-Review-global-pharmaceuticalindustry/ http://www.sourcejuice. report by PWC 2010 Pharmaceuticals: The next big opportunity (biosimilars). 2009 Global Pharma looks to India: Prospects for growth.org/industry/pharmaceuticals.References                http://www.icra.smartconsultinggroup.html http://www.

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