1. INTRODUCTION Among all the major industries in India, pharmaceuticals are surely the leaders. The Indian government has listed the pharmaceutical industry as an intellectual industry and investment in research and development has been enhanced. For the next 60 years, most of the drugs in India were imported by multinationals either in fully-formulated or bulk form. The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970, enabled the industry to become what it is today. This patent act removed composition patents from food and drugs, and though it kept process patents, these were shortened to a period of five to seven years. The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market, and while they streamed out, Indian companies started to take their places. They carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby steps towards drug innovation. The Indian pharmaceutical products account for 8 percent of the global pharmaceutical sales and India is the fifth largest producer of bulk medicines in the world. In 2001, the value of India's exports of medicines approached US$1.7 billion. Indian Pharmaceutical Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously. The Industry possesses 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. There are 20,000 laboratories in India's pharmaceutical industry and the scale of the pharmaceutical market amounts to Euro 5.3 billion. The leading 250 pharmaceutical companies control 80% of the market with market leader holding1

nearly 8% of the market share. It is an extremely fragmented market with severe price competition and government price control. Around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injections is met by home production. 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). Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market. Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). In the next section this paper shows broad picture of the top pharmaceutical industries in India regarding their sales, expansions, R&D expenditures.

2. INDIAS TOP PHARMA COMPANIES: India's top ten pharmaceutical companies recorded a total sale of around Rs 15,000 crore during the year 2003-04 and now set to consolidate their position in the2

international market. The Indian Pharma segment is spreading its business across the world by launching cost effective new products and giving tough time to large multinational companies. During last couple of years, top ten companies have filed many DMFs and ANDAs with the help of own R&D activities. The cash reach top ten pharma companies are also rewarding their investors handsomely by way of dividend or bonus shares and win shareholders confidence. Focus on R&D and new technology, thrust on exports, new tie-ups as well as mergers and acquisitions will give edge for the Indian companies. Further, as a part of cost cutting measure several international players are looking at Indian companies for contract manufacturing or tie-ups in R&D activities. During the last couple of years, several MNC in India have sold their plants and offering jobs on contract manufacturing basis to Indian players. This trend is likely to continue in coming years as a step towards cost cutting measure. The sales of top ten companies viz. Ranbaxy Laboratories, Cipla, Dr Reddy's Laboratories, Nicholas Piramal, Aurobindo Pharma, Lupin, Cadila Healthcare, Sun Pharmaceutical, Wockhardt and Orchid Chemical and Pharmaceutical went up by 16.9 per cent to Rs 14,860 crore during the year 2003-04 from Rs 12,715 crore in the previous year. Statistical values in crores

The above values specify the net sales, R&D, Exports, Expansions of top five companies of India, the net sales are increasing at rate 8-10%, and R&D expenditure is less than 10% of total sales which is very less compared to foreign

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companies of more than 30% of total sales. Their are more expansions in future in the form of Mergers and acquisitions. Mergers and acquisitions are also helping companies to boost their revenues in the more profitable markets. Some of the acquisitions are Dr Reddy acquired Tringenesis Therapeutics Inc, US in an $ 11 million Deal. Nicholas acquired the API business of Global Bulk Drugs. To overcome the challenges of competition, the companies are launching new generics for last couple of years. The Indian top companies are going ahead aggressively and filing new DMFs or launching new products. Ranbaxy is set to launch 20 new products. Dr Reddy launched Iburpofen and Nefzodone in North Amemrica. Ranbaxy's subsidiary in US received approval from US FDA for manufacture of Auinapril Hydrochloride tablets for hypertension drugs. During 2003-04 Cipla filed 7 DMFs, Dr Reddy 5 nos and Sun Pharma 4 nos. The stiff competition and heavy spending on R&D as well as marketing is putting some pressure on pharma segment and the top ten companies sales for the quarter ended September 2008 increased only by 2 per cent to Rs 3850 Crore from Rs 3780 Crore in the corresponding period of last year. There net profit declined by 16 per cent to Rs 562 Crore from Rs 668 Crore. However, the analysts from foreign broking firms as well as from domestic institutions are saying that the set back in working is temporary and the Indian Pharma segment is well set to improve working and overcome present problems.

Top pharmaceuticals in India, 2010

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In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia . Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70% thirty years ago. Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise. Although many of these companies are publicly owned, leadership passes from father to son and the founding family holds a majority share. In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year. India gained its foothold on the global scene with its innovatively-engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies. Growths in other fields notwithstanding, generics are still a large part

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of the picture. London research company Global Insight estimates that Indias share of the global generics market will have risen from 4% to 33% by 2007. This paper deals with different layers of pharma supply chain system in India. The layman may assume that it is like any other supply chain which brings manufactured goods to the retailer, but in real it differs. The supply chain starts from pharma companies who make finished or final drug and ends with the retailer who sells drug to the consumer, in between the manufacturer and the retailer they are C&F agents, stockists, wholesalers who purchase in bulk quantities. In pharma business pricing is important, for each user is different. Therefore a typical hospital gets these drugs at lower rate than a retail pharmacy store. In the next section this paper shows Ranbaxy phramas history, formation, markets, production facilities.

Objectives: To know about pharma distribution sales and supply chain in Indian market. Scope of study: My study is about Indian pharmaceutical markets, its distribution structure. Statistical values: Statistics values Ranbaxy domestic sales and exports for 2006-2010

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CorrelationsCorrelations sales sales Pearson Correlation Sig. (2-tailed) N exports Pearson Correlation Sig. (2-tailed) N 10 .982**

exports 1 .982**

.000 10 1

.000 10 10

**. Correlation is significant at the 0.01 level (2-tailed).

The above correlation matrix clearly shows that the correlation between sales and exports is positive correlated and it nearly equal to 1.

RegressionANOVA Model 1 Regression Residual Total a. Predictors: (Constant), sales b. Dependent Variable: exports Sum of Squares 3.630E8 1.369E7 3.767E8 Df 1 8 9b

Mean Square 3.630E8 1711497.436

F 212.090

Sig. .000a

Coefficients Model Unstandardized Coefficients B 1 (Constant) sales a. Dependent Variable: exports -2157.338 .706 Std. Error

a

Standardized Coefficients Beta t -1.146 .982 14.563 Sig. .285 .000

1882.716 .048

The required regression line is7

Exports =-2157.338+0.706(sales).

3. Profile of RanbaxyRanbaxy Laboratories Limited (BSE: 500359) is an Indian pharmaceutical company. Incorporated in 1961, Ranbaxy exports its products to 125 countries with ground operations in 46 and manufacturing facilities in seven countries. The company went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo gained majority control in 2008. Trading In 1998, Ranbaxy entered the United States, the world's largest pharmaceuticals market and now the biggest market for Ranbaxy, accounting for 28% of Ranbaxy's sales in 2005. For the twelve months ending on 31 December 2005, the company's global sales were at US $1,178 million with overseas markets accounting for 75% of global sales (USA: 28%, Europe: 17%, Brazil, Russia, and China: 29%). For the twelve months ending on December 31, 2006, the company's global sales were at US $1,300 million.

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Most of Ranbaxy's 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, Ranbaxy's shares were hit hard by a patent ruling disallowing production of its own version of Pfizer's cholesterol-cutting drug Lipitor, which has annual sales of more than $10 billion. In June 2008, Ranbaxy settled the patent dispute with Pfizer allowing them to sell Atorvastatin Calcium, the generic version of Lipitor(R)and Atorvastatin Calcium-Amylodipine Besylate, the generic version of Pfizer's Caduet(R) in the US starting November 30, 2011. The settlement also resolved several other disputes in other countries. On 23 June 2006, Ranbaxy received from the United States Food & Drug Administration a 180-day exclusivity period to sell simvastatin (Zocor) in the U.S. as a generic drug at 80 mg strength. Ranbaxy competes with the maker of brandname Zocor, Merck & Co.; IVAX Corporation (which was acquired by and merged into Teva Pharmaceutical Industries Ltd.), which has 180-day exclusivity at strengths other than 80 mg; and Dr. Reddy's Laboratories, also from India, whose authorized generic version (licensed by Merck) is exempt from exclusivity. On 16 September 2008, the Food and Drug Administration issued two Warning Letters to Ranbaxy Laboratories Ltd. and an Import Alert for generic drugs produced by two manufacturing plants in India. On February 25, 2009 the U.S. Food and Drug Administration said it has halted reviews of all drug applications including data developed at Ranbaxy's Paonta Sahib plant in India because of a practice of falsified data and test results in approved and pending drug applications. "Investigations revealed a pattern of questionable data," the FDA said. The addition of Ranbaxy Laboratories extends Daiichi-Sankyo's operations already comprising businesses in 22 countries. The combined company is worth about $30 billion. Ranbaxy statistics:

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In Indian market Ranbaxy deals both ethical and generic products, total of more than 400 products, typical distribution system of India is specified in following sections.

4. Report on pharma distributionINDIAN DISTRIBUTION SYSTEM: THE CURRENT STATE

India is a geographically diverse country with extreme climates that make distribution a critical function. The long channel of distribution and high incidence of brand substitution makes it mandatory for a company to make all its stock keeping units (SKUs) available at all levels at all times. In India, most brands have generic versions of drugs and retailers can usually obtain higher margins with generics than for branded products. To reduce risks of substitution, innovator companies must make sure their products are made available to the stockists and retail shops.

Channels of drug distribution

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The figure shows how a manufactured product passes through the company-owned central warehouse, which supplies it to the CFA or super stockist. From the CFA the stocks are supplied either to the stockist, substockist, or hospitals. The retail pharmacy obtains products from the stockist or substockist through whom it finally reaches the consumers (patients). Certain small manufacturers directly supply the drugs to the super stockist. In 2006, the market size of India's pharmaceutical logistics segment (distribution) was valued at around $200 million and the logistics/distribution industry has been growing at an average annual growth rate of 4% since 2002. According to the Indian Retail Druggists and Chemists Association, in 1978, there were roughly 10,000 distributors and 125,000 retail pharmacies in India. Today, the total number of stockists in India is around 65,000 and the number of pharmacies is about 550,000, an increase of around six- and four-fold, respectively.11

Despite the rapid increase in the number of stockists and pharmacies, there has not been a proportional increase in the volume of prescriptions distributed. Thus, the efficiency of the current system has clearly not been demonstrated. Further, it is estimated that more than three-fifths of Indians still do not have access to modern medicines. This clearly shows that the rural market is largely unattended and untapped. In the next sections this paper deals with detail description of each layer of pharma supply chain. Clearing and forwarding agents: The position of CFAs is one of the weakest in the supply chain; they exit only because of indias particular taxation systems, and new retail chains are attempting to by-pass the CFA and deal directly with producers. The rationale for the CFA depends on the divisions between central and state sales tax systems: The distribution set-up in the Indian pharma industry is highly fragmented and has evolved on the basis of the two tier sales tax structure. The central sales tax(cst)and the local sales tax. While the inter-state of goods attracts CST, inter state transfer of goods does not attract any tax. Therefore in order to avoid CST, all the medium and big pharma cos have a carrying and forwarding agents(CFA)/company (sales less than Rs 100 crore) adopted the super-stockist model as the cost of infrastructure for depots or CFAs outweighs the accrued tax advantages In principle, each of the larger pharmaceutical producers has one CFA in each of Indias state s; in practice, especially in the case of a larger company ,there may be several in each of the larger states, but not all states may warrant a CFA . If the 60 or so large companies have an average of 25 CFAs, then there are about 1500 in total. Pharmaceuticals companies increasingly replaced company-owned depots and warehouses with CFAs, in order to cut overheads: for example, Glaxo replaced all its warehouses with CFAs in 1996.By implications, some companies may still have depots under their direct control, rather than using CFAs. There is also some confusion over whether CFAs are essentially part of a production company and operate under contract to a single company, or if they can work for several companies but some says that a typical CFA would represent about six companies.12

From the point of view of the stockists, however, when they receive goods from a CFA they are invoiced in the name of the producer, not in the name of the CFA. The fee of the CFA may be a fixed percentage margin or may depend on turnover m and again there is uncertainty about how much they receive but reports suggests that it can be between 2 and 5 percent. It is also not cleat what has been happening to the CFAs when companies merge or are taken over: as with the stockists mergers and take-overs produce a theoretical surplus of CFAs, and we do not yet know what happens in these circumstances, whether each is given a region within a state, or retains part of business of the combined company. The Indian sales tax system is being slowly but steadily replaced by a value added tax, and if this process is successfully completed, the taxation incentive for this system may disappear. Finally, the new retail chains are negotiating direct contracts with producers, thus saving themselves the fees paid to CFAs days may be numbered.

Stockists: Stockists typically market products of 6-8 pharmaceutical companies, only a few distribute products of more than 50 companies. Mergers and acquisitions of pharmaceutical companies have almost doubled the number of stockists per company and created quite tough competition at this distribution level. Stockists of the same company are competing against each other and thus possibly strengthening the bargaining position of retailers. Stockists have their own visiting salesmen who contract and stock retailers on a frequent basis. Once again we have disagreements over the margins paid to wholesalers and stockists, as per reports stockists get 8-10% of their sale price to the retailer and percentage varies from controlled drugs and de-controlled drugs. How far these formal agreements work in practice is unclear, however. Some stockists apparently pass up to 6% to retailers, leaving themselves with margins of only 2-2.5%.on the other hand,

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stockists also sometimes get 5-10% from manufacturers in the form of free packs, some of which they may pass on as a discount to retailers. It is estimated the number of stockists in India at 60,000. Retailers: The remainder of the market is made up of a large number of small-scale suppliers, who often act as prescribers as well as retailers. The number of retailers is subject to some considerable margins as reports suggests that there are about 5,50,000 retailers or pharmacies ,it is not clear whether all retail outlets selling pharmaceuticals account for about 70-80 percent of the pharmaceuticals sales in the country ,with the remainder being sold directly through hospital pharmacies . In rural and small-towns accounting for 25-35 Percent of the market, the private medical practioners usually keep stocks of most of the medicines they expect to prescribe. Most small hospitals and nursing homes also have in-house pharmacies and require to buy the drugs on the premises, whether they are in or out patients. Pharmacists recommendations about drugs and their alternatives seem to be based on profitability and on relationships with representatives of various companies. The power of the retailers comes from their power not to sell a particular brand. They can let it gather ship it back to the supplier, push the more profitable brand instead. Retailers are entitled to margins of 16% for controlled formulations and 20% for decontrolled formulations on the maximum retail price: this is set by law and may be printed on the medication. But this formal position seems to mask considerable variations, whether by company, retailer, drug or for particular times when there is an unbalance between demand and supply , or when a stock of drugs and sometimes medical representatives offer price reductions to the retailers to move drugs more quickly or to increase the margin that can be earned by the retailer. The retailers probably comprise a wide variety of very different kinds of operation, ranging from small shops to retail chains. We discuss small shops further below, but in general these are closely linked to other small shops in Indias retail sector. In many cases these are family firms, with a single owner or a set of brothers, continuing a longer family tradition. They will normally have a small number of14

employees, who often turnover quite quickly: these ex-employees can often be found in rural areas or in small towns having set up business as drug retailer, themselves, or having established a position as an RMP. At the other end of the retail continuum are chains of retail outlets. Retail pharmacy chains are relatively new to India, and have generating considerable conflict with the existing retailers since about 2000. For example, subhiksha started as a supermarket-cum-pharmacy chain in 1997now has around 170 stores with turnover of over Rs 300 crore, mostly in Tamil Nadu, and cut the prices to consumers by covering the cost of the 6% local sales tax. The remaining retailers persuaded stockists to stop supplying subhiksha, and after a court case, the stockists were forced to resume supplies, on condition that subhiksha did not reduce prices. Though this dramatic turn of events has united the rest of the trade, the subhiksha kind of practices is likely to be the future norm. In order to cope with the impending competition, the others are merging to form co-operatives to derive similar benefits from stockists. Similarly, the medicine shoppe, one of the largest retail drug stores in the US, opened two retail outlets in Mumbai in 1999 and by may 2006 had 103 stores across six states, mainly in urban areas. By 2007 these early initiatives had spread to include Apollo, lifeken, medicine shoppe and health glow. There are also proposed large-scale projects of Ranbaxy, Fortis health care, and others, who are trying to develop retail pharmaceutical chains. An example of the kinds of changes that these chains are introducing can be seen in the account of the plans of Ranbaxy(a leading drug maker) and Fortis(who are building up a chain of high technology hospitals): the one stop shop chain will offer prescription and OTC drugs, health supplements, health foods, alternate medicines like ayurveda and homeopathy , home and personal care products, telemedicines and pathology collection centers under one roof. To be operated round the clock, it would extend value added services like free home delivery, prescription reminder service, loyalty programmes OPD appointments. A manager in one of retail chains explained how their system of 450 clinic-based pharmacies (in hospital and under direct control) and 50 franchise works:

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What we do is, we tie up with the manufacturers. When you have 450 pharmacies across the country you huge negotiation powers with them. That group does not do the purchasing through the distributor necessarily. They will position themselves as the distributor and buy from the manufacturer and get the wholesale margins .they buy it at that price but sell it at the consumer rate. So once your margins go up you can afford to provide better services and added benefits for your patients but you can certainly cut up to 70%. Youll still need to buy from other people. Although these innovations are largely an urban phenomenon, and probably mostly restricted to the metropolitan cities.

Public and Private sector procurement systems:The two main procurement systems in India comprise state or government procurement and procurement by large private health institutions. Each of these may comprise systems within systems, but not all of the may be very systematic. It is hard to get consistent and reliable estimates of the scale of these different procurement systems. According to a report prepared for the national commission on macroeconomics and health, in 2002 the combined budget for drug procurement by both the central and state governments was Rs 20,000 million. Reports suggests that total government procurement accounts for about 6% of total pharmaceutical sales in India, further information on expenditure by functions suggests that the medical stores depots and drug manufacture account Rs 4,585 million in 2001-02, out of a total expenditure by public sector bodies(central and state) of Rs 25,200 million. Center and state procurement process: There is no single central government procurement office although 25% of total public sector drug volume is procured by the central government for the central government health services, defence (armed medical services), public sector units, and state sector units that negotiate prices directly with producers/manufacturers. The medical stores organization (MSO) is responsible for the procurement and supply of quality medicines and medical instruments to central government hospitals and dispensaries in rural and suburban areas. Its has seven depots located16

in Mumbai, Kolkata, Chennai, Guwahati, Hyderabad , and New Delhi. It acquires drugs directly from pharmaceutical companies through tenders in order to reduce prices, but only about Rs 1,140 million worth of stores were purchased by it in 1978-79. The MSO also distributes drugs supplied by international organizations such as UNICEF, CIDEA, WHO, USAID. It has particular responsibilities for vaccines received from WHO, UNICEF, USAID and other various international agencies under various agreements entered with government of India, and it is responsible for stores required for national eradication programs such as anti-malaria , Antileprosy, Anti-TB, AIDS, as well as Family welfare under National Health and Family Welfare programs. In addition to the depots, there are three chemical testing laboratories attached to the Medical store depots at Mumbai, Chennai and Kolkata for testing the quality of the drugs and medicines. Most public sector drug procurement is carried out by the state governments, and practices vary considerably across the country. In the Army, the central command for the armed forces has a medical depot, which works on rate contracts. They float tenders for supplying the drugs that they need for armed forces personnel. Pharmaceuticals with GMP capacity-usally the bigger ones, but not necessarily so, and they could be MNC or local companies-are entered onto an approved register by the armed forces. When new drugs supplies are needed, these companies receive requests to submit tenders. Because these companies are all considered to manufacture quality products, the decisions about which companies quotes to accept are supposedly made on the basis of price, and usually the cheapest two or three companies will be asked to provide the drugs. In most other public sector cases, it would seem, there is a mix of centralized procurement like this for a limited range of basic medicines, and localized procurement for more specialized drugs. In practice, such systems are cumbersome, inefficient, and open to corrupt practice. Private purchasing by large users: Large private hospitals negotiate prices with C&Fs and distributors to avoid stockiest and retailer margins in addition to getting bulk purchase discounts. Some

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private hospitals invite tenders. Small hospitals and dispensing practitioners buy drugs from wholesalers. Pharma product types: In pharma there are two kinds of products, one is ethical product and other is generic product. Whenever a new drug is developed, the company before it first releases it holds the patent and the exclusive rights to be the only one making that drug for a certain time. If you want to buy a new drug, you can only buy the brandname version of it so called ethical drug. After a while say time of 10 years, the patent expires, and other companies can make their own generic versions available. At that point, most people will buy the generic version. The marketing strategies and supply chain system completely differs in ethical products and generic products, in the next section distribution system of Generic kinds of products specified in detail.

5. Generic Drug:A generic drug (generic drugs, short: generics) is a drug defined as "a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use." It has also been defined as a term referring to any drug marketed under its chemical name without advertising. A generic drug must contain the same active ingredients as the original formulation. Generic drugs are usually sold for significantly lower prices than their branded equivalent. One reason for the relatively low price of generic medicines is that18

competition increases among producers when drugs no longer are protected by patents. Companies incur fewer costs in creating generic drugs (only the cost to manufacture, rather than the entire cost of development and testing) and are therefore able to maintain profitability at a lower price. The prices are low enough for users in many less-prosperous countries to afford them. For example, Thailand has imported millions of doses of a generic version of the blood-thinning drug Plavix (used to help prevent heart attacks), at a cost of 3 US cents per dose, from India, the leading manufacturer of generic drugs. Major constraints in generic drugs are: y Style, design y Price Pricing and Margins: The prices and the margins of drugs for the wholesaler and retailers are largely decided by the National Pharmaceutical Pricing Authority (NPPA), which varies depending on whether the active constituent of the product is a scheduled drug or a nonscheduled drug. Scheduled drugs are price controlled whereas nonscheduled drugs are not. The NPPA is an organization of the government of India established to fix or revise prices of controlled bulk drugs and formulations. Companies must keep drug prices affordable to the general public. To keep medicines within reach of the poor population, the government has covered 76 scheduled drugs. In addition to the above mentioned margins, wholesalers and retailers are also compensated with additional trade offers. Hospitals and large institutions sometimes directly negotiate with the manufacturing company and get the drugs in their pharmacy at lower costs. Stockists compete with each other in a given city. Generally, hospitals order large quantities and can negotiate with stockists, who provide payment terms, credit periods, and margins. Margins at various levels of Generic distribution system

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Current Generic distribution chain in India

The above figure shows the generic distribution, blue color arrows specify order process and red color arrow marks specify stock movement.

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6. Ethical DrugsA Ethical drug or prescription drug may only be sold by a pharmacist when authorised by a written prescription from a medical practitioner. Ethical drug is a synonym for prescription drug that is often favoured by pharmaceutical companies despite being less widely understood.

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The law varies from country to country, but a drug that requires prescription in one of the major pharmaceutical markets (the US, Europe and Japan, in order of size) will generally require prescription in all. The opposite of a prescription drug is an over-the-counter drug. Selling prescription drugs requires a sales force that can successfully reach the necessary prescribers. The number of prescribers to be reached, and therefore the size of the sales force required, depends on who is expected to prescribe a drug. This can vary from a small number of specialists to any GP. Because of this only the biggest pharmaceutical companies are able to market a wide range of products globally by themselves. Even fairly substantial companies that are nonetheless not giants may do one, or usually more, of the following: Specialise in a range of drugs that sell to particular specialists and develop a sales force big enough to reach only those specialists. License out drugs in regions where they do not have a sales fore of their own. License out some drugs completely. Specialise in over-the-counter or generic drugs that do not require such a large sales force. Their large sales forces are a key reason why the major pharmaceutical companies are unlikely to lose their dominance even if their research efforts prove to be less effective than those of smaller companies (a very real risk). Major constraints in ethical drugs are: y Quality y Brand value Margins at various levels of Ethical distribution system

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Current ethical distribution in India

In the above figure blue arrows specify order process and red arrows specify stock movement.

7. Analysis23

The present distribution growth is at 8%, generic field is growing much more faster rate then ethical drugs due patent expiry of ethical drugs, in my analysis Ranbaxy is now mainly concentrating generic drugs both in domestic and export marks, at present Ranbaxy owns nearly 250 generic drugs India . By comparing values of domestic sales and exports of ranbaxy by using regression method it specifies that pharmaceutical market has faster growth. Dr. Reddys and Cipla are also now concentrating on generic drugs. The main reasons for generic growth is prices are less then compared to ethical drugs

8. ConclusionIndias distribution growing at faster rate of 8%, all the major industries in India, pharmaceuticals is surely the leaders. Generic drugs are usually sold for significantly lower prices than their branded equivalent. A Ethical drug or prescription drug may only be sold by a pharmacist when authorised by a written prescription from a medical practitioner. If India is able to take a 10% slice in the emerging market in developed countries it will open an opportunity of around $50bn at current prices of patented and branded drugs and shall be able to surpass the major exporters of the world and be the global leader in the Pharmaceuticals landscape.

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