The Indian Pharmaceutical Industry today is in the front rank of Indias science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian Pharmaceutical Industry is estimated to be worth, $4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously.
The number of purely Indian pharmaceutical companies is fairly low. Indian pharmaceutical industry is mainly operated and controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in India at lowest cost.
Most pharmaceutical companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical.
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Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise.
Although many of these companies are publicly owned, leadership is passed from father to son and the founding family holds a majority share.
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the Indian market are small-to-medium enterprises. It has been estimated that 250 of the largest companies control 70% of the Indian market. The 1970 Patent Act., made the multinational companies to represent only 35% of the market, down from 70%, thirty years ago.
In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA were filed by Indian companies. Growths in other fields notwithstanding, generics are still a large part of the picture.
As such, the Indian pharmaceutical industry has now become the third largest producer in the world and is poised to grow into an industry of $ 20 billion by 2015, from the current turnover of $ 12 billion.
As a result, manufacturing expertise and efficiency were the only requirements to participate in this industry, creating low barriers of entry. The most critical challenge facing the global pharmaceutical industry today is the increasing cost of drug discovery and development and the increasing time to market. This is further compounded by:
Impending patent expirations of blockbuster molecules
Low public opinion
Challenges to intellectual property by increasingly aggressive generic companies.
Increasing regulatory hurdles
This scenario is forcing the multinational pharmaceutical companies (MNCs) to rethink their strategic options in order to exploit their core competencies across the globe. In this situation, India stands to a gain a lot because of its inherent advantages like stability, culture, cost, and educated workforce. This has led to increased alliances and collaborations as a result; the leading Indian pharmaceutical companies have become some of the most efficient manufacturing units in the world. In fact, India has the highest number of US FDA (Food and Drug Administration) certified manufacturing facilities outside USA
The overall phenomenal progress made by the industry in the last three decades has instilled a strong belief in the government and the pharmaceutical companies in India that the country has a competitive strength and it should be enhanced by suitable policy measures and firm specific actions with regards to export, innovation, strategic alliances and investment.
The pharmaceutical policy 2002 echoes the same sentiments and has shifted focus of the policy from self reliance in drug manufacturing to the objective of enhancing global competitiveness. The introduction of policy says: “The basic objectives of the government’s policy relating to drug and pharmaceutical sector were enumerated in drug policy of 1986. These basic objectives still remain largely valid,Â however,Â the drug and the pharmaceutical industry in the country today faces new challenges on account of liberalization of the Indian economy theÂ globalizationÂ ofÂ theÂ worldÂ economy and on accountÂ ofÂ new obligations undertaken by India under the WTO agreements. These challenges require a change in current pharmaceutical policy and the need for new initiatives beyond those enumerated in drug policy 1986, as modified in 1994, so that policy inputs are directed more towards promoting accelerated growth of the pharmaceutical industry and towards making it more internationally competitive.
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The need for radically improving the policy framework for knowledge-based industry has also been acknowledged by the government. The Prime Minister’s Advisory Council on Trade and Industry has made important recommendations regarding knowledge-based industry.Â The Pharmaceutical industry has been identified as one of the most important knowledge based industries in which India has a comparative advantage.” Â
THE GROWTH STAGE OF INDIAN PHARMACEUTICAL INDUSTRY
2.1 GROWTH STAGES OF INDIAN PHARMA INDUSTRY
Bengal Chemicals & Pharmaceuticals Limited (BCPL), established in 1901, is a Public Sector Undertaking (PSU) of the Government of India and is India’s first pharmaceutical company. The company was started by Prafulla Chandra Roy in Kolkata (then known as Calcutta) and has since manufactured such household Indian products as “Hospitol”, “naphthalene balls”, and “Phenol”. The company is headquartered in Kolkata and reported aggregated revenues of RsÂ 6,199 lakhs (US$Â 138.2 million) in fiscal 2006.
The Nascent industry, however, received setbacks in the post world war-II period as a result of new therapeutic developments in the western countries that triggered natural elimination of older drugs from market usage by newer drugs like sulpha ,antibiotics, vitamins, hormones, antihistamine, tranquilizers, psycho pharmacological substances etc. This culminated in the discontinuation of local production based on indigenous materials and forced the industry to import bulk drugs meant for processing them in to formulations and for selling in the domestic market.
Figure- 2.1: stages of Growth of Indian Pharmaceutical Industry
Source: ISID Working Paper, 2006/05.
The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s. In Â the Â post independence Â period,Â Indian Â pharmaceutical Â industry Â exhibited Â four Â stages Â of growth Â (see Â Figure Â 2.1& 2.2).Â In Â the Â first Â stage Â during Â 1950s-60s,Â the industry was largely dominated by Â foreign Â enterprises Â and Â it Â continued Â to Â rely Â on Â imported Â bulk Â drugs Â notwithstanding Â its Â inclusion Â in Â the Â list Â of Â ‘basic Â industries’Â for Â plan Â targeting Â and Â monitoring.Â Foreign Â firms,Â enjoying Â a Â strong Â patent Â protection Â under Â the Â Patent Â and Â Design Â Act Â 1911,Â were Â averse Â to Â local Â production Â and Â mostly Â opted Â for Â imports Â from Â home Â country Â as Â working Â of Â the Â patent.Â Given Â the Â inadequate Â capabilities Â of Â the Â domestic sector Â to Â start Â local Â production Â of Â bulk Â drugs Â and Â hesitation Â of Â foreign Â firms Â to Â do Â so,Â the Â government Â decided Â to Â intervene Â through Â starting Â public Â sector Â enterprises.Â This Â led Â to Â the Â establishment Â of Â the Â Indian Â Drugs Â and Â Pharmaceuticals Â Ltd.Â (IDPL)Â plants Â at Â Rishikesh Â and Â Hyderabad Â in Â 1961 Â and Â the Â Hindustan Â Antibiotics Â at Â Pimpri,Â Pune,Â inÂ 1954,Â to manufacture Â penicillin.Â The Â starting Â of Â the Â public Â sector Â enterprises Â has Â been Â an Â important Â feature Â in Â the Â evolution Â of Â the Â pharmaceutical Â industry Â as Â it Â assumed Â initiative Â roles Â in Â producing Â bulk Â drugs Â indigenously Â and Â led Â to Â significant Â knowledge Â spillovers Â on Â the Â private Â domestic Â sector.
The second growth stage,Â of the industry took place in the 1970s.Â The Â enactment Â of Â the Â Indian Â Patent Â Act Â (IPA)Â 1970 Â and Â the Â New Â Drug Â Policy Â (NDP)Â 1978 Â during Â this Â stage Â are Â important Â milestones Â in Â the Â history Â of Â the Â pharmaceutical Â industry Â in Â India.Â The IPA 1970 brought in a number of radical changes in the Â patent Â regime Â by Â reducing Â the Â scope Â of Â patenting Â to Â only Â processes Â and Â not Â pharmaceutical Â products Â and Â also Â for Â a Â short Â period Â of Â seven Â years Â from Â the Â earlier Â period Â of Â 16 Â years.Â It also recognizes compulsory licensing after three years of the patent.Â The Â enactment Â of Â the Â process Â patent Â contributed Â significantly Â to Â the Â local technological Â development Â via Â adaptation,Â reverse Â engineering Â and Â new Â process Â development.
Â As Â there Â exits Â several Â ways Â to Â produce Â a Â drug,Â domestic Â companies Â innovated Â cost-effective Â processes Â and Â flooded Â the Â domestic Â market Â with Â cheap Â but Â quality Â drugs.Â This Â led Â to Â the Â steady Â rise Â of Â the Â domestic Â firms Â in Â the Â market place.Â The Â NDP Â 1978 Â has Â increased Â the Â pressure Â on Â foreign Â firms Â to Â manufacture Â bulk drugs Â locally Â and Â from Â the Â basic Â stage Â possible.Â Foreign Â ownership up Â to Â 74 Â per Â cent Â under Â the Â Foreign Â Exchange Â Regulation Â Act Â (FERA)Â 1973 Â was Â permitted Â to Â only Â those Â firms Â producing Â high Â technology Â drugs.Â Foreign Â firms Â that Â are Â simply Â producing Â formulations Â based Â on Â imported Â bulk Â drugs Â were Â required Â to Â start Â local Â production Â from Â the Â basic Â stage Â within Â a Â two Â year Â period.Â Otherwise Â were Â required Â to Â reduce Â their Â foreign Â ownership Â holding Â to Â 40 Â per Â cent.Â New Â foreign investments Â were Â to Â be Â permitted Â only Â when the Â production Â involves Â high Â technology Â bulk Â drugs Â and Â formulations Â thereon.
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In the third growth stage or phase of evolution Indian pharmaceutical industry developed modern technology for manufacturing of all dosage forms like tablets, capsules ,liquid ,oral, injectables etc.. This domestic industry based on large scale reverse engineering and process innovation achieved near self sufficiency in production of bulk drugs belonging to various major therapeutic groups resulting in lasting impact on competitive position of Indian pharmaceutical firms in national and international markets.
During , 1980-90’s ,Indian pharmaceutical industry had emerged as one of the most export oriented sectors in Indian pharmaceutical industry with more than 30% of the production being exported to the foreign market. In 1991, domestic firms contribute about 70-80% market share in case of bulk drugs and formulations respectively. The trade deficits of seventies had been replaced by trade surpluses of 1980’s. (FIG-2.1).
The fourth stage of evolution of industry during 1990’s witnessed dramatic changes in the policy regime governing the pharmaceutical industry. The drug de-licensing, hundred percent foreign investments is permitted through automatic route and price control has been significantly reduced. One of the major factors that have increased the confidence of foreign multinationals looking for local opportunities in India is the adoption of a new product patent regime in January 2005, before that India had already carried out three amendments in march-1999, June2002 and April 2005, in the patent act of 1970 to bring to Â bring Â Indian Â patent Â regime Â in Â harmony Â with Â the Â WTO Â agreement Â on Â Trade Â Related Â Intellectual Â Property Â Rights Â (TRIPs).Â The Â third Â and Â the Â final Â one,Â known Â as Â the Â Patents Â (Amendment)Â Act,Â 2005 Â came into Â force Â on Â 4th Â April Â 2005 Â and Â introduced Â product Â patents Â in Â drugs,Â food Â and Â chemicals sectors.Â The Â term Â of Â patenting Â has also Â been Â increased Â to Â a Â 20 Â year Â period. The number of pharmaceutical units has also increased to over 23,000 in 2002, further more
Fig: 2.2: Growth phase of Indian pharmaceutical industry
SOURCE: BEST PHARMA INDUSTRY REPORT-2011-INDIA
The fifth stage is in progression (Fig.2.2), in which we are observing investment in innovation and research, with enactment of new IP laws and investments in biotechnology aided companies. There is promising growth in production of bulk drugs and formulations (Table: 2.1) from Rs 10 crores in 1947-48 to Rs 21100 crores in 2002-03 in formulations and almost nil in 1947-48 to Rs 5400 crores in 2002-03 in bulk drugs production. The drug industry also becomes capable to spent 497crores in 2002-2003 from almost nil in 1947-48 on research and development of new molecules.
All in all Indian drug sales are expected to rise by an annual 8% to nearly $26.59 bn between 2006 and 2015 and further is the matter of wait and watch depending up on conditions prevailing in international and domestic markets. In the UNIDO-classification of developing countries, according to the “state of art” in the pharmaceutical sector India is ranked among the top and today India manufactures over 400 bulk drugs and around 60,000 formulations.
2.2 Drug industry-growth
As shown in, Table: 2.1 and table2.2, depicts the growth progress in production of bulk drugs and finished formulations. India produces bulk drugs related to various therapeutic areas. Indian pharmaceutical industry, manufactures over 400 bulk drugs and roughly 60,000 finished medicines used in different formulations.
Table: 2.1: DRUG INDUSTRY – GROWTH INDICATOR (INR crores)
Bulk drugs –
(including fine chemicals)
Source: Pharmaceutical marketing in India by S.R.Changati, et.al.
Table: 2.2:Progress of pharmaceutical production in India (INR crores)
Source: Publicly available sources of information.
TABLE: 2.3: DGCI, Kolkata report on Export/Import of Drugs and Pharmaceuticals (INR , Crores)
VALUE OF EXPORT OF DRUGS & PHARMACEUTICALS INCLUDING FINE CHEMICALS
VALUE OF IMPORT OF “MEDICINAL & PHARMACEUTICALS PRODUCTS”
Source: DGCIS, KOLKATA
2.3 THE GROWTH SCENARIO IN CONTINEUM:
India’s US $ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per year. It is one of the largest and most advanced among the developing countries.
The industry has enormous growth potential. Factors listed below determine the rising demand for pharmaceuticals.
â€¢ The growing population of over of a billion
â€¢ Increasing income
â€¢ Demand for quality healthcare service
â€¢ Changing lifestyle has led to change in disease patterns, and increased demand for new medicines to combat lifestyle related diseases.
More than 85 per cent of the formulations produced in the country are sold in the domestic market, there has also been a record increase in consumption of drugs worldwide. India with its large population has recorded the therapeutic segmentation in healthcare market with changes in pattern of drug consumption in turn affecting its production.Fig:2.3 shows the percentage increase in sales in various therapeutic segments. India is largely self-sufficient in case of formulations. Some life saving, new generation under-patent formulations continue to be imported, especially by MNCs, which then market them in India. Overall, the size of the domestic formulations market is growing strongly at 10 percent per annum (Table, 2.4), with rs23047crores in 2006-07, from rs2350crores in 1987-88.
Fig: 2.3: Percentage Increase therapeutic segments.
SOURCE: ORG-MARG AUDIT-2011.
Table 2.4 shows demand for drugs as per therapeutic segments, showing categories, for treatment of lifestyle-related diseases such as diabetes, cardiovascular diseases, and central nervous system are on the increase. Health scenario is also changing. There are around 700,000 new cases of cancer each year and total of around 2.5 million cases. It is estimated that there are around 40 million people in India with diabetes and the number is rising, 5.1 million HIV/AIDS patients, and 14 million tuberculosis cases. According to industry reports, while the Indian pharmaceutical industry witnessed a growth of 7 to 8 percent, the cardio-vascular segment recorded 15 to 17 percent growth and anti-diabetes segment of over 10-12 percent growth. So, with the increase in diseases and various ailments, consumption of medicines is on increase day by day (refer, Fig: 2.3).
TABLE: 2.4 GROWTH IN THERAPEUTIC SEGMENTS
MARKET SHARE (%)
VALUE GROWTH (%)
As per estimates, Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs had accounted for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). Table: 2.5, shows the 16.98% CAGR for bulk drugs amounting to rs17, 307.02 crores in 2009-10.
2.4 BULK INDUSTRY GROWTH
Source: Dept. of Pharmaceuticals, G.O.I., Annual, report, 2010-11.
The export market growth has been one of the most outstanding features of the Indian pharmaceutical industry (Table-2.5). Negligible before the 1970s, exports started picking up after the abolition of product patents in 1972, accelerating in the 1980s and then growing rapidly since the mid-1990s. In recent years, exports have been increasing annually at more than 20%. The proportion of exports in net sales for the studied 120 companies was 44%. The export market was found to be larger than the domestic market not only for large companies, such as Ranbaxy (Now owned by Japanese Daichi Sankyo Corporation), Dr. Reddy’s orÂ Cipla , but also for smaller companies such as Granules , Shilpa Medicare, Kopran , Transchem, and Pure Pharmaceutical etc. The period between 2000 and 2010 witnessed India’s top 10 drug companies growing in their sales turnovers, ranging between Rs 500-Rs 800 crores, to professionally-run MNC generics manufacturing companies with turnovers ranging from Rs 3,500 crores to over Rs 7,000 crores. India is among the top 20 pharmaceutical exporters world-wide.
Most of these exporting firms earlier dependent on bulk drug supplies, small exports to unregulated markets in Africa and Asia and formulation sales in the domestic market, the last 10 years saw them aggressively tapping regulated markets of the US and Europe and penetrating into newer and emerging market Exports
Over 60 per cent of India’s bulk drug production is exported. India’s pharmaceutical exports are to the tune of Rs 87 billion, of which formulations contribute nearly 55 per cent and the rest 45 per cent comes from bulk drugs. In financial year 2005, exports grew by 21 per cent.
Domestic pharmaceutical export, growing at 30 per cent per annum, touched a new height of US $ 4.8 billion in the financial year 2006-07. The year’s exports will push the drug sectors contribution to India’s Forex earnings to 7.75 per cent from the current 5 per cent. The growth in drug exports, despite the pressing generic competition in the global markets, is attributed to increased Abbreviated New Drug Applications (ANDAs) approvals in the US market and contribution from unconventional markets in Latin America, Australia and the emerging markets in the Middle East and African Region. The formulations and exports are largely to developing nations in CIS, South East Asia, Africa and Latin America. In the last 3 years generic exports to developed countries have picked up.In the coming years, opening up of US generics market and anti AIDS market in Africa will boost exports.
India’s pharmaceutical sector has seen unprecedented changes in the past decades ensuing for a remarkable growth in its exports (pharmaceutical exports occupy a share of 4.4% to 5.2% of India’s total exports over the last 6 years) and exports grew at a CAGR of around 22% in the 6 year period of 2004-05 to 2009-10( Fig:2.4). India’s growth story in itself vindicates its potential; it had a $ 333.33m turnover in 1980 to around $22.30 bn. by 2010-11
FIG: 2.4 PHARMA EXPORT & TOTAL EXPORT SHARE
pharmaceutical industry in the country today faces new challenges on account of LIbralisation of the Indian economy graph2.JPG
SOURCE: Indian pharmaceutical export firstname.lastname@example.org
2.5 Revenue from Export
As earlier discussed India accounts for less than two per cent of the world market for pharmaceuticals, with an estimated market value of US $ 10.4 billion in 2007 at consumer prices, or around US $ 9 per capita but has the potential to reach more than 2% by 2020.
India currently represents just US $ 6 billion of the $ 550 billion global pharmaceutical industry but its share is increasing at 10 percent a year, compared to 7 percent annual growth for the world market overall. Also, while the Indian sector represents just 8 percent of the global industry total by volume, putting it in fourth place worldwide, it accounts for 13 percent by value, and its drug exports have been growing 30 percent annually. Cipla, Nicholas Piramal, Ranbaxy, Zydus Cadila, Dr. Reddy’s are the few Indian pharmaceutical companies, which are known at the global level due to their quality products.
The Indian market for over-the-counter medicines (OTCs) is worth about $940 million and is growing 20 percent a year, or double the rate for prescription medicines. The industry’s exports were worth more than $3.75 billion in 2004-05 and they have been growing at a compound annual rate of 22.7 percent over the last few years, according to the government’s draft National pharmaceuticals Policy for 2006, published in January 2006. The Policy estimates that, by the year 2010, the industry has the potential to achieve $22.40 billion in formulations, with bulk drug production going up from $1.79 billion to $5.60 billion.
Imports have registered a CAGR of only 2 per cent in the past 5 years. Import of bulk drugs have slowed down in the recent years as per DGIC reported data in the year 2010-11. The value of export was Rs 10,937 Crores, recording a declining growth of 9.82% as compared to 15.15% in 2009-10. The situation is advantageous and good sign, as the industry is becoming self reliant in production and less dependent on foreign markets.
Table: 2.6 Projected Export Growth (INR CRORES)
Source: Dept. of Pharmaceuticals, G.O.I., Annual, report, 2010-11.
Based on the retrospective data, USA, Germany, Russia, UK, China, Brazil, Canada, South Africa, Nigeria, Netherlands, Spain, Turkey, Ukraine, Vietnam, Israel, Italy, Mexico, UAE, Singapore, Iran had been potential importers of Indian Drugs. Countries like South Africa, Israel, Turkey, Kenya, Singapore, UK, China, Russia, Italy and Vietnam etc. have been identified to be potential prospective markets with high growth rates of imports from India. Africa, Latin America, ASEAN and CIS countries with huge demands deem them to be put in the category of focus countries as these are the emerging markets and have a huge potential with day in day out incremental growth rates of per capita drugs consumptions supported by treaties like SAFTA (with SAARC), treaties with GCC, EU, Japan, Korea etc. As shown in table: 2.10, based on such estimates, it has been predicted that the 17% export growth of Rs 248,000 crores would be achieved in 2019-20 with a domestic growth of 22% amounting to Rs 233,000crores.
CROSS BORDER ACQUISITIONS IN INDIAN PHARMACEUTICAL INDUSTRY
2.6 INDIAN PHARMACEUTICAL SECTOR CROSS-BORDER ACQUISITION
The health-care costs are rising world-wide. Leading companies across the world are merging. Strategic alliances and collaborations are taking place in order to meet the increasing R&D budgetary requirement that exceed billion dollars each for many leading global pharmaceutical players. Indian Drug manufacturers are pursuing foreign acquisitions due to their need to:
Improve global competitiveness
Move up the value chain
Create and enter new markets
Increase their product offering
Acquire assets (including research and contract manufacturing firms, in order to further boost their outsourcing capabilities) and new products
Consolidate their market shares
Compensate for continued sluggishness in their home market.
Often there is a significant overlap of expenditure in creating manufacturing assets or investing in R&D either in generics or in basic research resulting into wastages at national level. Consequently corporate have indulged either in acquisitions or mergers to avoid duplication of investments and capture larger market share at global place.
Table 2.7: No. of overseas acquisition by Indian-pharmaceutical-industry (1995 to 2007)
No. of Acquisitions
Source: EXIM Bank
Table 2.7 shows the data of number of overseas acquisitions by Indian pharmaceutical Industry. We can conclude that the year 2005 witnessed the maximum number of overseas acquisition due to paradigm change in pharmaceutical policies and enactment of certain new laws which are later discussed in this chapter. Indian companies had gained a lot by these cross border acquisitions and details of which has been given in table 2.8 Many Indian companies are seeking to expand their distinctive capabilities by acquiring specific skills, knowledge and technology abroad that are either unavailable or of inadequate quality at home. By mergers and acquisitions they get advantage of acquiring new resources and gain entry to new markets for better profitability. Table2.8 shows the number of cross border acquisitions by Indian companies with their focus areas.
Table 2.8 Indian pharmaceuticals cross border Acquisitions
And research services
U.S.generics, specialty Products, APIs, formulations, custom synthesis
BMS Laboratories and Meridian
Roche’s API Business (Mexico)
Drug discovery research, formulations
Klinger Lab (Brazil)
Servycal SA (Argentina)
API’s contract manufacturing
CRAMS,Pharma specialty chemicals,intermediates,
and clinical services
Trinity-laboratories (along with subsidiary trigen lab)(U.S)
Million for 75%
Target- research associates
CRAMS,generic APIs, intermediates and formulations.
Explora lab. (Switzerland)
Fine Chemicals Corp. (S. Africa)
CRAMS space -Contract manufacturing,APIs,branded
Dobutrex brand acquisition (USA)
Rhodia’s inhalations business (UK)
Avecia Pharma (UK)
Generics,OTC and nutraceuticals
Manufacturing Plant (Poland)
EUR 1.6 million
,U.S generics, API’s.
Two facilities from Valeant Pharma US$10 million
Able Laboratories (U.S.
*63.92%Stake acquired BY DAIICHI-SANKYO IN 2008.
U.S.and Europe generic markets
RPG Aventis (France)
18 generic products of Efarmes S.A.
Brand-Veratide from P & (Germany)
Heumann Pharma (Germany)
Contract manufacturing and
generics market,branded generics
CP Pharma (UK)
Source: Jaya prakash pradhan; ISID working paper2006/05
2.7 INDIAN PHARMACEUTICAL MARKET AND THE WORLD :
The period between 2000 and 2010 witnessed India’s top 10drug companies growing in their sales turnovers, ranging between Rs 500-Rs 800 crore, top professionally-run MNC generics manufacturing companies with turnovers ranging from Rs3,500 crore to over Rs 7,000 crore. India is among the top 20 pharmaceutical exporters world-wide. Most of these exporting firms earlier depended on bulk drug supplies, small exports to unregulated markets in Africa and Asia and formulation sales in the domestic market, the last 10years saw them aggressively tapping regulated markets of the US and Europe and penetrating into newer and emerging markets. The Indian industry had filed only 3 marketing applications with the USFDA in 1998, the number swelled to 148 in 2009. Approximately $123bn of generic products is at risk (subject to patent renewal approvals by regulators) of losing patents by 2012.Even at a conservative estimate of 15% opportunity this translates into $18.4bn opportunity for India. However the figures need to be appropriately deflated since Indian opportunity will lie in generics equivalent of branded drugs, which would be cheaper. Ageing populations of the US (plus the 2010 US Healthcare Reforms in action), China & European economies leading to the more and more expenditure on medicines and appreciation in the per capita consumption value of the drug products with cheaper rates.
As global markets such as North America, Europe and Japan continue to slow down (graphical representation below), pharmaceutical companies are scanning markets for new growth opportunities to boost drug discovery potential, reduce time to market and squeeze costs along the value chain. The Industry is beginning to realize that some of the most promising opportunities will come from emerging markets (Asia/Australia/Africa & Latin America).Â IMSHealth and other sources suggest that emerging markets (China, India, Brazil, Russia, Turkey, Mexico and South Korea) will contribute to over 40% of the incremental growth of the global Pharmaceutical industry over the next decade.
With its enormous advantage ,including a large well educated ,skilled and English speaking workforce, low operational costs and improving regulatory infrastructure, India has the potential to become the region’s hub for pharmaceutical and biotechnology discovery research, manufacturing, exporting and health care services within the next decade. However, in order for this to happen, it is imperative that the regulatory environment continues to improve . otherwise ,India will have to face tough competition from china leading to capture of market shares by china as their government strong commitment and pro industry policies have produced a favorable and protective environment for not only product patent but also for crucial data protection so while developing an Indian collaborative R&D strategy, pharmaceutical MNCs should keep in mind certain issues like data and IP security, performance metrics, and quality standards, and address and evaluate these upfront to ensure a successful relationship. Although the major factor that has increased the confidence of foreign multinationals looking for local opportunities in India is the adoption of a new product patent regime in January 2005. This already had facilitated concurrent global phase II and III clinical trials. A new patent regime has changed the dynamics of the Indian pharmaceuticals industry in other respects, too. Several leading domestic producers have begun to conduct original research into new chemical entities (NCEs) and novel drug delivery systems. However, these companies are likely to license most of these drug candidates to Western pharmaceutical companies, because few Indian companies can afford the high costs and failure rates associated with developing an NCE. In this context, several Indian firms have already entered into research partnerships with multinationals. Some pharmaceutical MNCs like AstraZeneca have opened their own captive research centers in India to take advantage of the low costs as well as availability of high quality intellectual work force.
FIG: 2.5- Indian rank vs. world rank
SOURCE: IMS Health market prognosis,March 2009;Market size ranking in constant US$.
Russia 2013, marketing insight estimates.
(ASSOCHAM). IMS estimates the healthcare market in India at $31.59 bn. by 2020, whereas the global management consulting major, McKinsey & Co. predicts that the Indian pharmaceutical market is expected to touch $40 by 2015. The industry has given employment to approximately 2.86 mn people and has around 20,053 units. Globally, India is 4th in terms of volume (8% ofÂ world’s production), 13th in terms of value, and 17th in terms of pharmaceutical export value. The drugs and pharmaceuticals exported are worth over $3.8 bn.
INDIAN PHARMACEUTICAL MARKET
2.8 DOMESTIC PHARMACEUTICAL MARKET
The pharmaceutical industry in India meets around 70% of the country’s demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical-formulations.
As discussed in earlier chapters about the Indian Pharmaceutical sector which is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control. North Indian states & UT’s are also engaged in production of pharmaceutical products, few states like Himachal Pradesh, Uttaranchal, are also providing tax holidays so as to motivate the pharma companies to enhance their production facilities, more over the climatic conditions and other macro factors are suitable for the growth of pharma and especially biotech., Industries in these two states. Table2.14 shows the state wise distribution in north India.
FiG.-2.6 :STATE- WISE DISTRIBUTION OF PHARMACEUTICAL SECTOR IN INDIA, 2010-11 . graph3.JPG
Source: Annual report: 2010-11
The above map of India shows the state wise distribution of pharma units, as per annual report-2010-11, of Department of pharmaceuticals, Ministry of chemicals & fertilizers, Government of India. We can compare with table no: 2.15. The distribution of pharmaceutical units in north Indian states has increased substantially as compared to year, 2000-01.
Table: 2.9: STATE- WISE DISTRIBUTION OF PHARMACEUTICAL SECTOR IN NORTH INDIA – 2000-01
NO. OF UNITS(numbers)
TOTAL PRODUCTION (Rs Lakh)
Source: ISID WORKING PAPER, 2007/02.
Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.
The key players in Indian market (excludingÂ their parent group financials andÂ operations) with there are as of operations in the industry’s avenues are enumerated below in Table 2.9.
The main areas segmented for the industry are: Â Domestic Generics, Developed market generics (also called the regulated markets), Emerging market generics (also called the ROW or the LRMs), CRAMS, Biosimilars or Biogenerics, Drug discovery (Novel Drugs), Vaccines and MedicalÂ Device.
India’s domestic Pharma market, which was valued at approximatelyUS$12 bn in 2010, and showed a strong growth of 21.3% for the twelve months ending September 2010, 14. PwC estimates that over the next 10 years, the domestic market will grow toUS$49 bn,a compounded annual growth rate (CAGR) of 15%, with the potential to reachUS$74 bn, a CAGR of 20%, if aggressive growth drivers kick in Viz. the double digit GDP growth rates, the government policies supporting the R&D investments, insurance sector reforms and growth, the pricing controls leading to the drugs’ affordability even by the major rural markets Â but as of now the rural markets contribute to only 17% of the sales so there’s a huge market unleashed and the improvements in the patented drugs sale in the domestic market due to increasing per capita income ofÂ India.
Table: 2.9: KEY PLAYERS IN INDIAN PHARMACEUTICAL MARKET
PHARMACEUTICAL MARKET KEY PLAYERS IN INDIAN
The highly fragmented Indian pharmaceutical industry has around 30,000 players, out of which 330 are in organized sector. Indian pharmaceutical industry exports its products to more than 200 countries, including highlyregulated markets of Europe, Japan, USA and Australia. The cGMPs developed by the industry,regulators and government agencies like USFDA (USA), WHO (Geneva-Global), ANVISA(Brazil), MCC (South Africa), TGA (Australia), SFDA (China), DCGI (India) others likecountry specific Ministries of Health facilitate the production of different dosage forms at thehighest of their global standards. Indian firms (and firms with Indian subsidiaries) have grabbed revenues out of a few major operational segments of industry sub division Viz. from US Market& Non US but International Market formulations, Domestic formulations, and CRAMS and others as shown in theÂ representation table:2.16.
2.9 TOP PHARMAEUTICAL COMPANIES IN INDIA: A SHORT REVIEW
There are five government-owned companies the Indian public sector. These companies are the Indian Drugs and Pharmaceuticals, Hindustan Antibiotics Limited, Bengal Chemicals and Pharmaceuticals Limited, Bengal Immunity Limited and Smith Stanistreet Pharmaceuticals Limited. Some of the major Indian private companies are Alembic Chemicals, Aurobindo Pharma, Ambalal Sharabhai Limited, Cadila Healthcare, Cipla, Dr Reddy’s, IPCA Laboratories, Jagsonpal Pharma, J.B. Chemicals, Kopran, Lupin Labs, Lyka Labs, Nicholas Piramal, Ranbaxy Labs, Matrix Laboratories, Orchid Chemical and Pharmaceuticals, Sun Pharmaceuticals, Ranbaxy Laboratories, Torrent Pharma, TTK Healthcare, Unichem Labs, and Wockhardt.
The foreign companies in India include Abott India, Astra Zeneca India, Aventis Pharma India, Burrough-Wellcome, Glaxo SmithKline, Merck India, Novartis, Pfizer Limited, and Wyeth Ledele India and many more.
India also exports pharmaceuticals to numerous countries around the world, including to the U.S., Germany, France, Russia and UK.
Since our major concern is relationship marketing in pharmaceutical industry, so a short review of Indian companies is presented which was observed during the research study and also an integral to our topic concern. Tableâ€¦.. Shows the some of major pharma companies in India, doing a good business worldwide.
YEAR OF ESTABLISHMENT
The company was incorporated in 1961 and went public in 1973.In June 2008, Daiichi Sankyo acquired a 34.8% stake in Ranbaxy for a value $2.4 billion. In November 2008, Daiichi-Sankyo completed the takeover of the company from the founding Singh family in a deal worth $4.6 billion by acquiring a 63.92% stake in Ranbaxy.
Ranbaxy is among the top 100 pharmaceuticals in the world and that it is the 15 th fastest growing company.
It is consolidating its position to become the top 5 generics producer in the World, with the purchase of French firm RGP Aventis in 2003. It keeps a dedicated research facility staffed with over 1100 scientists. They currently have two molecules in Phase II trials and 3-5 in pre-clinical testing.
The Company is aggressively pursuing its internationalization strategy it has also gained market leadership in India, leveraging its strong brand building skills.Ranbaxy exports its products to 125 countries with ground operations in 46 and manufacturing facilities in seven countries.
In 2011, Ranbaxy Global Consumer Health Care received the Pharma OTC Company of the year award.
For the year ended Dec 31, 2006, the Company’s Global Sales were at USD 1,340 Million. Overseas markets accounted for around 80% of global sales.
The Company’s largest market, USA with the sales of USD 380 Million, while Europe and BRICS (Brazil,Russia, India, China, South Africa) countries contributed USD 194 Million and USD 477 Million to global sales.
The addition of Ranbaxy Laboratories extends Daiichi-Sankyo’s operations – already comprising businesses in 22 countries. The combined company is worth about $30 billion.
In 2010, Company registered a gross profit of rs17070.9 million as compared to rs.3924.1 million in, 2001.
GLOBAL PRESENCE/MARKETING NETWORK
Ranbaxy has an expanding international portfolio of affiliates, joint ventures and representative offices across the globe with a presence in 23 of the Top 25 pharma markets of the world. It has robust operations in USA, UK, France, Germany, Russia, India, Romania and South Africa, and is strengthening its business in Japan, Italy, Spain and several other markets in the Asia Pacific.
The Company has successfully concluded 15 acquisitions since 2004, including 8 in 2006 (4 in Europe, 1 in the US, 2 in India and 1 in South
Africa). Ranbaxy will continue to look at target acquisitions in US, Europe, India and emerging markets based on value and synergies that can be unlocked from such transactions.
By 2012, Ranbaxy hopes to be one of the top 5 generics producers in the world. The Company will focus on increasing its momentum in the generics business in its key markets of US, Europe, BRICS and Japan through organic and inorganic routes.
Table:2.11 Dr. Reddy’s Laboratories
Dr. Reddy’s Laboratories
Year of Establishment
The company was Founded in 1984 with US $160,000
Dr. Reddy’s is a vertically integrated, global pharmaceutical company with proven research capabilities and presence across the pharmaceutical value chain. They manufacture Active Pharmaceutical Ingredients (API) and Finished Dosage forms. In addition, the drug discovery arm of the company conducts basic research in the areas of diabetes, cardiovascular, inflammation and bacterial infection. Dr. Reddy’s was the first Asia-Pacific pharmaceutical outside of Japan and the sixth Indian company to be listed on the New York Stock Exchange. 58 per cent of Dr. Reddy’s revenues come from generic drugs. Dr. Reddy’s has long been a research-oriented firm. It had set up a New Drug Development Research (NDDR) in 1993 and out-licensed its first compound just four years later. Dr. Reddy’s has since outlicensed two more molecules and currently has three others in clinical trials.Revenues for fiscal 2007 were USD 1.51 billion .The net revenue had increased to US$ 1.6billion in 2011 with net income of US $ 248million in 2011.
Global Presence/ Marketing network
They market their products globally, with a focus on United States, Europe, India and Russia.
-.Acquires Benzex Laboratories Pvt. Limited in 1988 to expand its bulk actives business.
– Acquisition of American Remedies Limited, a pharmaceutical company based in India. In 1999.
– Dr. Reddy’s Laboratories become India’s third largest pharmaceutical company with the merger of Cheminor Drugs Limited, a group company in 2001.
– Conducts its first overseas acquisition – BMS Laboratories Limited and Meridian Healthcare in UK in 2002.
-Acquires Roche’s API Business with a total investment of USD 59 million in 2005.
-Acquires betapharm- the fourth-largest generics company in Germany for a total enterprise value of â‚¬ 480 million in 2006.
Future Prospects – Dr Reddy’s Laboratory Licensing deal with Novo Nordisk Open to brand acquisitions ,bulk prices haven’t bottomed out as yet
Table:2.12 Nicholas Piramal
Piramal healthcare (Nicholas Piramal)
Year of Establishment
Established in 1988
Nicholas Piramal started its existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of mergers, acquisitions and alliances. The company has formed a name for itself in the field of custom manufacturing. It cites its 1700-person global sales force as a core strength. It is well-poised for the challenge of surviving in the aftermath of product patent protection. The company has respected intellectual property rights since its inception.
The company grossing USD 350 million per year. It gained a revenue of INR3,671.05 crore (US$732.37 million) in 2010-11,with a net income of INR481.74 crore(US$96.11 million) in 2010-11.
Global Presence/ Marketing Network
Nicholas Piramal gained a sales and marketing network spanning 90 countries.
Recently, the UN Conference on Trade and Development’s World Investment Report 2011 ranked Piramal Healthcare’s CMO (contract manufacturing) business vertical as number five in the top 10 pharmaceutical contract manufacturers worldwide; and was awarded the number one position amongst all Indian CMOs
The company started its existence with the 1988 acquisition of Nicholas Laboratories and grew through a series of mergers, acquisitions and alliances. It has recently acquired Rhodia’s inhalation anaesthetics business.
Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent protection. 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 100,000.
Year of Establishment
In 1935, Founded by nationalist Indian scientist Khwaja Abdul-Hamied, the, Chemical, Industrial & Pharmaceutical Laboratories was set up, which came to be popularly known as Cipla. It was officially opened on September 22, 1937 when the first products were ready for the market.
Today they have 31 world-class manufacturing facilities spread across the country, with dedicated plants for Oncology products, Hormones, Inhalers, Carbapenems, and Cephlosporins, among others. They more than meet the stringent international standards, such as that of US FDA, MHRA-UK, TGA Australia, Bfarm-Germany MCC-South Africa, WHO, TPD-Canada.
Cipla produces one of the widest ranges of products and dosage forms in the world today, everything from tered-dose inhalers, pre-filled syringes, trans-dermal spray patches, lyophilized injections, nasal sprays, medical devices, and thermolabile foams. Whether it is constantly extending our product range or consistently introducing innovations, the mission is always to make the life of the patient better.
Revenue in 2004 totaled USD 552 million (using Rs 43.472 = USD1) about 75 per cent of which was derived in India. It recorded a revenue of INR6,422.88crore (US$1.28 billion) IN 2011,with a net income of rs960.39 crore(US$191.6 million) in 2011.
Global Presence/ Marketing Network
cipla has been building a strong global presence, and it now distributes its 800-odd products in over 170 countries.
Mainly focused on the domestic market, Cipla has largely refrained from big-ticket acquisitions overseas, new molecules research and patent challenges.
Cipla started with a vision to build a healthy India. And along the way realised, that in their own small way, they could contribute to making the world a healthier place. They will continue to bring a smile on as many faces as they can to heal the world as much as they can.
Year of Establishment
Biocon India is incorporated as a joint venture between Biocon Biochemicals Ltd. of Ireland and an Indian entrepreneur, Kiran Mazumdar-Shaw in 1978.
Biocon is India’s premier biotechnology company. Headquartered in Bangalore Biocon has evolved from an enzyme company to a fully
integrated biopharmaceutical enterprise, focused on healthcare. Biocon strategically focuses its activities on its bio-pharma business verticals that include APIs, biologicals and proprietary molecules.
Biocon Limited and its two subsidiary companies, Syngene International Limited and Clinigene International Limited form a fully integrated biotechnology enterprise specializing in biopharmaceuticals, custom research and clinical research.
Total Revenues is Rs 9.9 billion for the year-ended 31 st March, 2007, which increased to INR28.14 billion (US$561.39 million) in 2010-11 with a net income of INR3.68 billion (US$73.42 million) in 2010-11.
Global Presence/ Marketing Network
Biocon’s integrated business approach has enabled the company to establish a significant presence in the global biopharmaceutical market
via its product offerings and customized, high value solutions at any stage in the lifecycle of a drug-from discovery to market.
It was Among Top 20 Indian companies in Forbes ‘Best Under A Billion’ list in 2009.
It received Bio-Excellence Award 20100, for Outstanding Achievement in the Healthcare Sector at Bangalore Bio.
In 2007, Biocon made a strategic decision to divest its historic enzymes business to Novozymes A/S of Denmark.
Consistent with their long-term growth strategy, Biocon remains committed to building biotherapeutics franchise through their own R&D efforts. To further enhance their IP and technology platforms, they have made and investment of Rs. 764 million in R&D, which is a 76% increase over the previous fiscal.
Table:2.15 Aurbindo pharma
Year of Establishment
Aurobindo Pharma was born of a vision. Founded in 1986 by Mr. P.V.Ramaprasad Reddy, Mr. K.Nityananda Reddy and a small, highly committed group of professionals
The company became a public venture in 1992. It commenced operations in 1988-89 with a single unit manufacturing semi synthetic penicillins (SSPs) at Pondicherry. Aurobindo Pharma had gone public in 1995 by listing its shares in various stock exchanges in the country. The company is the market leader in semi-synthetic penicillin drugs. It has a presence in key therapeutic segments like SSPs, cephalosporins, antivirals, CNS, cardio-vascular, gastroenterology, etc.
Revenue reached US$865.19(million)e
Global Presence/ Marketing Network
Aurobindo Pharma has identified international operations, catering to over 100 countries, as a major engine of growth and expanding global network of marketing and manufacturing operations across countries like China, Brazil, Japan, Netherlands, South Africa, Thailand, UK, USA, Russia, Netherlands and many more which will further expand its international reach.
The company’s robust product portfolio is spread over 6 major product areas (encompassing Antibiotics, Anti-Retro Virals, CVS, CNS, Gastroenterologicals, and Anti-Allergics) with around 65 APIs in the non-antibiotics and over 55 APIs in the antibiotic segment.
It ranks among the top 5 pharma companies in India and is a multi product, multi technology, transnational company. Today, the Company’s products are serving consumers in India and over 100 other countries.
Subsidiaries in strategic pharmaceutical markets have positioned it to ride the challenges, powered by the strengths, the brilliance and hard work of its global workforce, stellar track record, ever-growing infrastructure and cost-competitiveness.
-Planning to further penetrate through joint ventures/subsidiaries/organic means into China, Brazil and other Latin American countries.
-Emerging as a leading player in global high quality innovative speciality generic formulations and domestic brand segments.
– Develop a broad portfolio of DMFs/ANDAs through non-infringing processes and intellectual properties and become a significant player in the generics market, especially in the regulated markets.
-Aurobindo will be good formulation company with the largest Active Pharmaceutical Ingredients manufacturer under CGMP qualified plant.
TABLE-2.16: TOP 20 PUBLIC LISTED LIFE SCIENCE COMPANIES IN INDIA
REVENUE(2011) in Million USD
Dr. Reddy’s Lab
GSK Pharmaceuticals ltd.
Orchid chemicals & pharmaceuticals ltd.