Post on 07-May-2015
Growth of Indian pharmaceuticals in the world market
CONTENTS
Sr
No
chapter Page
no
1 Introduction 3-11
2 Reasons for Growth 12-17
1 Cost advantage 13
2 Contract Manufacturing 14
3 Research and Development 16
4 Mergers and Acquisitions 17
3 SWOT Analysis 18-23
1 SWOT Analysis 19
2 Trends and Strategies 24
4 Efforts Taken by the government 25-35
1 Experience Drawn from Past Pharmaceutical Policies 25
2 Important Developments after liberalization process in 1991 27
3 Research and Development 30
4 Pharma ParksSEZs for Pharma industry 33
5 Greater Thrust on Pharma Exports 34
5 Efforts Taken by the industry 36-37
6 Major Players 38-43
1 Ranbaxy Laboratories 39
2 Dr Reddys Laboratories 40
3 Nicholas Piramal 41
4 Cipla 41
5 Biocon 42
6 Serum Institute of India 42
7 Strides Arcolab 43
7 India vs China in pharmaceuticals 44-47
1 The Chinese edge 45
2 Where India scores 46
3 The equation Present and future 47
- 1 -
Growth of Indian pharmaceuticals in the world market
8 Some important articles 48-55
1 Tweaking drugs wont help cos skip price control 49
2 Cracking Japans generics market code 50
3 India as offshore pharma destination 51
4 Dr Reddys net profit triples 53
9 Conclusion 56
10 Recommendations 58
11 Bibliography 60
- 2 -
Growth of Indian pharmaceuticals in the world market
Introduction
- 3 -
Growth of Indian pharmaceuticals in the world market
The Indian pharmaceutical sector has come a long way being almost non-
existent before 1970 to a prominent provider of healthcare products meeting almost
95 of the countrys pharmaceuticals needs The domestic pharmaceutical sales have
increased from Rs4bn in 1970-71 to Rs214bn in 2002 at a CAGR of 137 per
annum The total Indian production constitutes about 13 of the world market in
value terms and 8 in volume terms The per capita consumption of drugs in India
stands at US$3 is amongst the lowest in the world as compared to Japan- US$412
Germany- US$222 and USA- US$191
Indian pharmaceutical industry is mounting up the value chain From being a
pure reverse engineering industry focused on the domestic market the industry is
moving towards basic research driven export oriented global presence providing
wide range of value added quality products and services Government policies will
play an important role in defining the future of the pharmaceutical industry The
product patent regime which came into effect from January 2005 will lead to long-
term growth for the future
In the present scenario the growth of a domestic pharmaceutical company is
critically dependent on its therapeutic presence The old and mature categories like
anti-infectives vitamins analgesics are de-growing while new lifestyle categories
like Cardiovascular Central Nervous System (CNS) and Anti Diabetic are expanding
at double-digit growth rates
Increased generic penetration intense competition fragmentation of the
industry has negatively impacted the overall value growth of the domestic
pharmaceutical market In this scenario to grow in the domestic market
pharmaceutical companies are constantly eyeing for innovation introduction of new
value added products product life cycle management and enlarging their market
reach
Indian companies are putting their act together to tap the generic drugs
markets in the regulated high margin markets of the developed countries The US
- 4 -
Growth of Indian pharmaceuticals in the world market
market will remain the most lucrative market for the Indian companies led by its
market size and the intensity of blockbuster drugs going off patent An estimated
US$45bn of drugs expected to go off patent by 2007 in US alone
Outsourcing in the fields of RampD and manufacturing is the next best event in
the pharmaceutical industry Spiraling cost expiring patents low RampD cost and
market dynamics are driving the MNCs to outsource both manufacturing and research
activities India with its apt chemistry skills and low cost advantages both in research
and manufacturing coupled with skilled manpower will attract a lot of business in the
days to come
The Indian Pharmaceutical Industry today is in the front rank of Indiarsquos
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 $ 45 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
Playing a key role in promoting and sustaining development in the vital field
of medicines Indian Pharmaceutical Industry boasts of quality producers and many
units approved by regulatory authorities in USA and UK International companies
associated with this sector have stimulated assisted and spearheaded this dynamic
development in the past 53 years and helped to put India on the pharmaceutical map
of the world
The Indian Pharmaceutical sector is highly fragmented with more than 20000
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
- 5 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
8 Some important articles 48-55
1 Tweaking drugs wont help cos skip price control 49
2 Cracking Japans generics market code 50
3 India as offshore pharma destination 51
4 Dr Reddys net profit triples 53
9 Conclusion 56
10 Recommendations 58
11 Bibliography 60
- 2 -
Growth of Indian pharmaceuticals in the world market
Introduction
- 3 -
Growth of Indian pharmaceuticals in the world market
The Indian pharmaceutical sector has come a long way being almost non-
existent before 1970 to a prominent provider of healthcare products meeting almost
95 of the countrys pharmaceuticals needs The domestic pharmaceutical sales have
increased from Rs4bn in 1970-71 to Rs214bn in 2002 at a CAGR of 137 per
annum The total Indian production constitutes about 13 of the world market in
value terms and 8 in volume terms The per capita consumption of drugs in India
stands at US$3 is amongst the lowest in the world as compared to Japan- US$412
Germany- US$222 and USA- US$191
Indian pharmaceutical industry is mounting up the value chain From being a
pure reverse engineering industry focused on the domestic market the industry is
moving towards basic research driven export oriented global presence providing
wide range of value added quality products and services Government policies will
play an important role in defining the future of the pharmaceutical industry The
product patent regime which came into effect from January 2005 will lead to long-
term growth for the future
In the present scenario the growth of a domestic pharmaceutical company is
critically dependent on its therapeutic presence The old and mature categories like
anti-infectives vitamins analgesics are de-growing while new lifestyle categories
like Cardiovascular Central Nervous System (CNS) and Anti Diabetic are expanding
at double-digit growth rates
Increased generic penetration intense competition fragmentation of the
industry has negatively impacted the overall value growth of the domestic
pharmaceutical market In this scenario to grow in the domestic market
pharmaceutical companies are constantly eyeing for innovation introduction of new
value added products product life cycle management and enlarging their market
reach
Indian companies are putting their act together to tap the generic drugs
markets in the regulated high margin markets of the developed countries The US
- 4 -
Growth of Indian pharmaceuticals in the world market
market will remain the most lucrative market for the Indian companies led by its
market size and the intensity of blockbuster drugs going off patent An estimated
US$45bn of drugs expected to go off patent by 2007 in US alone
Outsourcing in the fields of RampD and manufacturing is the next best event in
the pharmaceutical industry Spiraling cost expiring patents low RampD cost and
market dynamics are driving the MNCs to outsource both manufacturing and research
activities India with its apt chemistry skills and low cost advantages both in research
and manufacturing coupled with skilled manpower will attract a lot of business in the
days to come
The Indian Pharmaceutical Industry today is in the front rank of Indiarsquos
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 $ 45 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
Playing a key role in promoting and sustaining development in the vital field
of medicines Indian Pharmaceutical Industry boasts of quality producers and many
units approved by regulatory authorities in USA and UK International companies
associated with this sector have stimulated assisted and spearheaded this dynamic
development in the past 53 years and helped to put India on the pharmaceutical map
of the world
The Indian Pharmaceutical sector is highly fragmented with more than 20000
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
- 5 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Introduction
- 3 -
Growth of Indian pharmaceuticals in the world market
The Indian pharmaceutical sector has come a long way being almost non-
existent before 1970 to a prominent provider of healthcare products meeting almost
95 of the countrys pharmaceuticals needs The domestic pharmaceutical sales have
increased from Rs4bn in 1970-71 to Rs214bn in 2002 at a CAGR of 137 per
annum The total Indian production constitutes about 13 of the world market in
value terms and 8 in volume terms The per capita consumption of drugs in India
stands at US$3 is amongst the lowest in the world as compared to Japan- US$412
Germany- US$222 and USA- US$191
Indian pharmaceutical industry is mounting up the value chain From being a
pure reverse engineering industry focused on the domestic market the industry is
moving towards basic research driven export oriented global presence providing
wide range of value added quality products and services Government policies will
play an important role in defining the future of the pharmaceutical industry The
product patent regime which came into effect from January 2005 will lead to long-
term growth for the future
In the present scenario the growth of a domestic pharmaceutical company is
critically dependent on its therapeutic presence The old and mature categories like
anti-infectives vitamins analgesics are de-growing while new lifestyle categories
like Cardiovascular Central Nervous System (CNS) and Anti Diabetic are expanding
at double-digit growth rates
Increased generic penetration intense competition fragmentation of the
industry has negatively impacted the overall value growth of the domestic
pharmaceutical market In this scenario to grow in the domestic market
pharmaceutical companies are constantly eyeing for innovation introduction of new
value added products product life cycle management and enlarging their market
reach
Indian companies are putting their act together to tap the generic drugs
markets in the regulated high margin markets of the developed countries The US
- 4 -
Growth of Indian pharmaceuticals in the world market
market will remain the most lucrative market for the Indian companies led by its
market size and the intensity of blockbuster drugs going off patent An estimated
US$45bn of drugs expected to go off patent by 2007 in US alone
Outsourcing in the fields of RampD and manufacturing is the next best event in
the pharmaceutical industry Spiraling cost expiring patents low RampD cost and
market dynamics are driving the MNCs to outsource both manufacturing and research
activities India with its apt chemistry skills and low cost advantages both in research
and manufacturing coupled with skilled manpower will attract a lot of business in the
days to come
The Indian Pharmaceutical Industry today is in the front rank of Indiarsquos
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 $ 45 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
Playing a key role in promoting and sustaining development in the vital field
of medicines Indian Pharmaceutical Industry boasts of quality producers and many
units approved by regulatory authorities in USA and UK International companies
associated with this sector have stimulated assisted and spearheaded this dynamic
development in the past 53 years and helped to put India on the pharmaceutical map
of the world
The Indian Pharmaceutical sector is highly fragmented with more than 20000
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
- 5 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
The Indian pharmaceutical sector has come a long way being almost non-
existent before 1970 to a prominent provider of healthcare products meeting almost
95 of the countrys pharmaceuticals needs The domestic pharmaceutical sales have
increased from Rs4bn in 1970-71 to Rs214bn in 2002 at a CAGR of 137 per
annum The total Indian production constitutes about 13 of the world market in
value terms and 8 in volume terms The per capita consumption of drugs in India
stands at US$3 is amongst the lowest in the world as compared to Japan- US$412
Germany- US$222 and USA- US$191
Indian pharmaceutical industry is mounting up the value chain From being a
pure reverse engineering industry focused on the domestic market the industry is
moving towards basic research driven export oriented global presence providing
wide range of value added quality products and services Government policies will
play an important role in defining the future of the pharmaceutical industry The
product patent regime which came into effect from January 2005 will lead to long-
term growth for the future
In the present scenario the growth of a domestic pharmaceutical company is
critically dependent on its therapeutic presence The old and mature categories like
anti-infectives vitamins analgesics are de-growing while new lifestyle categories
like Cardiovascular Central Nervous System (CNS) and Anti Diabetic are expanding
at double-digit growth rates
Increased generic penetration intense competition fragmentation of the
industry has negatively impacted the overall value growth of the domestic
pharmaceutical market In this scenario to grow in the domestic market
pharmaceutical companies are constantly eyeing for innovation introduction of new
value added products product life cycle management and enlarging their market
reach
Indian companies are putting their act together to tap the generic drugs
markets in the regulated high margin markets of the developed countries The US
- 4 -
Growth of Indian pharmaceuticals in the world market
market will remain the most lucrative market for the Indian companies led by its
market size and the intensity of blockbuster drugs going off patent An estimated
US$45bn of drugs expected to go off patent by 2007 in US alone
Outsourcing in the fields of RampD and manufacturing is the next best event in
the pharmaceutical industry Spiraling cost expiring patents low RampD cost and
market dynamics are driving the MNCs to outsource both manufacturing and research
activities India with its apt chemistry skills and low cost advantages both in research
and manufacturing coupled with skilled manpower will attract a lot of business in the
days to come
The Indian Pharmaceutical Industry today is in the front rank of Indiarsquos
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 $ 45 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
Playing a key role in promoting and sustaining development in the vital field
of medicines Indian Pharmaceutical Industry boasts of quality producers and many
units approved by regulatory authorities in USA and UK International companies
associated with this sector have stimulated assisted and spearheaded this dynamic
development in the past 53 years and helped to put India on the pharmaceutical map
of the world
The Indian Pharmaceutical sector is highly fragmented with more than 20000
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
- 5 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
market will remain the most lucrative market for the Indian companies led by its
market size and the intensity of blockbuster drugs going off patent An estimated
US$45bn of drugs expected to go off patent by 2007 in US alone
Outsourcing in the fields of RampD and manufacturing is the next best event in
the pharmaceutical industry Spiraling cost expiring patents low RampD cost and
market dynamics are driving the MNCs to outsource both manufacturing and research
activities India with its apt chemistry skills and low cost advantages both in research
and manufacturing coupled with skilled manpower will attract a lot of business in the
days to come
The Indian Pharmaceutical Industry today is in the front rank of Indiarsquos
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 $ 45 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
Playing a key role in promoting and sustaining development in the vital field
of medicines Indian Pharmaceutical Industry boasts of quality producers and many
units approved by regulatory authorities in USA and UK International companies
associated with this sector have stimulated assisted and spearheaded this dynamic
development in the past 53 years and helped to put India on the pharmaceutical map
of the world
The Indian Pharmaceutical sector is highly fragmented with more than 20000
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
- 5 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
The pharmaceutical industry in India meets around 70 of the countrys
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 ie medicines ready for consumption by patients and
about 350 bulk drugs ie chemicals having therapeutic value and used for production
of pharmaceutical formulations
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 RampD 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 Indian patent act of 1970 amended on March 22 2005 marks the end of a
protected era and signals a new phase in the integration of India into the global
pharmaceutical market The new amendment seeks to make copying of post-1995
patented drugs illegal As India enters product patent regime how will it affect the
Indian pharmaceutical industry (IPI) health care industry legal machinery enforcing
the regulations and most importantly patients in India and the developing world given
the fact Indian drugs are exported to more than 65 countries
With a regulatory system focused only on process patents helped to establish
the foundation of a strong and highly competitive domestic pharmaceutical industry
which in the grip of a rigid price control framework transformed into a world supplier
of bulk drugs and medicines at affordable prices to common man in India and the
developing world Introduction of product patents will however mark the end of a
golden age for IPI The new regulations will reshape the landscape of IPI forcing
- 6 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
significant changes and divide within the industry A look into organization of
pharmaceutical producers of India (OPPI) directory shows only 300 units out of
10000 registered companies are in the organized sector While process patent helped
to flourish IPI into a world-class generics industry product patent regime will filter
the best from the pack and would be favorable to players with built-in scientific and
technical resources The impact of the new regulations will not deter the Indian
pharmaceutical majors as they are already doing roaring business in the very countries
where these patent laws are strictly in force
Driven by the knowledge skills growing enterprise low costs improved
quality and demand (domestic and international) the pharmaceuticals sector has
witnessed a tremendous growth over the past few years - from a turnover of Rs 5000
crores in 1990 to over Rs 50000 crores during 2004-05 Exports have also grown
very significantly to over Rs 16700 crores during this period
Exports of Drugs Pharmaceuticals and Fine Chemicals
1999-2000 2000-01 2001-02 2002-03 2003-04
Rs 723016
Crore
($ 160
billion)
Rs 857547
Crore
($195 billion)
Rs 98347
Crore
($218
billion)
Rs 11925 4
Crore
($2 65
billion)
Rs 1410000
Crore
($313 billion)
Growth of Pharmaceutical Exports
1999-
2000
2000-
01
2001-
02
2002-
03
2003-
04
1557 2073 1113 212 1824
- 7 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Export markets increasingly drive IPI in a turnover of US$5 billion exports
constitute $32 billion and the industry is poised to grow to $25 billion by 2010
(McKinsey) The share of IPI in world pharmaceutical market is 10 (ranks 13th) in
value and 8 (ranks 4th) in volume terms The global market for generic drugs is
estimated at $27 billion (2001) and the expiry of patents on drugs will be worth $80
billion (2005) offers a huge opportunity to IPI The industry has developed Good
Manufacturing Practices (GMP) facilities for the production of different dosage
forms The pharmaceutical industry exports drugs and pharmaceuticals worth over $
38 billion It ranks 17th in terms of export value of bulk actives and dosage Indian
exports cover more than 200 countries including the highly regulated markets of
USA Europe Japan and Australia
It is also recognized that the cost of drugs produced in India is amongst the
lowest in the world It is estimated that by the year 2010 industry has the potential to
achieve Rs 1 00000 crores in formulations with bulk drug production going up from
Rs 8000 crores to Rs 25000 crores Indiarsquos rich human capital is believed to be the
strongest asset for this knowledge-led industry Various studies show that the
scientific talent pool of 4 million Indians is the second largest English speaking group
worldwide after the US
India today has the largest number of US Food amp Drug Administration (FDA)
approved drug manufacturing facilities outside the US In addition Drug Master Files
(DMFs) filed by Indian companies with the FDA is 126 higher than Spain Italy
China and Israel put together DMF has to be approved by FDA for a drug to enter the
US market
Research amp Development (RampD) is a key to the strength of pharmaceutical
industry especially in the product patent period The global pharmaceutical industry
spent $304 billion (2001) on RampD The RampD expenditure (as a percentage of
turnover) by the IPI is low (19) when compared global giants (10 - 16) With
transition into the new regime many Indian companies are mobilizing their resources
war chest with an increase in their RampD budget Government of India (GOI)
- 8 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
encouraged the RampD in pharmaceutical companies by extending 10 year tax holiday
to this sector Besides planning commission has earmarked $34 million towards drug
industry RampD promotion fund for the tenth plan
Globally pharmaceutical industry grew at a compounded annual growth rate
of 91 per cent in the last 23 years to $491 billion propelled by a string of innovative
blockbusters Multinationals were reshaped by mergers and acquisitions as a way of
fattening their research pipelines This at best represents a short-term solution With a
slew of brand name drugs losing patent protection in the next few years and the
pressure building for pharmaceuticals to cut price these giants find themselves under
immense strain to find new drugs and reduce price Bringing a new drug into the
market costs a company an average of about $800 to $900 million Some estimates
show that patient recruitment and medical personnel account for nearly 70 per cent of
the clinical costs that are required to bring a drug to market The less expensive means
to raise research productivity is outsourcing research to low cost havens such as India
and China The global pharmaceutical outsourcing market stands at $10 billion
(2004)
Pharmaceutical multinationals have maintained a low-key presence in Indian
market due to absence of product patents and rigid price controls Pharmaceutical
industry did not receive significant foreign direct investment (FDI) From August
1991 to December 1998 this industry accounted for a meager 044 of the total FDI
Introduction of product patents will see multinationals strengthening their presence in
the country The second largest population in the world a growing economy and
rising income levels makes Indian market difficult to ignore
In the domestic market the share of Indian companies has steadily increased
from around 20 per cent in 1970 to 70 percent now Ranbaxy Laboratories is the
market leader in terms of revenues followed by Cipla and Dr Reddys Laboratories
Glaxo is the only multinational to figure among the top ten pharma companies in
India
- 9 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
In India 97 per cent of drugs are off patent and are manufactured by a vast
number of companies The key therapeutic segments include anti-infectives cardio
vascular and central nervous system drugs Anti-infectives comprise the largest
therapeutic segment in India accounting for about 26 per cent of the market
Lets take a look at how and whom does the new rule affect with a few specific
case A symptom of the new regulation is a dispute about the anti-blood cancer drug
Gleevac sold by Novartis for $2750 per month when the prohibited generics used to
cost less than one-tenth of the price In India 24000 new cases of this disease are
reported each year with about 18000 patients succumbing to it The country does not
have a strong health insurance sector as in the US to cushion the rising healthcare
cost In addition most patients pay for medicines through their own funding and is not
backed by medical insurance schemes Private sector provides 80 of the countryrsquos
health care and the government role is limited with a budget of only $215 million as
per the 2005-06 budget estimates
Since 1986 when the first case of AIDS was reported in India the affected
population has grown to 45 million in the late 2002 The impact of the recent
amendments will be felt in developing world as well as half the AIDS patients in the
third world rely on Indias generic drug industry Cipla Ranbaxy Laboratories Matrix
Laboratories and Hetero Drugs recently announced an agreement with the Clinton
foundation to provide drugs to four African and nine Caribbean countries at a per
capita cost of about $037 per day Indias ministry of health is negotiating a final
price with the generic drug manufacturers in an effort to obtain drugs for India at a
price even lower than that The 12 ARVs (anti retro-viral drugs) used for AIDS and
manufactured in India are pre-1995 period inventions As AIDS patients develop
resistance to old drugs new treatments will become less affordable
If a drug is desperately needed the new law allows the government like the
rest of the world to declare an emergency and cancel its patent India had never
declared such an emergency and for years resisted admitting that it had an AIDS
problem
- 10 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
India is also home to 25 million DementiaAlzheimers disease patients As
most of the anti- holinesterse drugs are recent the price of these medicines would
automatically go up
The government-run patent office will come under pressure for the first time
in several years to streamline the entire process As with any new administrative or
legal system transition to a new regime will not be smooth Can the enormously
strained Indian legal system bear the additional pressures as we enter the product
patent world
The decades of incubation and shielding of IPI by favorable government
policies and absence of foreign competition is over IPI is in the cross roads now and
staring at a new world full of opportunities and threats
The Indian pharmaceutical industry is fast on its road to healthy growth The
Indian pharmaceutical sector was largely positioned as a generics market But now it
is transforming to emerge as major contributor in the global perspective
The drive of the Indian pharmaceutical sector towards its greater share in the
global industry is from its introduction of product patents in 2005 In the last twenty
years patents were only granted on processes decision This being to the
disadvantages of many multi-national companies they exited from the country
However it turned advantageous to India which enabled it to become a leading
producer of generic medicines
RNCOSrsquo market research report ldquoOpportunities in Indian Pharmaceutical
Sectorrdquo tells that the pharmaceutical sector in India currently shares US $6 billion of
the total $552 billion global pharmaceutical industry And this share is poised to grow
at a rate of 12 every year compared to the annual growth of 8 in the world
market This is pointed evidence to the promising scenario of the pharmaceutical
market in India
- 11 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Reasons for Growth
Cost advantage
Contract Manufacturing
Research and Development
Mergers and Acquisitions
- 12 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Reasons for growth
21 Cost advantage
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
pricing pressures
low public opinion
challenges to intellectual property by increasingly aggressive generic
companies
re-importation pressures
MedicareMedicaid reform
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 a lot to gain because of its inherent advantages
like stability culture cost and educated workforce This has led to increased alliances
and collaborations thus eventually creating a win-win situation for both the parties
The growth of Indian pharma industry is also driven by the low drug
production costs which are 55 percent lower than in the western countries Another
reason of high growth rates is the system of contract manufacturing
- 13 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
22 Contract Manufacturing
Many global pharmaceutical majors are looking to outsource manufacturing
from Indian companies which enjoy much lower costs (both capital and recurring)
than their western counterparts Many Indian companies have made their plants
cGMP compliant and India is also having the largest number of USFDA-approved
plants outside USA
Indian companies are proving to be better at developing Active Pharmaceutical
Ingredients (APIs) than their competitors from target markets and that too with non-
infringing processes Indian drugs are either entering in to strategic alliances with
large generic companies in the world of off-patent molecules or entering in to contract
manufacturing agreements with innovator companies for supplying complex under-
patent molecules
Some of the companies like Dishman Pharma Divis Labs and Matrix Labs
have been undertaking contract jobs for MNCs in the US and Europe Even Shasun
Chemicals Strides Arcolabs Jubilant Organosys Orchid Pharmaceuticals and many
other large Indian companies started undertaking contract manufacturing of APIs as
part of their additional revenue stream Top MNCs like Pfizer Merck GSK Sanofi
Aventis Novartis Teva etc are largely depending on Indian companies for many of
their APIs and intermediates The Boston Consulting Group estimated that the
contract manufacturing market for global companies in India would touch $900
million by 2010 Industry estimates suggest that the Indian companies bagged
manufacturing contracts worth $75 million in 2004
- 14 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Select Contract Manufacturing Deals in India
Indian company Multinational Product
Lupin Laboratories Fujisawa Cefixime
ApotexCefuroxime Axetil Lisinopril
(Bulk)
Nicholas Piramal Allergan Bulk and Formulations
Advanced Medical
Optics Eye Products
Wockhardt Ivax Nizatidine (anti- ulcerant)
Dishman Pharmaceuticals Solvay
PharmaceuticalsEprosartan Mesylate
IPCA Labs Merck Bulk Drugs
Tillomed Atenelol
Orchid Chemicals and
Pharmaceuticals Apotex
Cephalosporin and other
injectables
Sun Pharma Eli Lilly CVS products anti-infective
drugs and insulin
Kopran Synpac
PharmaceuticalsPenicillin- G Bulk Drug
Cadila Healthcare Altana Pharma Intermediates for Pantoprazole
Boehringer IngelheimGastrointestinal and CVS
Products
Biocon Bristol Myers Squibb Bulk Drugs
- 15 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
23 Research and Development
India is becoming an increasingly attractive destination for RampD activities in
the pharmaceutical industry A variety of factors from changing IP and patent laws
via favorable costskill ratios to the past success of outsourcing in the IT fields have
converged to create a compelling business opportunity for Indian companies in
pharmaceutical RampD Global pharmaceutical companies can exploit this opportunity
by developing an lsquoIndia Strategyrsquo to enhance and complement their existing RampD
efforts Indian Pharmaceutical companies are in a favourable position to develop
drugs at a fraction of the international costs due to the low manpower cost
infrastructure quality scientists and the capability to conduct path-breaking research
The Government has taken various policy initiatives in order to strengthen
Research and Development in the pharma sector
Fiscal incentives are awarded to Research and Development units in the
pharma sectors towards the development of new drug molecules clinical
research new drug delivery systems new Research and Development set ups
and infrastructure provision
Certain leading Research and Development companies have increased their
Research and Development spending to over 5 percent of their turnover in
comparison to an average spending of 2 per cent
Pharma units interested in obtaining Income Tax Exemption under Section
35(2AB) need to get their Research and Development unit recognized by
CSIR
A Pharmaceutical Research and Development Promotion Fund to the tune of
Rs 150 crores has been established for promoting Research and Development
in the pharma sector
- 16 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
24 Mergers and Acquisitions
The pharmaceutical sector leads the MampAs wave after information technology
This trend is fuelled by the need to explore newer markets and products for future growth
in this industry Further acquisitions also act as mechanisms to alleviate regulatory
constraints in penetrating overseas markets Hence Indian pharmaceutical companies are
increasingly focusing on global acquisitions and are adopting the strategy of acquiring
existing generic drug marketing companies that hold valid drug licenses The
pharmaceutical companies have been aggressively making acquisitions overseas
especially in the US and Europe in the past two to three years Most of the acquisitions
have been in the generics space and have resulted in Indian firms gaining access to
manufacturing facilities in potential areas like the European Union Industry
consolidation is considered to be a better option for inducing growth Many organised
companies like Ranbaxy Sun Pharma Wockhardt DRL and Cipla have already adopted
the consolidation strategy in an attempt to strengthen their base in the regulated markets
by acquiring small companies in Europe and the US
- 17 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Trends and Strategies
- 18 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
SWOT Analysis
Strengths
1048707 Low cost - Indian manufacturers are one of the lowest cost producers of drugs in the
world With a scalable labor force Indian manufactures can produce drugs at 40to
50 of the cost to the rest of the world In some cases this cost is as low as 90
1048707 Strong technical skills ndash Indian pharmaceutical industry posses excellent chemistry
and process reengineering skills This adds to the competitive advantage of the Indian
companies The strength in chemistry skill help Indian companies to develop
processes which are cost effective
1048707 Fluency in English speaking - Most people in India especially those who are
educated and have advanced degrees are fluent in English This aptitude allows them
to communicate with most of the outside world which is an important asset to the IPI
The health statistics of India make it clear that India produces a sufficient number of
medical and pharmacy graduates which contributes to the strengthening of the IPI
1048707 Patent ndash The Patent Act and Drug Price Control Order of the 1970s forced MNCs to
shrink their operations in India thus providing space for indigenous pharmaceutical
companies to expand in the local market As a result in the past two to three decades
domestic pharmaceutical companies have established operations and are self
sufficient in all aspects For example Cipla Limited could provide the generic version
of the AIDS triple cocktail to impoverished South African people at $350patientyear
or at a price that is one-thirtieth its cost in the United States Indian patent laws
allowed local companies to set up operations to produce bulk drugs that are still under
patent by various synthetic routes The prevalence of this reverse engineering is
controversial but it suggests that the IPIrsquos chemists have a strong showing in organic
medicinal chemistry The IPIrsquos tremendous potential to produce bulk drugs will be a
major asset in future drug discovery programs
- 19 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Weaknesses
1048707 Poor RampD expenditure -Compared to the global pharmaceutical industry Indian
RampD expenditure is still minuscule which could have a negative effect in the long
run especially in Product Patent regime The average R amp D spend in India though
growing at a CAGR of 18 over last five years is just 19 of sales as against 10-
16 spend by global pharma companies Even if 25 of gross sales are invested in
RampD the IPIrsquos total RampD budget is comparatively very small Individual RampD
budgets of many US companies probably amount to much more than the cumulative
RampD budgets of all the companies in India Thus availability of funds is a major
weakness of the IPI
1048707 Tag of being ldquoCopy Catsrdquo ndash Majority of the Indian companies are dependent on
replicating drugs developed by MNCs hence Indian companies are viewed in not so
good light
1048707 Price Regulation - The Indian pharma companies are marred by the price
regulation Over a period of time this regulation has reduced the pricing ability of
companies The NPPA (National Pharma Pricing Authority) which is the authority to
decide the various pricing parameters sets prices of different drugs which leads to
lower profitability for the companies The companies which are lowest cost
producers are at advantage while those who cannot produce have either to stop
production or bear losses
1048707 Slow growth - Indian pharma market is one of the least penetrated in the world
However growth has been slow to come by As a result Indian majors are relying on
exports for growth To put things in to perspective India accounts for almost 16 of
the world population while the total size of industry is just 1 of the global pharma
industry
- 20 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
1048707 Low entry barriers - Due to very low barriers to entry Indian pharma industry is
highly fragmented This makes Indian pharma market increasingly competitive
The industry witnesses price competition which reduces the growth of the industry in
value term To put things in perspective in the year 2003 the industry actually grew
by 104 but due to price competition the growth in value terms was 82 (prices
actually declined by 22)
1048707 Labour laws - Outdated and restrictive labour laws are hampering all the industries
in India and making it unviable for the MNCs to set up production base in
India
1048707 Animal rights - Animal experiments are an essential part of pharmaceutical RampD
Every drug molecule must be screened using animals first to determine its efficacy
and side or toxic effects If Indian animal rights activists block the use of animals in
RampD experimentation the IPI will be forced to turn to other countries for animal
studies A great need exists to provide appropriate information to animal activists in
India so a balance can be struck between animal rights and human rights
1048707 Infrastructure - The infrastructure in India is good but could be improved The
development of infrastructure is a key to success and the IPI must take more
definitive steps to overcome this weakness
- 21 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Opportunities
1048707 Off patent drugs - Large number of drugs going off-patent in Europe and in the US
between 2005 to 2009 (approx $80 billion) offers a big opportunity for the Indian
companies to capture this market Since generic drugs are commodities by nature
Indian producers have the competitive advantage as they are the lowest cost
producers of drugs in the world
1048707 Expansion - Opening up of health insurance sector and the expected growth in per
capita income are key growth drivers from a long-term perspective This leads to the
expansion of healthcare industry of which pharma industry is an integral part
1048707 Outsourcing - Being the lowest cost producer combined with FDA approved plants
Indian companies can become a global outsourcing hub for pharmaceutical products
1048707 Patent - A patent is granted to an invention that is novel nonobvious and useful
The IPI has a clear opportunity to be part of the international patent community in the
acquisition of patents This process will stimulate economic development provide job
opportunities and help India build a global reputation as a nation with a strong
scientific community It will also make modern medicines available to the entire
Indian population More important indigenous RampD activities will help domestic
companies discover drugs to treat tropical diseases
- 22 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Threats
1048707 Transition from ldquoProcessrdquo patent to ldquoProductrdquo patent ndash This is the major threat
Indian pharmaceutical industry is facing Indian companies especially medium and
small sized do not have capabilities to develop new molecules and they may succumb
to the giants
1048707 Counterfeit drugs ndash The extent of the problem of counterfeit drugs is unknown
Counterfeiting is difficult to detect investigate and quantify So it is hard to know or
even estimate the true extent of the problem What is known is that they occur
worldwide and are more prevalent in developing countries It is estimated that
upwards of 10 of drugs worldwide are counterfeit and in some countries more than
50 of the drug supply is made up of counterfeit drugs
1048707 Other low cost countries - Threats from other low cost countries like China and
Israel exist However on the quality front India is better placed relative to China So
differentiation in the contract manufacturing side may wane
- 23 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Trends and Strategies
The Indian domestic pharmaceutical industry is increasingly becoming
globally competitive to counter the weaknesses and threats The key trends and
strategies being adopted by the local pharmaceutical industry are
Increased RampD Focus
Driven by the imminent change to a product patent regime at home from 2005
the leading pharmaceutical companies in India have been increasing their RampD
budgets over the yearsIndian pharmaceutical companies are likely to double their
expenditure on RampD over the next 2 years
Exports driven growth
Indian pharmaceutical companies are on a global beat Currently exports
contribute more than half the total revenues for most of the Indian pharmaceutical
majors Exports have increased in recent years as Indian pharmaceutical companies
have made deep inroads into the regulated generic markets of the US and Europe in
addition to unregulated markets
- 24 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Efforts Taken by the government
Experience Drawn from Past Pharmaceutical Policies
Important Developments after liberalization process in 1991
Research and Development
Pharma ParksSEZs for Pharma industry
Greater Thrust on Pharma Exports
- 25 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian government
In the year 2002 Government had formulated a new Drug Policy but the same
could not be implemented due to litigation involving it hence the policy of 1994 still
continues to be in force The present Policy known as the National Pharmaceuticals
Policy 2005 has been necessitated due to several developments that have taken place
during the course of last few years as well as to address some of the major concerns as
highlighted above Price regulation of the essential medicines is an important
component of this policy However several other matters having a close bearing on
the pharmaceuticals sector have also been included in the policy
41 Experience Drawn from Past Pharmaceutical Policies
The first comprehensive Drug Policy of 1978 and thereafter the Drug Policy of
1986 together with the application of process patent under the Patent Act of 1970
successfully paved the way for development of indigenous pharmaceutical industry
which went into the production of generic drugs in a big way A conducive
environment for success was provided by the then prevailing trade and economic
policies During the period from 1978 to 1990 indigenous industry acquired a
respectable status in terms of product range and market share RampD was confined to
process developmentinnovation of existing molecules As regards pricing the span of
control inclusionexclusion of drugs under price control methodologies adopted etc
continued to be debated The Government developed principles of selectivity from
time to time to keep the price control manageable and focused as would be observed
from declining trend in number of drugs under price control In 1970 almost all bulk
drugs and their formulations were under price control In keeping with the economic
policies of the country the number got reduced to 347 bulk drugs in 1979 142 in 1987
and finally to 74 in 1995 It would have got reduced further under the criteria adopted
in the Pharmaceutical Policy 2002 however the same could not be implemented due
to litigation involving it
- 26 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
42 Important Developments after liberalization process in 1991
Following are some of the important developments that have taken place in
pharmaceutical sector after the process of liberalization of the Indian economy was
initiated by the Government in the year 1991
1) Industrial Licensing
Industrial licensing for all kinds of drugs has been abolished (it has recently been
done for the last remaining bulk drugs produced by the use of recombinant DNA
technology bulk drugs requiring in-vivo use of nucleic acids and specific cell-tissue
targeted formulations)
However the need for obtaining manufacturing license under Drugs and Cosmetics
Act 1940 continues for all units whether organized or small scale The State Drug
Controllers are authorized to issue such licenses in most cases
2 Foreign Direct Investment
FDI up to 100 is permitted subject to stipulations laid down from time to time in
the Industrial Policy through the automatic route in the case of all bulk drugs cleared
by the Drug Controller General (India) all their intermediates and formulations
Recently bulk drugs produced by the use of recombinant DNA technology bulk drugs
requiring in-vivo use of nucleic acids as the active principles and special celltissue
targeted formulations have also been allowed this facility
3 Foreign Technology Agreement
Automatic approval for Foreign Technology Agreement (FTA) is already available in
the case of all the bulk drugs cleared by Drug Controller General (India) all their
intermediates and formulations except bulk drugs produced by the use of
recombinant DNA technology bulk drugs requiring in-vivo use of nucleic acids as the
active principles and specific celltissue targeted formulations
- 27 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
4 Imports
Imports of drugs and pharmaceuticals are regulated through EXIM Policy in force and
presently all items except those requiring clearance under The Narcotics and
Psychotropic Substances Act 1985 are allowed under OGL Further a centralized
system of registration has been introduced under the Drugs amp Cosmetics Act and
Rules made there under administered by Ministry of Health and Family Welfare
These arrangements may continue to regulate imports of Drugs and Pharmaceuticals
5 Exports
Exports are permitted in accordance with the EXIM Policy and relevant
proceduresrules formulated for the purpose by the Directorate General of Foreign
Trade Exports are also subject to laws prevalent in importing countries Also the
exporters are allowed imports of inputs on duty-free basis for export production The
industry has shown commendable export performance the trade balance being
positive Over the last few years the compounded annual growth rate in exports has
been 227 percent
6 Constitution of Pharmaceutical Export Promotion Council (Pharmexil)
In order to provide a boost to pharmaceutical exports Government constituted a
separate Export Promotion Council for Pharmaceuticals (Pharmexil) in the year 2004-
05 This Council works closely with the Department of Commerce and the Export
Promotion Cell in the Department of Chemicals and Petrochemicals to undertake
activities such as promoting exports preparing country-profiles assessing export
potential across the countries and to have greater degree of interaction internationally
7 Research amp Development
As recommended by the Mashelkar Committee in 1999 a Pharmaceutical Research
and Development Support Fund (PRDSF) with a corpus of Rs 150 crores has been set
up under the administrative control of the Department of Science and Technology A
Drug Development Promotion Board (DDPB) to administer the utilization of PRDSF
has also been set up
- 28 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
8 Product Patent in Pharmaceuticals -
Product patent in pharmaceuticals has been introduced in the country with
effect from 1st January 2005 by amending the Patents Act 1970 in conformity with
the TRIPS agreement The physical infrastructure in the four patent offices in the
country (Kolkata Delhi Chennai and Mumbai) has been substantially strengthened
and computerization has been introduced Steps are now being taken to further
augment and improve the software and human resources in these offices to enable
them to deal with the new responsibilities
9 Schedule M of Drugs and Cosmetics Act 1940-
The revised Schedule M of the Drugs and Cosmetics Act 1940 related to Good
Manufacturing Practices (GMP) has come into effect from 1stJuly 2005This would in
the long run strengthen the pharmaceutical industry as a producer of quality medicines
10 Introduction of Value Added Tax (VAT)
VAT has been introduced in India with effect from 1st April2005 Already 22 States
have implemented it The remaining States are likely to implement it in the near
future VAT on medicines has been kept at 4
11 Excise Duty payable on MRP (Maximum Retail Price)
A Notification was issued on 7th January 2005 under which Excise duty became
leviable on MRP with an abatement of 40
- 29 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
43 Research and Development ndash
A Fiscal Incentives
India is emerging as the most favored destinations for collaborative RampD
bioinformatics contract research and manufacturing and clinical research as a result
of growing compliance with internationally harmonized standards such as Good
Laboratory Practices (GLP) current Good Manufacturing Practices (cGMP ) and
Good Clinical Practices (GCP) With the application of product patent in the case of
pharmaceuticals it is imperative for the Indian industry to accelerate its efforts in
RampD in this sector The present level of spend on RampD (about 5 of turnover) is
much lower as compared to most of the developed countries (15 to 20) With a view
to encourage RampD in this sector it is essential to provide suitable incentives to
industry At the same time it is also necessary that the incentives are made use of by
those units which are genuinely engaged in RampD As such the required incentives
would be made available with some safeguards to ensure that these are available to
the deserving cases only The incentives available would be as under ndash
a) The benefit of 150 weighted exemption under section 35(2AB) to be continued
till 31st March 2015
b) Section 35(2AB) to be extended to depreciation on investment made in land and
building for dedicated research facilities expenditure incurred for obtaining
regulatory approvals and filling of patents abroad and expenditure incurred on clinical
trials in India
c) Reference Standard (sample under test) would be exempted from import duty
d) Reference books to be imported for RampD would be exempted from import duty
e) Presently there are 101 specified instruments (list 28) required for RampD purposes
which are exempt from import duty With the ever changing requirements new
instruments are required to be imported These instruments based on the certification
of DSIR would also be exempt from import duty The fiscal incentives are at present
only available up to 31st March 2007 Since RampD activity has to be carried over long
periods of time fiscal incentives would be granted over a longer period of time
extending upto 10 years ie upto 31st March 2015 The above incentives would be
available to such units which fulfill the following conditions
- 30 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
a) The unit should be prequalified and registered with Department amp Scientific and
Industrial Research (DSIR) as RampD centre
b) The unit should submit a statement certified by the Auditors showing the total
expenses incurred on RampD
c) In case of claims for clinical trials the unit should submit approval obtained from
the Drug Regulatory Authority for carrying out the trials and certificate by the CEO or
the Auditor for completion of trials
d) In case of claims for patent filing abroad the unit should submit relevant document
(official receipt etc) showing the filing expenses duly certified by the CEO or the
Auditor
e) In case of claims related to land and buildings the unit should submit a letter
signed by the CEO confirming that the claims pertain to facilities used exclusively for
R amp D
B RampD Intensive Companies (Gold Standard Companies)
The Pharmaceutical Research and Development Committee headed by Dr RA
Mashelkar in its report submitted to Government in November 1999 recommended
that RampD intensive companies fulfilling certain conditions should be given price
benefits for the drugs under DPCO It specified certain norms in this regard and
termed these as the gold standards Since six years have elapsed since this report was
submitted it has been considered proper to revise these norms
The revised norms are as under ndash
a) Invest at least 3 of the annual sales turnover on RampD or Rs 50 crores per annum
(average of last 3 years) whichever is higher on research facilities
b) Employment of at least 200 scientists in India (MScs or Phds employed at least for
one year)
c) Own and operate manufacturing facilities in India which have been approved by at
least two reputed foreign regulatory agencies (US Europe Japan Canada Australia
Israel South Africa etc)
- 31 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
d) Have filed at least 10 patent applications in India based on research done in India
Companies fulfilling the above norms would be eligible for the benefit of
200 weighted deduction under 35(2AB) till 31st March 2015 Additional incentives
under price control measures may also be considered to such companies by
Department of Chemicals and Petrochemicals However in order to be eligible for any
of the additional incentives such companies would be expected to fulfill the following
norms ndash
a The unit should submit a statement signed by HRDRampD chief or CEO certifying
the number of scientists employed through the year
b The unit should submit a statement certified by the CEO and the Auditor that it has
invested at least 3 per cent of the annual sales turnover or Rs 50 cr (average of the last
three years) whichever is higher on R amp D
c The unit should submit certified true copy of the approval granted by the Drug
Regulatory Authority of the specified countries approving the manufacturing facility
for export to their country
d The unit should submit particularsdocuments evidencing patents filed in India
The inter-departmental Screening Committee constituted by DSIR may further
recommend additional safeguards to be taken for making available fiscal incentives to
various companies (Comments by DST CSIRDBTDSIR)
C Pharmaceutical Research and Development Support Fund (PRDSF)
At present the Pharmaceutical Research and Development Support Fund (PRDSF)
has a corpus of Rs 150 crores (where only interest income is available for spending)
is utilized for funding RampD projects of Research Institutions and industry in the
country It is not adequate to meet the present day and the emerging requirements of
this sector It needs to be sufficiently augmented over the next five years It has been
decided to convert it into an annual grant of Rs 150 crores and thereafter it would be
suitably increased further in a phased manner over a period of next five years Priority
would be given for RampD in case of diseases which are endemic to India like malaria
tuberculosis hepatitis-B leis mania (kala-azar) HIVAIDS etc
(Comments by HealthDSTDBTExpenditureRevenuePlanning Commission)
- 32 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
44 Pharma ParksSEZs for Pharma industry-
In order to enable India to achieve a leading position as the Drug Maker of the
World it is essential that a World class infrastructure is provided for the
accelerated growth of the industry Added to this are the environmental concerns due
to difficulties in hazardous waste disposal by some of the bulk drug units In order to
provide the required infrastructure it is essential to have a scheme where Central
Government State Governments and industry are participants A special scheme for
setting up 29 pharmaceutical parks in the country (separate for bulk and for
formulations) in the next 5 years is proposed This would be broadly on the lines of
Scheme for Integrated Textile Parks
a) This scheme would be based on public-private partnership model
b) Each park would be set up in a minimum area of 250 acres for bulk and 100 acres
for formulations It would be expected to have about 50 to 100 units investment of
1000 crs to Rs 2000 crs and likely employment of about 20000 persons
c) Scheme to be implemented through SPVs (Special Purpose Vehicles) with Industry
Associations to be the main promoters
d) An MOU will be signed with a leading professional body consultant to act as
Project Management Consultant
e) Where an SEZ is to be set up the minimum size criterion for pharma SEZs would
be 50 hectares for the next 3 years This would encourage quick setting up of such
parks and for demonstration effect After a successful take-off of the scheme
minimum size may be increased suitably all environmental approvals in the case of
pharma parks would be granted at the State level only
(Comments by HealthDIPPCommerceEnvironment)
(Government has recently passed an Act to facilitate setting up of Special Economic
Zones in the country Some SEZs for pharma have been sanctioned in a few states
There is need to have more of such economic zones in the country It is estimated that
an SEZ in an area of 50 hectares would require an investment of Rs 100-120 crores
on land and development It would be able to attract an investment of Rs 1000 crores
- 33 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
and would be able to generate exports worth Rs 2000 crores and employment of about
6000 people Looking to the attractive tax concessions and good infrastructure
available in these parks these are becoming popular with the industry)
45 Greater Thrust on Pharma Exports
Pharmaceutical Export Promotion Council (Pharmexcil) is the sole agency authorized
for issuance of Registration-cum-Membership Certificate to exporters of Drugs and
Pharmaceuticals Pharmexcil during the last over one year of its formation has
successfully completed various projects particularly sponsoring full-fledged trade
delegations to various countries Future growth of pharma sector would be largely
driven by exports to other countries Although exports of pharma products from India
are growing at a healthy rate there is need to accelerate this further in view of the vast
potential existing in some of the countries
Following steps are envisaged to be taken in this regard
a) Suitable measures would be taken to tackle the non tariff barriers to exports of
pharma products in various countries through consistent efforts and greater
interaction with the concerned agencies of the focus countries
b) Africa Latin America ASEAN and CIS countries have been put in the
category of focus countries by Commerce department These would continue to get
special attention for the purpose of exports
c) The South Asian Free Trade Area (SAFTA) an agreement between Saarc
countries comprising of India Pakistan SRI LANKA Bangladesh Nepal Bhutan
and Maldives is scheduled to come into force on January 1 2006 It will be fully
operational by 2016 The pact holds huge potential for intra-regional trade growth
which is presently only US$7 billion (only6 of the total external trade in the region
which is US$350 billion) Pharmaceuticals has a substantial potential in the intra-
regional trade of the area A detailed study would be undertaken of this potential A
study to determine the market potential for pharma products in these countries and
their registration procedures requirements would be carried out soon
d) Some more countries with good potential namely GCC European Union Japan
and Korea would also be paid special attention looking to the big potential for
pharma exports in these An action plan including a study of the pharma export
- 34 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
potential in these countries would be carried out to improve exports of pharma
products to these countries
e) International meetsconferencesseminars with potential countries would be
organized on a regular basis in India and abroad
f) Apart from the existing formal arrangements for export of drugs there is an urgent
need to have a government-industry standing forum for each of the high potential
markets comprising of the key industry players active in that area and concerned
government departments
g) Quality is an important issue with the importers from India It would be
worthwhile to lay down guidelines regarding the consignments of pharma products
being exported outside India A system of registration for quality products would be
worked out in consultation with industry
h) Exports may be exempted from service tax
i) Pharmexil would be suitably strengthened to meet the future challenges of export
market It would be assisted financially and otherwise for opening
warehousesoffices in some of the countries to help the Indian entrepreneurs there
for an online library organization of exhibitions in various countries and brand
building activity
(Comments by CommercePharmexcil)
- 35 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical
industry
- 36 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Efforts by the Indian pharmaceutical industry
The IPI seeking to take full advantage of benefits offered by the government has
been allocating money to RampD Its focal points are drug discovery development of
drug delivery systems biotechnology and bioinformatics Companies are
reevaluating their strengths and emphasizing product segments that are profitable to
the company Many companies are trimming their portfolios to focus on particular
therapeutic segments Pharmaceutical marketing is also changing rapidly and
pharmaceutical companies are making elaborate marketing efforts Companies such as
Sun Pharma Nicholas Piramal and Dr Reddyrsquos Laboratories have opted for
brandcompany acquisition to increase therapeutic reach and market penetration Such
specialization would make the entry of MNCs difficult Some theorize that companies
with a strong marketing force would be attractive for possible take-overMany
pharmaceutical companies are entering into marketing arrangements such as Hoechst
Marionrsquos agreement with Nicholas Piramal and Ranbaxyrsquos pact with Cipla Glaxo
and Hoechst Marion Recent mergers and acquisitions include Nicholas Piramalrsquos
acquisition of Roche Products a company mainly involved in diagnostic products and
Zydus Cadilarsquos acquisition of German Remedies in India Sanofi Synthelabo the
second largest pharmaceutical company in France will buy out Ahmedabad-based
Torrent PharmaceuticalsVery recently Dr Reddyrsquos Laboratories signed a definitive
agreement to acquire 100 of Meridian Healthcare and BMS Laboratories whose
primary business is manufacturing and marketing generic pharmaceuticals in the
United Kingdom
- 37 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Major Players
Ranbaxy Laboratories
Dr Reddys Laboratories
Nicholas Piramal
Cipla
Biocon
Serum Institute of India
Strides Arcolab
- 38 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Major players
61 Ranbaxy Laboratories
Tejendra Khanna Chairman
Ranbaxy Laboratories Limited is an Indian company incorporated in 1961
It is Indias largest pharmaceutical company It exports its products to 125 countries
with ground operations in 46 and manufacturing facilities in 7 countries It is ranked
among the top 10 generic companies worldwide The CEO of the company is
Malvinder Mohan Singh
In 1998 Ranbaxy entered the USA the worlds largest pharmaceuticals
market and now the biggest market for Ranbaxy accounting for 28 of Ranbaxys
sales in 2005
For the twelve months ending on December 31 2005 the Companys Global
Sales were at US $1178 billion with overseas markets accounting for 75 of global
sales(USA 28 Europe 17 Brazil Russia India and China 29)
Most of Ranbaxys products are manufactured by license from foreign
pharmaceutical developers though a significant percentage of their products are off-
patent drugs that are manufactured and distributed without licensing from the original
manufacturer because the patents on such drugs have expired
In December 2005 Ranbaxys shares were hit hard by a patent ruling
disallowing production of its own version of Pfizers cholesterol-cutting drug Lipitor
which has annual sales of more than $10 billion
It was the first Indian pharmaceutical to have a proprietary drug (extended-
release ciproflaxin marketed by Bayer) approved by the US FDA and the US
market accounts for 36 of its sales 78 of Ranbaxyrsquos sales are from overseas
markets its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100
- 39 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in
the world and that it is the 15th fastest growing company By 2012 Ranbaxy hopes to
be one of the top 5 generics producers in the world and it consolidated its position
with the purchase of French firm RGP Aventis in 2003 Ranbaxy also has higher
aspirations however ldquoto build a proprietary prescription business in the advanced
marketsrdquo To this end it keeps a dedicated research facility in Gurgaon staffed with
over 1100 scientists They currently have two molecules in Phase II trials and 3-5 in
pre-clinical testing It spent $75 million in RampD in 2004 a 43 increase over its 2003
expenditure
62 Dr Reddys Laboratories
K Anji Reddy Chairman
Founded in 1984 with $160000 Dr Reddyrsquos was the first Asia-Pacific
pharmaceutical outside of Japan and the sixth Indian company to be listed on the New
York Stock Exchange It earned $446 million in fiscal year 2005 deriving 66 of this
income from the foreign market In order to strengthen its global position Dr Reddy
acquired UK-based BMS Laboratories and subsidiary Meridian Healthcare
Although 58 of Dr Reddyrsquos revenues come from generic drugs the
company was committed to WTO-compliance long before the 2005 bill took effect
and most of these products were already off patent Dr Reddy has long been a
research-oriented firm preceding many of its peers in setting up a New Drug
Development Research (NDDR) in 1993 and out-licensing its first compound just
four years later Dr Reddyrsquos has since outlicensed two more molecules and currently
has three others in clinical trials
Although Dr Reddyrsquos is publicly-traded the Reddy family (including
founderchairman K Anji Reddy son-in-lawCEO GV Prasad and sonCOO Satish
Reddy) holds a hefty 26 share in the company1144
- 40 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
63 Nicholas Piramal
Ajay G Piramal Chairman
Now a company grossing $350 million per year 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 another core strength with its acquisition of Rhodiarsquos inhalation anaesthetics
business Nicholas Piramal gained a sales and marketing network spanning 90
countries
Nicholas Piramal 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 and refused to ldquosupport generic companies seeking first-to-file or
early-to-market strategiesrdquo Instead it decided to make its own intellectual property
and opened a research facility last November in Mumbai with hopes of launching its
first drug in 2010 at a cost of $100000
64 Cipla
Dr Yusuf K Hamied Chairman and Managing Director
Cipla burst into the international consciousness in 2000 with Triomune an
AIDS treatment costing between $300 and $800 per year that infringed upon patents
held by several companies who were selling the cocktail for $12000 per year Long
before this news Cipla had been building a strong global presence and it now
distributes its 800-odd products in over 140 countries Privately-held Cipla holds a
prominent spot in its home country as well it is the leader in domestic sales having
just unseated GlaxoSmithKline for the first time in 28 years Revenue in 2004 totaled
$552 million (using Rs 43472 = $1) about 75 of which was derived in India Cipla
did not report having a research program
- 41 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
65 Biocon
Dr Kiran Mazumdar-Shaw Chairman and Managing Director
Biocon is probably best known for its founder Kiran Mazumdar-Shaw who
overcame incredible gender-based discrimination to become the richest woman in
India Originally an extension to an Irish chemicals company seeking to break into the
Indian market Biocon is now the leading biotech in India bringing in Rs 64636 crore
(almost $150 million) in revenue for fiscal year 2004 It initially made its money by
producing enzymes but Biocon recently decided to become a research-oriented
company with the goal of bringing a proprietary new drug to market
The company went public in March 2004 and ldquoits shares were oversubscribed
by 33 times on opening dayrdquo Eight months later it launched Insugen a bio-insulin
that is its first branded product Biocon also has two wholly-owned subsidiaries
Syngene and Clinigene that perform custom research and clinical trials
66 Serum Institute of India
Dr Cyrus Poonawalla Chairman
The Serum Institute of India can make the enviable claim that 1 out of every 2
children in the world is immunized with one of their vaccines It is the worldrsquos largest
producer of measles and DTP vaccines and its portfolio includes other vaccines
antisera plasma products and anticancer compounds The Serum Institute earned Rs
565 crore ($130 million) in revenue in fiscal year 2005 selling mainly to UN agencies
and to the Indian government The Serum Institute is part of the Poonawalla Group
whose holdings include a horse stud farm and manufacturers of industrial equipment
and components
- 42 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
67 Strides Arcolab
Arun Kumar MD
Bangalore-based Strides Arcolab is one of Indiarsquos largest exporters of finished
pharmaceuticals with operations in over 50 countries It is amongst the top five global
manufacturers of soft gelatines and a leading sterile injectables manufacturer in India
The company has 13 manufacturing plants spread across the US Brazil Mexico
Italy Poland Singapore and India Strides is the first one to enter the Latin American
market The Latin American (Latam) pharmaceutical market is a semi-regulated
market but the regulatory framework is similar to advanced pharmaceutical markets
Their Latin operations have grown rapidly and we have become the largest Indian
pharmaceutical company in that region
- 43 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
The Chinese edge
Where India scores
The equation Present and future
- 44 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
India vs China in pharmaceuticals
In the global economy both India and China have staked claims as nations to
watch out for in the future Both these countries along with their counterparts Russia
and Brazil (labeled as the BRIC nations) have been touted to emerge as the fastest
growing economies by 2050 While much has been said about the impact of India and
China on the dynamics of the global economy here we shall attempt to find out as to
which country has the edge in the global pharmaceutical space
71 The Chinese edge
China has proven its capabilities in the manufacturing space and the same
advantage extends to the pharmaceutical segment as well Being a cost-efficient
country it has emerged as the preferred destination for outsourcing intermediates
(used in the manufacture of APIs) and Active Pharmaceutical Ingredients Chinese
companies have forged growing relationships with top global pharma companies
(referred to as Big Pharma) in custom manufacturing and also for outsourcing older
APIs Besides this China also has the edge over India in the biotech field due to the
presence of high quality research institutions and the Chinese governments
commitment
The number of DMF (Drug Master File) filings made by Chinese companies
have also been witnessing a rise in recent times highlighting the growing interest of
multinationals in the country In fact India too has been sourcing intermediated from
China for the purpose of manufacturing low cost APIs
- 45 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
72 Where India scores
That said while China is set to provide stiff competition to India in the API
space it still lags behind in the formulations segment This can be gauged by the fact
that in the global generics market while India accounts for 25 of the Abbreviated
New Drug Applications (ANDA) filed in the US market China has yet to file a single
ANDA Indias advantage vis-agrave-vis China lies in RampD availability of scientific
manpower laws that have begun to recognize intellectual property and Indian
companies having alliances with global pharma companies in research generics and
manufacturing Even in the API space while China has been growing at a fast pace it
still falls behind India in terms of overall filings made until now
India is making increasing strides in the global generics space as can be
evinced by the progress made by Tier-I companies such as Ranbaxy and DrReddys
Ranbaxy is already ranked amongst the top ten generic companies in the world Both
of them have emerged as major contenders in the consolidation activity gaining
momentum in the generics market and have also been aggressive in challenging
innovator patents (Para IV) In contrast the Chinese Tier -I company Zhejiang Hisun
has yet to make a significant mark in the global generics market
India VS China Top company comparison
Ranbaxy Hisun
Formulations presence in US Yes No
Formulations presence in EU Yes No
API presence in the US Yes Yes
API presence in the EU Yes Yes
Local formulations presence Yes Yes
Drug discovery research Yes No
DMF filings Yes Yes
ANDA filings including Para IV Yes No
- 46 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Source Newport Strategies
73 The equation Present and future
Given the fact that the low cost distinction is no longer a trait unique to the Indian
pharmaceutical sector with the resurgence of Chinese companies in this area Indian
companies will have to focus more than ever on moving up the value chain This has
to be by capitalizing on the generics opportunity (in both plain vanilla and value
added products) strengthening efforts on the NDDS and NCE research front and
continuing relationships with global pharma in research and manufacturing At
present on an overall basis India does have the edge over China in terms of relevance
to the global pharmaceutical industry That said Indian companies need to capitalize
on the window of opportunity currently available before the competition from China
begins to pose a significant threat
- 47 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Some Important Articles
Tweaking drugs wont help cos skip price control
Cracking Japans generics market code
India as offshore pharma destination
Dr Reddys net profit triples
- 48 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Some Important articles from Economic times
81 Tweaking drugs wont help cos skip price control OCTOBER 25 2006
The game may soon be up for drug-makers who dodge price control by
effecting minor changes in the composition of a drug or by changing its brand name
or strength
The proposed Drugs (Price Regulation and Control) Bill of rsquo06 will arm the
government or a designated authority the power to forestall such changes in a drug
sold under an approved brand name without a therapeutic justification
Some companies have in the past got the composition of drugs altered without
any significant therapeutic value addition after National Pharmaceutical Pricing
Authority (NPPA) fixed the prices Doxycycline a broad-spectrum antibiotic which
is under price control is a classic case which now comes in combination with lactic
acid bacillus mdash a source of bacteria that helps in digestion
In some cases this practice leads to even irrational combination of medicines
said a trade source Drug approvals and compositional changes fall under the domain
of the Union and state health ministries while pricing is the turf of the central pricing
agency NPPA an attached office of the chemicals and fertilisers ministry
NPPA fixes prices of specified strengths of medicines and when a company
changes either the strength or the composition there is no government-fixed price for
the changed entity till the drug regulator catches up
Although the drug is still under price control companies make gains by selling
the product at their own price till NPPA intervenes again After a recent ET report on
this practice the investigating wing of the Monopolies and Restrictive Trade Practices
(MRTP) Commission had swung into action and ordered a probe into the matter
The director general of investigation and registration (DGIR) has asked as
many as 16 major drug makers including MNCs to furnish details about their
- 49 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
productsrsquo composition and recent alterations in them to see if they escaped price
control by such means
82 Cracking Japans generics market code FRIDAY OCTOBER 27 2006
Indian generic makers have traditionally looked west mdash to the US and Europe
mdash for new markets But those markets are becoming less attractive with generic
penetration already high competition is intense
And moves by retailers such as Wal-Mart to slash prices and profit margins on
generics in the US only add to the pressure The next big opportunity lies to the east
in Japan where changes in drug regulations will create a large and potentially
lucrative market for generics in the next few years
Like its US and European counterparts Japan has struggled to bring rising
health-care costs under control In 2004 cheaper generics made up just 17 of the
total volume of the Japanese drug market (and 5 of the value) dramatically lower
than other developed countries (53 and 46 of drug volume in the US and
Germany respectively)
Japanrsquos fiscal situation and demographic profile also add urgency Healthcare
spending has increased from 6 to 9 of Japanese GDP between 1990 and 2004 The
future healthcare burden will be exacerbated as the elderly population balloons and
has medical costs four times that of the non-elderly
Not only will Japanrsquos share of people over 65 years be among the highest in
developed countries mdash projected to be 30 as against 19 for US and 26 for
Germany mdash but the Japanese will also live longer Japan has among the highest life
expectancy in the world especially for women
So far the governmentrsquos belt-tightening efforts have focused on reducing the
$65 billion in pharmaceutical costs which represents 23 of Japanrsquos National Health
Insurance expenditures and accounts for the second-largest pharmaceutical market in
the world
- 50 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Regulations passed recently aim to create the right incentives to stimulate both
supply of and demand for generics To increase generic demand patients will now
face lower direct costs for using generics due to lower prices and out-of pocket
spending compared with branded products
Hospitals will also have an incentive to use cheaper generics as they will
receive a single lump sum payment that will cover all medical costs And doctors and
pharmacists will receive a small cash incentive for prescribing and dispensing
generics
Similarly to increase the supply of generic products suppliers will now be
able to apply for approvals twice a year rather than annually and will be required to
sell a full range of product dosages but need to only prove bio-equivalence for the
highest-dosage strength
The strategies to increase generic substitution should yield results over the
longer term as they embody the tried-and-tested approaches used by other developed
countries Evidence from places like the UK and Germany with comparable health
system and incentive programmes suggest that a pro-generics approach can boost
demand significantly
- 51 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
83 India as offshore pharma destination FRIDAY NOVEMBER 03 2006
The global pharmaceutical industry is desperate to improve its productivity
when researching and developing new drugs Over the last 10 years or so
multinational pharmaceutical companies (MPCs) have accordingly been off-shoring
more and more of their RampD to emerging countries to accelerate output and reduce
costs
The two main beneficiaries of this trend have been unsurprisingly India and
China And equally unsurprisingly they are in constant though unpublicised
competition to claim a still greater share of the bounty
The two countries must have a great deal in common from an MPCrsquos
perspective Both boast remarkable new technical capabilities at least in some phases
of the RampD value chain
Both have a deep pool of talent and a vast treatment-naiumlve population of
patients for clinical trials On the negative side both raise much the same concerns for
MPCs notably over the security of data and other intellectual property (IP) and over
administrative and regulatory roadblocks
Given such similarities how is an MPC to differentiate the two countries
when weighing its off-shoring options Well for a start their skills do vary from
phase to phase India is still clearly ahead of China in data management and probably
in chemistry-phase activities as well while China has more advanced biology
capabilities
Such considerations might sway an MPCrsquos ad hoc outsourcing decisions but
its strategic thinking would be influenced more by the difference in ldquovalue
propositionrdquo put forward by each country
The Chinese pharmaceutical market will be worth US $25 billion in 2010
(nearly three times Indiarsquos market in 2010)) MPCs mdash in the hope of increasing their
access to that treasure-chest mdash are tempted to place a long-term strategic bet by
- 52 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
outsourcing high-tech projects there or even setting up a fully-fledged captive RampD
centre
India by contrast offers a shorter-term as well as ongoing payoff Its vendor
base is far broader than Chinarsquos and being quick-footed and resourceful can churn out
abundant high-quality work at short notice Jointly these Indian service-providers
offer a rapid turbo-charge to an MPCrsquos RampD engine The MPC secures not just time-
and cost-savings but also a smoother flow to its entire RampD pipeline
This unique advantage is something that Indian pharma companies cannot
afford to ignore let alone jeopardise They need to play it to maximum effect
promoting the image on the one hand and nurturing the reality on the other
After all the great competitor China is hardly sitting idle MPCs are fast
establishing a captive base there Recent case in point AstraZenecarsquos $100 million
investment in China Its vendor base is increasing in number and advancing
remorselessly in capabilities
- 53 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
84 Dr Reddys net profit triples FRIDAY OCTOBER 27 2006
Dr Reddys Laboratories Ltd said on Friday quarterly net profit more than
tripled beating forecasts helped by strong growth in the key US market and gains
from drugs exclusivity
But the company said it may not be possible to repeat the exceptional
performance in the October to December quarter and beyond as the exclusivity for
two generics -- prostate cancer treating Proscar and cholesterol drug Zocor -- end in
December
Authorised generics 180-day period ends December To that extent the
revenue will diminish very significantly but the other aspects of our business will
continue to perform GV Prasad Dr Reddys chief executive told Reuters in an
interview
Analysts said it would gain from other authorised generics
Although pricing pressures are existing their authorised generic deals could
keep the revenues flowing said Kavita Thomas an analyst at First Global Securities
which has an outperform rating on the stock
Other Indian drug makers have also reported a strong performance in the July
to September quarter helped by a surge in sales of generic drugs and strong growth in
the domestic market
The Hyderabad-based company Indias only New York-listed drug maker
said net profit according to US accounting standards rose to 280 billion rupees
($6196 million) from 890 million rupees reported a year earlier
A Reuters poll of 10 brokerages had predicted a median profit of 157 billion
rupees for the firm Indias fourth-largest pharmaceuticals company
US SALES
Total revenue jumped to 20 billion rupees from 58 billion rupees while
revenue from its core businesses excluding the contribution from authorised generics
and acquisitions grew 42 percent to 82 billion rupees
- 54 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Revenue from North America generics finished dosage business jumped to
908 billion rupees from 299 million rupees helped by authorised generic versions of
Zocor and Proscar which contributed 39 percent of the total revenue
Third-ranked Ranbaxy Laboratories Ltds quarterly net profit rose by more
than six times while number one Cipla Ltd reported 47 percent growth and second-
ranked Sun Pharmaceutical Industries said net profit rose 26 percent
Shares in Dr Reddys valued at $24 billion rose about 15 percent in the
quarter lagging the Mumbai exchanges healthcare index which rose about 18
percent
Its shares ended 26 percent higher at 73035 rupees in a firm Mumbai market
on Friday
Dr Reddys said in October that it may exclusively distribute the generic
version of GlaxoSmithKline Plcs Imitrex tablets in the United States as it had settled
a legal dispute
- 55 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Conclusion
- 56 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
CONCLUSION
The achievements of the Indian pharmaceutical industry are spectacular in recent
times and are praise worthy which has evolved as model industry of the country in
performance India has a strong infrastructure for pharmaceutical business environment
But in the 21st century the pharmaceutical value chain would depend on the ability of
pharmaceutical companies to make the technological shift necessary to maintain and
increase their competitive positions
- 57 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Recommendations
- 58 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
RECOMMENDATIONS
1 With the second-largest population in the world a highly educated population
that is fluent in English and with technical skills and well-developed buying
power India has great potential for industrial growth
2 Since India has an edge over China tapping the world generics market before
China is very important for Indian pharmaceutical industry
3 Combining information technology with the pharmaceutical industry is also a
good tool which can be utilized by the IPI
4 The government and the economy of India have also helped the IPI to grow
- 59 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Bibliography
- 60 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -
Growth of Indian pharmaceuticals in the world market
Bibliography
Analysis of the Indian Pharmaceutical Industry With Emphasis on Opportunities in 2005 - Hemant N Joshi
National Pharmaceuticals Policy 2006 Part-A - Department of Chemicals and Petrochemicals Government of India
httpwwwresearchandmarketscomreportinfoaspreport_id=41589ampt=eampcat_id=
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Indian Pharmaceutical Industry - Dhruv Sagar
httpwwwdgciskolnicin
httpenwikipediaorgwikiPharmaceuticals_28India29
httpwwwpharmaceutical-drug-manufacturerscompharmaceutical-industry
Arpit Jhunjhunwala
Contact no9867367199
- 61 -