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Indian Pharmaceutical Industry in 2020

A REPORT ON

“DEVELOPING FUTURE SCENARIOS

FOR THE INDIAN BIO/PHARMA

INDUSTRY

IN 2020”

(DELPHI STUDY APPROACH)

By:

ARUN GUPTA

09BS0000425

SMI BRAIN NET.

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A REPORT

ON

“DEVELOPING FUTURE SCENARIOS FOR THE INDIAN

BIO/PHARMA INDUSTRY IN 2020”

(DELPHI STUDY APPROACH)

BY

Arun Gupta

09BS0000425

SMI BRAIN NET

A REPORT SUBMITTED IN PARTIAL FULLFILMENT OF

THE REQUIREMENT OF

MBA PROGRAM OF

THE ICFAI UNIVERSITY, DEHRADUN

SUBMITTED TO:-

FACULTY GUIDE: COMPANY GUIDE

Prof. A. Lakshminarasimha Prof. Dr. Roger Moser

Associate Dean IBS-Bangalore Director SMI India

DATE OF SUBMISSION: 14/5/10

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DECLARATION

I declare that the study entitled “Developing Future Scenario for the Indian

Pharmaceutical Industry in 2020” conducted at SMI BRAINNET, Bangalore is a record of

independent work carried out by me during the academic year 2010. I have completed my

study under the guidance of my faculty Guide Prof. Lakshminarasimha .A. of IBS-

Bangalore and company guide Prof. Dr. Roger Moser of SMI BrainNet.

I also declare that this study is the result of my effort and has not been submitted to any other

University or Institution for the award of any degree or personal favor whatsoever. All the

details and analysis provided in the report hold true to the best of my knowledge.

Date: 14 May 2010 Arun Gupta

Place: Bangalore IBS Bangalore

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ACKNOWLEDGEMENT

I would like to express our heartfelt gratitude and thankfulness towards our

Industry Analytics professors, Dr. Prof. Roger Moser for giving us an

opportunity to work on this project, which has helped us gain an in depth

understanding of the Indian Pharmaceutical Industry. Also the expert comments

given timely helped a lot.

The timely advice given by Prof. A. Lakshminarasimha has gone a long way in

ensuring that we do not lose focus while working on the project. The constant

guidance and meaningful suggestions provided by them also helped in making

this project a relevant and a rich source of learning for the students of Industry

Analytics. With his kind reference we have visited a government manufacturing

plant KAPL (Karnataka Antibiotics and Pharmaceuticals Limited) and get a

knowledgeable exposure about all the departments of a company. We come to

know how the functioning is done in an organization.

We hope that this project would enable the readers understand present and the

future scenarios of Indian Pharmaceutical Industry.

Regards,

Arun Gupta.

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Table of Contents

DECLARATION ................................................................................................................... 3 ACKNOWLEDGEMENT ..................................................................................................... 4

ABSTRACT: ......................................................................................................................... 7 INTRODUCTION ................................................................................................................. 8

Company Profile: ............................................................................................................. 8

SMI:............................................................................................................................... 8

SMI India ....................................................................................................................... 8 Our academic partner – IIM-B ....................................................................................... 9

Our corporate partner(s) ................................................................................................. 9 Research ........................................................................................................................ 9

BrainNet ..................................................................................................................... 10 DEVELOPING A FUTURE SCENARIO ............................................................................ 11

Fundamental Steps of Scenario Planning ..................................................................... 12

Objective of the project.................................................................................................. 14

Limitations of the project .............................................................................................. 14

METHODOLOGY: ............................................................................................................. 14

Overview of Delphi Technique: ..................................................................................... 15

RealTime-Delphi – Procedure for Respondents ........................................................... 15

Experts focused approach: ............................................................................................ 18

INTRODUCTION: INDIAN PHARMACEUTICAL INDUSTRY....................................... 19

INDUSTRY SEGMENTATION .......................................................................................... 22 DOMESTIC GROWTH DRIVERS: .................................................................................... 25

CRITICAL SUCCESS FACTORS....................................................................................... 27

New product development ............................................................................................. 27

Therapeutic coverage ..................................................................................................... 28

Exports ........................................................................................................................... 29

Low cost production through scale ............................................................................... 29

FACTORS WHICH MAKE INDIA MOST FAVORITE OUTSOURCING HUB: .............. 30

PEST Analysis of Pharmaceutical Industry: ......................................................................... 33

Political Factors.............................................................................................................. 33

Economic Factors ........................................................................................................... 34

Social Factors ................................................................................................................. 35

Technological Factors .................................................................................................... 36

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SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY ................................ 38

Strengths ........................................................................................................................ 38

Weakness ........................................................................................................................ 39

Opportunities ................................................................................................................. 39

Threats ........................................................................................................................... 40

Projections: .......................................................................................................................... 41

Outcome Projections:..................................................................................................... 41

Enabler Projections: ...................................................................................................... 42

Impact on Industry: ....................................................................................................... 44

EXPLANATION OF THE OUTCOME PROJECTIONS AND 6 ENABLER‟S

PROJECTIONS with EXPERT COMMENTS ..................................................................... 49

Outcome projections ...................................................................................................... 49

Enabler projections: ...................................................................................................... 49

Short Stories Which Will Support the Above Projections: .................................................... 60

Lifestyle Diseases: DIABETES in India ........................................................................ 60

BRANDED PILL BITTER DOSE ................................................................................ 61

Chronic diseases cost India more than $ 1 billions. ...................................................... 62

Government support ...................................................................................................... 62

REGRESSION ANALYSIS ................................................................................................ 63

Impact on Industry:- ...................................................................................................... 63

APPENDIX ......................................................................................................................... 69

Experts Rating regarding Impact on Industry ............................................................. 69

Calculations for Conclusion: ......................................................................................... 70

References: .......................................................................................................................... 71

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ABSTRACT:

The proposed project is about future scenario development of Indian Pharmaceutical industry

by 2020. For projecting the most probable/likable scenarios, existing Political, Economical,

Social as well as Technological factors are considered and a PEST framework is formulated.

While developing this framework we need to consider the enabling factors (enablers) which

can influence in future. These enablers are suggested and recommended by experts from

Pharmaceutical industry as well as academic background.

Each Pharmaceutical company is controlled by 5 major elements which will directly

affect their functioning. They are Customers, Suppliers, Competitors, Government and

Society in large. The entire project started with identifying the various Political, Economical,

Socio-Cultural and Technological factors that can influence Pharmaceutical sector especially

in India. Then these identified factors were grouped under the key five elements. Now the

most challenging part of project was to find out which are all factors of the key elements

affect which all PEST factors. On the basis of this relationship existing we identified main

projections also their corresponding enabler projections. These identified projections are

sent to experts for Delphi analysis. Experts have to comment on each of main projection and

also on enabler projections. Experts have to flash their thoughts on 3 parts for each projection

1) Probability of projection happening

2) Impact on industry

3) Desirability Of occurrence. Also expert can post their comments on each part.

Experts were selected from Pharma industry, consulting firm, academics, supplier segment

and also financial analysts for Pharmaceutical industry. We have got 45 responses from the

experts. After getting the response from the experts to analyze the data we have done Factor

analysis, Regression analysis and come out at the final conclusion of the probability of

happening of the most likable scenario.

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INTRODUCTION

Company Profile:

SMI:

The importance of Purchasing, Logistics and Supply Chain Management has increased

enormously. Due to recent business developments, the strategic significance of Purchasing

and Logistics has been recognized. Their functions are treated accordingly - not just

when cost reductions and quality improvements are concerned. The latest research proves

that competitive advantages emerge from the procurement of innovative products and services

– Purchasing does indeed act as an innovation driver. Logistics is often referred to as a

"strategic weapon" to be used against the competition.

The Supply Chain Management Institute (SMI) is one of the leading research institutes

worldwide for Purchasing, Logistics and Supply Chain Management at the European Business

School (EBS) in Wiesbaden. Together with renowned partners from the academic and

business world, we successfully drive up-to-date and innovative topics in Purchasing,

Logistics and Supply Chain Management research projects and studies.

At the same time, increasing customer expectations require an integrated approach in which

all activities along the value added chain are planned, implemented and

controlled throughout the entire product life cycle. Supply Chain Management takes over this

function in the company and tracks the long-term performance improvement of every single

company of the Supply Chain as well as the Supply Chain as a whole.

SMI India

China is known as the "workbench of the world", India is rapidly developing into a global

service provider – not only in IT, but also in contract research in the pharmaceutical,

biotechnological and chemical industries, in engineering services for the automotive and

aerospace industries, etc. At the same time, a growing customer base in India requires high-

quality products and services. Multinationals as well as local companies have great

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opportunities in India but also face many challenges. One of these challenges is the optimal

management of the supply chain essentially including sourcing and logistics. Especially in the

area of sourcing and supply management, a gap exists in India between the required support

from universities for local and multinational companies operating in India and the number of

research centers focusing on theses challenges.

Our academic partner – IIM-B

It is well known for its excellent education of students and the success of its alumni all over

the world. IIM Bangalore is the host of the research and education center of SMI and part of

its Global Research and Education Network.

Our corporate partner(s)

The EADS-SMI Endowed Chair for Sourcing and Supply Management was established in

2007 jointly by EADS (European Aeronautic, Defence and Space Company) in order to

establish the first research and education center in India, solely focusing on sourcing-related

challenges in India

Research

The research focus of SMI India is the optimal management of the interface between suppliers

in India and operations abroad or other parts of India. SMI India is therefore part of the

following research groups:

Sourcing Organizations: Effective Management and Efficient Structures in Emerging

Markets.

Regional Sourcing Strengths and Weaknesses: A Cluster-based Analysis for India and

China.

Supplier Management in Emerging Markets: Integration Challenges and Transparency

Requirements

In addition, SMI India is conducting research projects in India-specific Supply Risk

Management and Talent Management together with different partners from industry.

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BrainNet

BrainNet is a leading international brand for Supply Chain Management Consulting.

BrainNet, a consultancy based in Bonn, Germany, a market leading purchasing consultancy,

also sends experienced industry insiders to its clients. Not only do they attend the negotiations

with the suppliers but, beforehand, they also cast an expert eye over the production plants to

gauge the negotiating leverage.

BrainNet is one of the leading international brands for the supply chain management

consulting:

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DEVELOPING A FUTURE SCENARIO

Scenarios provide substitute images of probable futures, they serve to enable an organization

to think ahead rather than to forecast future situations, without any evaluation of the

probability that they will arise. Scenarios consist of a consistent set of external factors over

which the company has no influence.

Planning for future scenario enhances the effectiveness of corporate management. It increases

the visibility of the future and widens the room for manoeuvre. It also enhances

management‟s ability to calculate the potential impact of possible environmental changes. Is

developing future scenario worth the effort? Well, this is a decision for each company to

make. With increasing financial insecurity, a lot of companies are installing scenario planning

as an essential part of their business model.

Evolution of Scenario Planning

Planning scenarios dates back to more than 60 years and has its roots in military strategy.

Scenarios were developed during World War II to handle the possible effects on the

environment if an atomic bomb were to be detonated. Herman Kahn and the Hudson Institute

further developed this method, the rationale being to “think the unthinkable” and then

assigning probabilities to it.

In corporate management, planning scenarios gained importance during the end of 1960,

when Shell was able to anticipate different potential outcomes of the oil crisis. Due to their

early preparation of strategic options, Shell managed benefits from the crisis and gained

competitive advantage. Shell used second generation scenarios (decision-support scenarios)

which analyzed business dependence on certain relevant factors and their influence on the

decision makers. While the first generation scenarios were explanatory scenarios, they only

highlighted the possible future developments. By 1980s lot of companies in USA used

scenario planning technique.

Still scenario planning did not become the integral part of many companies due to

sophisticated process, time needed and a frequent unwillingness to deal with somewhat soft

factors. But today, scenario planning has formed an integral component of the business model

of almost all the companies and is of a sensitivity analysis or long term forecast.

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Planning for the Future

General traditional planning is based on a single bundle of assumptions – the official future of

the organization, while alternative futures are not taken into consideration. There is a vague

assumption that expectation for the future do not differ much from the past. Planning is

basically done on the fact that tomorrow does not deviate much from today, which is a

dangerous deception in today‟s uncertain world.

One-dimensional thinking about the future is just not enough in today‟s ever-changing world.

This is where scenario planning helps an organization to prepare not just for a single future

but for a future space instead. Key performance indicators increase the robustness and

flexibility of the corporate management, thereby giving a clear picture of the business model.

Fundamental Steps of Scenario Planning

Figure: Advanced Scenario Thinkshop (AST)

Advanced Scenario Thinkshop (AST) is a tightly organized and systematic process of

developing a scenario. It is a balanced mix of quantitative and qualitative elements, while at

its heart, this process is about evaluation of relevant business models and the possible

strategic courses of action in the context of well defined scenarios for the companies.

There are basically three steps in planning a scenario:

1. Think

2. Calculate

3. Prepare

Think: The future can not be predicted, but equally it did not come out of blue. Organizations

try to identify and select the uncertainties which are important for the success of the company

and for which it needs to be prepared. Thinking can be facilitated through different steps:

Reflect on current global and industry specific trends

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Differentiate between certain and uncertain events

Analyze substitute developments of uncertain trends

Infer scenarios through coherent combinations as well as aggregation and description

of the relevant variations of uncertainties.

Calculate: The measurement of the success of a business model is based on calculation of the

effects the scenarios have on the key performance indicators. Accurately defined statements

helps in shaping up of the interface between the scenario and the planning model. External

statements reflect the necessary attributes of the defined scenarios, while internal statements

reflect the necessary attributes of the business model.

Prepare: Is the current strategy and the direction of the business model enough to secure the

growth and competitive advantage of the company in the important scenarios? Or further

measures are necessary for the survival and stability of the company? These questions can not

be answered in simple yes or no, there are certain strategies that can be used while answering

these questions, the best strategy or a combination of strategies that suits the business model a

particular company can be used by that company to prepare itself for the future. The strategies

are:

Robustness: Provide a satisfactory performance in as many defined scenarios as

possible.

Flexibility: Leave the strategic options open as long as possible.

Multitrack: Allow the parallel pursuit of competing options for as long as possible.

Risk: Provide the highest yield, even if the other scenarios result in losses.

Robustness and flexibility are the best solutions for preparing for future as they can yield the

greatest benefits. At times of instability in the market flexibility can be even more essential

than robustness where as multitrack model is too resource intensive, costly and the level of

risk associated are also high.

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Objective of the project

The objective of the project is to develop scenarios that will act as indicators of the

complexities that the pharmaceutical industry will face in the future, i.e. in the year 2020 and

to act as forerunner on managing these complications. This is followed by contacting the right

experts for their comments on the predicted scenarios. The experts were asked to assess the

projections in terms of the probability of occurrence, their impact on the Indian

pharmaceutical industry, and their desirability using the ratings scale provided. Scenarios for

the year 2020 were developed with the help of the views received from experts.

Limitations of the project

Since the pharmaceutical industry is very vast and it covers wide range of products,

only limited companies are taken into consideration for the research.

Company Experts may not give the exact details and conceal some important fact and

details.

It is difficult to contact the right experts for this research due to their busy schedule.

The Delphi approach accesses the future based on the opinions of the experts, the

accuracy of these predictions remains a major limitation.

METHODOLOGY:

The study approaches the Indian Pharmaceutical industry with a unique approach that does

not boast of numbers and complexities. It‟s simple because the focus is on preparing for the

worst scenarios and otherwise not involving narrowed down views that are very susceptible to

the dynamism, credible because the predictions pass through different phases of screening and

authentication by the expert panel comprising of a heterogeneous set of academicians,

industry personnel and industry consultants, dynamic because the participants can review

their views at their convenience to suit the discussion and give it a dimension, authentic

because the views expressed are part of the knowledge inherited by the panel over the subject

through their many years of service in the sector and related fields. Once the expert panel has

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an exact dimension on the study, the study focuses on the sustainability of the projections and

elucidating the rest on how to prepare for the unpredictable and complicated future we live in.

Overview of Delphi Technique:

The Delphi technique is one of the most commonly known methods of future research. It is a

systematic, multi-stage survey procedure and was developed by the RAND Corporation at the

end of the 1950s to avoid the general problems associated with group discussions (bandwagon

effect, halo effect). It was first used in the “Delphi project” in which seven researchers

assessed the possible targets of Soviet attacks on the US in the form of a structured, written

survey. After years of being used solely for military purposes, the Delphi technique was

presented to the public in 1964. As part of the “Report on a Long-Range Forecasting Study”

T. J. Gordon and O. Helmer presented the results of long-term forecasting of scientific and

technical developments for the next 50 years.

Today the Delphi technique is a standard approach used in science and everyday life. A

classic Delphi survey comprises several rounds. Once the future assumptions, or projections

as they are known, have been developed, the first round of the survey involves a group of

previously selected experts. They are individually and anonymously confronted with

questions which require quantitative appraisals. In addition to the appraisals, each expert can

also provide comments to justify his or her opinion. Before the next round, all the participants

can view the cumulated group appraisal and the comments made. The participants then have

the opportunity to modify their appraisals. Through this Delphi process, the panel of experts

comes close to reaching a consensus on the appraisals.

RealTime-Delphi – Procedure for Respondents

The RealTime-Delphi developed was an innovative and quick-response platform for

participants to appraise their expectations of the future. The participants were asked to

appraise 18 projections online in terms of their probability of occurrence, impact, and

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desirability. They could also add comments and reasoning to their responses. Immediately

after answering a question, the real-time calculations provided the participants with insight

into the statistical group opinion and comments collected. The participants were then able to

reconsider and change the responses they provided after the first round. The Delphi was

designed to be self-explanatory. Nevertheless, the participants were able to access a tutorial at

any point which explained the background to and the procedures used in the RealTime-

Delphi. Every participant completed an average of around four rounds of the survey. The first

round ran through all 20 assumptions, i.e. 20 first round screens and 20 revision screens with

group statistics. Each time the participant logged in subsequently and was taken to a

consensus portal, this was considered to be a new round.

The statistical group opinion was provided for each survey dimension in the form of a box-

plot. A box-plot (also known as a “box-and-whisker plot”) can be described as a diagram

showing a row of univariate numerical data (e.g. from 0 to 100%) as well as several

characteristics of the series of data (e.g. median, distribution, outliers). The median was

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indicated by a black line in the box-plot. A gray shaded area showed the second and third

quartile – also called “interquartile range”, which is known as a measure of dispersion. The

central innovative aspect of the box-plot was the graphical and differentiated illustration of an

outlier position. Divergence from the group was indicated using different colors:

a) Green: Within the group opinion

b) Yellow: Moderate divergence

c) Orange: Significant divergence

d) Red: Strong divergence

An “outlier labeling rule” also helped with classifying observations as “out” or “far out” of

the group opinion. In addition to the statistical group opinion, the arguments already collected

from the experts for each projection could also be viewed. Once all 18 projections had been

answered, the session was ended automatically. When next logging in, each participant was

immediately taken to a consensus portal. The consensus portal was a form of control panel

from where a respondent could jump into and review every single projection. The color of the

buttons indicated the status of the given probability judgment for a projection, i.e. the

divergence from the group opinion.

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Experts focused approach:

For the Delphi study we approached almost 500 experts and out of these 44 have responded

through their comments. So we can say that the response rate is around 9%. We have

contacted experts from different fields so that we can have overview of the different

prospectus of different fields. Actually we have contacted some academicians from IITs, IIMs

and best Pharma colleges in India. Research scholars and PhDs from renowned institutes like

NIPER (National Institute of Pharmaceutical Education and Research, CSIR labs, CRI

Kausauli etc. Doctors from India‟s best hospitals like AIIMS. GOI officials, Industry experts

from magazines, pharma companies (suppliers), consultants and financial analysts. All these

experts view industry in a different look and have different things to share. In our survey the

break of experts is as follows:

Out of 44 experts 9 are from academics, 25 from industry and 10 from research centres. So we

got the data that is a mixture with maximum number of experts are from industry will actually

tell the difference between the present scenario and what is it going to be.

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INTRODUCTION: INDIAN PHARMACEUTICAL INDUSTRY

“The Indian pharmaceutical industry is a success story providing employment for millions

and ensuring that essential drugs at affordable prices are available to the vast population of

this sub-continent.”

The pharmaceutical industry has been considered an “evergreen” industry. It has weathered

recessions, downturns and upturns and has provided investors with certain risk/reward that

was well understood and documented. The rate of change in this industry, compared with

most of the others, has always been sedate – with a group of few pharmaceutical companies

driving its future.

Pharmaceutical Industry in India is one of the largest and most advanced among the

developing countries. It is ranked 3rd

in volume terms and 14th

in value terms globally. It

provides employment to millions and ensures that essential drugs at affordable prices are

available to the vast population of India. Indian Pharmaceutical Industry has attained wide

ranging capabilities in the complex field of drug manufacture and technology. From simple

pain killers to sophisticated antibiotics and complex cardiac compounds, almost every type of

drug is now made indigenously.

Indian Pharmaceutical Industry is playing a key role in promoting and sustaining development

in the vital field of medicines. Around 70% of the country's demand for bulk drugs, drug

intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and vaccines is

met by Indian pharmaceutical industry. A number of Indian pharmaceutical companies

adhere to highest quality standards and are approved by regulatory authorities in USA and

UK.

The Indian pharmaceutical industry traditionally relied on “reverse engineering” i.e. product

copying, through which vast profits were made. In recent years, however, the larger domestic

companies have realized the need to undertake original research and / or penetrate into the

regulated generics markets in the USA/EU in order to survive in the global market. At the

same time, the Indian pharmaceutical industry is renowned for supplying affordable generic

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versions of patented drugs for illnesses like HIV/AIDS to some of the world‟s poorest

countries.

Some of the strategies that have been followed by Indian pharmaceutical companies for their

growth in the global markets have been as follows:

Geographic diversification with few companies focusing on increasing presence in

the regulated markets and others exploring the developing/under-developed markets

of the world.

As a part of diversification strategy, some of the companies have acquired brands,

facilities and businesses overseas. Some companies have even started their local

marketing in foreign markets.

Partnerships for supply of bulk drugs and formulations with the generic companies

as well as innovators.

For regulated markets such as the US, there are companies focussing on value

added generics, niche segments or patent challenges in the US.

Focus on offering research and manufacturing services on a contractual

basis(CMOs and CROs)

Apart from these strategies Indian companies have to devise newer strategies continuously to

survive in the highly competitive global market in an industry that is characterized by - high

capital requirement, high technical requirement, high process skills, high value addition

prospects, high export volumes, high market sophistication. Indian companies are

following the route of mergers and acquisitions to make inroads in the foreign markets. They

need to consolidate further in different parts of the world to become trans-national players.

Indian companies will have to rise above the statement of Michael Porter (1990), that most

multi-national firms are just national firms with international operations. They shall certainly

be at an advantage, as their strong national identities will give them a competitive advantage

in the global markets.

This decade has seen perhaps the most significant changes in the fortunes of the pharma

industry:

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1. Development of new products, the real driver of growth and profitability, has seen a

serious drop in approvals, against a backdrop of ever increasing R&D costs.

2. There has been an emergence of biologics as a significant driver of new R&D. Many

of the established pharmaceutical companies have had to make changes/acquisitions to

align their portfolios to include a larger biologic presence.

3. On the other end of the product life-cycle, the ever strengthening generic competition

has meant rapid declines in sales of products going off patent.

4. The global financial crisis of the past two years has added the final challenge in that

the key markets, US & Europe, have had low/no growth.

Big Pharma in particular have had to take a look at their business models and refocus energies

towards new growth opportunities (biologics, cytotoxics and emerging markets) as well as

evaluate more cost efficient operating models. The result has been that the innovative

pharmaceutical industry has moved into a faster trajectory of outsourcing and off shoring of

R&D and manufacturing across APIs and dosage forms. The global outsourcing industry

is USD51b and growing at 14%; faster than the global pharmaceutical industry growth.

India is perfectly positioned to be a preferred destination for global pharmaceutical companies

to outsource R&D as well as manufacturing. Some of the key drivers being:

• Track record of supplying pharmaceutical API and formulations globally (with all the

requisite quality and regulatory approvals in place) – particularly small molecule

• Strong cost/quality proposition. Lower costs and strong supply of skilled manpower

(scientists, QA/QC professionals etc) and capital efficiency

• Diverse and wide group of companies who have acquired this capability India as a

outsourcing market is USD1.1b and growing at ~51%. The opportunity for growth for

Indian as well as global companies looking at setting up in India is very strong and

sustainable for the foreseeable future.

The Indian outsourcing industry has overcome many hurdles along the way and is now poised

to assume the mantle of leadership as a strategic partner of choice for global pharmaceutical

companies across the areas of R&D and manufacturing.

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INDUSTRY SEGMENTATION

Indian pharmaceutical industry can be widely classified into Bulk drugs, Formulations and

Contract research. Bulk drugs are the Indian name for Active Pharmaceuticals Ingredients

(API). Formulations cover both branded products and generics. Indian pharmaceutical sector

is self sufficient in meeting domestic demand and exports successfully to various markets

globally. The existence of process patents in India till January 2005 fuelled the growth of

domestic pharmaceutical companies and developed them in areas like organic synthesis and

process engineering, as a result of which, Indian pharmaceuticals sector is able to meet almost

95 percent of the country‟s pharmaceutical needs. India is globally recognized as a low cost,

high quality bulk drugs and formulations manufacturer and supplier. Contract Research,

a nascent industry in India has witnessed commendable growth in the last few years. As per

Yes Bank /OPPI report (2007-08), formulation segment (including domestic formulation and

formulation exports) constituted 72% of the total pharmaceutical industry (in terms of sales)

while bulk drugs and contract research constituted 25% and 3% of pharmaceutical industry

respectively.

Fig: Segment wise Sales

(SOURCE: YES BANK / OPPI)

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Presently, the growth of a domestic pharmaceutical company is critically dependant on its

therapeutic presence. In terms of end-use, the pharmaceutical industry is sub-divided into

several therapeutic segments. These segments are broadly defined on the basis of therapeutic

application. Some of these segments are low-volume, high margin segments, while the others

are high-volume with relatively low margins. The new lifestyle categories like Cardiac,

Respiratory and Vitamins are expanding at double-digit growing rates. The long term ailment,

chronic therapies is now accounting 24% of the market. The only growth driver for acute

therapies is the new product introduction under this segment. Today, anti-infective which

used to be the single largest therapeutic segment in Indian pharmaceutical industry is

increasing. Anti-infective segment is now 1st in terms of value contribution followed by

Gastrointestinal and Cardiac.

The key therapeutic segments include:

Anti-infective

Cardio vascular

Central nervous system drugs

Anti-infective is currently the largest therapeutic segment in India. It accounts for one-fifth of

total market turnover. Next in line, and accounting for one-tenth each, are cardio-vascular

preparations, cold remedies, pain killers and respiratory solutions.

Fig. Therapeutic wise distribution (ORGIMS)

(SOURCE: CRISINFAC, YES BANK/ OPPI)

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The global pharmaceutical industry is in the midst of challenging times:

In 2008, the global pharmaceutical market has grown at the slowest rate in this decade and is

expected to slow down further. The market reached USD773 billion at a growth rate of 4.8%

in 2008, which is the slowest growth rate of the decade. US and Europe which contributed

almost 73% of the global market in 2008, achieved growth rates of 1.4% and 5.8%

respectively. Going forward, the US market is expected to stagnate or decline further over the

next five years while the European market is expected to grow at a sluggish pace with a

CAGR of 2 - 5% for 2008 - 2013. There are primarily four reasons for this slowdown:

• Decreased R&D productivity: during the eight year period between 2000 and 2008, while

the total R&D spend of pharmaceutical companies has increased from USD53 billion to

USD129 billion, the number of drugs approved has declined. This decreased R&D

productivity is due to the increased failure rate in trials and higher cost of developing new

drugs due to stricter regulatory requirements.

• Current global financial crisis: the crisis has severely affected the liquidity of small biotech

companies; with 44% of the US biotech companies having less than a year‟s operating cash

and 26% having less than six months of operating cash. Further, the consumer spend on

healthcare has declined, reflected by a drop in the number of prescriptions in the US by 2%

for the first time in a decade in 2008-09.

• Increasing penetration of generics: penetration of generics in US, in terms of their share in

total prescriptions, has increased from 47% in 1999 to 63% in 2007 .Going forward, this is

expected to increase further driven by impending patent expiries and measures by

governments to reduce healthcare costs.

• Fewer and smaller blockbusters: decreased number of blockbuster approvals to replace the

existing ones going off patent and reduced sales potential of recently launched drugs will

further decelerate the market growth. The sales of blockbuster drugs have grown only 9% in

2007 compared to 24% in 2004. Further, projected sales of top 10 NMEs launched in 2008

show no potential of achieving a blockbuster status in the next 5 years.

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DOMESTIC GROWTH DRIVERS:

Pharmaceutical sector is one of the most globalized sectors among the Indian industries. The

downside is pharmaceutical sector traditionally has been immune to business cycles. The

upside of Indian pharmaceutical sector, however, is influenced by a mix of global and local

factors. Global factors are important as most Indian companies ship a major portion of their

production to overseas markets. Also, multinationals operating in the Indian market follows

the central research and global marketing model. Their actions are largely dictated by global

trends although local issues are given due importance. The domestic market is critical for both

Indian companies and multinationals. For Indian companies, the domestic market lends

stability to bottom line and offer means to cope with fluctuations in global demand. The

growth drivers for Indian pharmaceutical market are:

Growing Population and Improving Incomes: Household incomes are rising in

India; the proportion of middleclass in Indian population is also increasing. Statistics

show a clear migration of population towards middle and upper classes. Rise in

income levels is always accompanied by greater demand for medical facilities and

pharmaceutical products. Middle class is already 70 million strong and is expected to

grow even fast, accounting for a higher share of total population. Increase in living

standards will lead to longer life expectance and higher consumption of drugs and

health care services.

Changing lifestyles: Rising incomes and improving literacy rates are leading to

change in lifestyles. While incomes provide the means to access medical facilities and

products, improving literacy boost awareness about diseases and lead to higher

consumption of drugs. Changing lifestyles, however, is leading to a change in disease

profile especially in urban areas. Hectic lifestyles and high cholesterol diets are

resulting growing incidence of diseases such as cardio vascular diseases and cancer.

Research and Development: The R&D efforts of Indian companies have been largely

focussed on chemical synthesis of molecules and their cost effective production

thereof. India has a large pool of technical and scientific personnel with good English

language skills. Indian scientists have developed a high degree of chemical synthesis

26 | P a g e


skills while engineers have developed competencies in producing molecules cost

effectively. These skills have helped Indian companies tap generic markets abroad

successfully in the past and will continue to do so.

Healthcare Expenditure: Indian healthcare system is largely run by the govt with

private sector playing a small, but important part. The healthcare system in India

comprises government hospitals in cities and towns and a network of health centres in

rural areas. This is supplemented by a string of private hospitals and clinics in largely

urban areas. The public expenditure on health has been growing at a decent rate while

private expenditure has been recording marginal growth.

Insurance Sector giving a Lift: Indian insurance sector has been thrown open to

private sector. Large sections of Indian population are not covered by health insurance

schemes. Currently, less than 10% of the Indian population is covered by some form

of health insurance.

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CRITICAL SUCCESS FACTORS

The rules of pharmaceutical business are changing. Indian pharmaceutical companies can no

longer get away with plundering intellectual properties of multinational companies.

Pharmaceutical business has become a new ballgame altogether after the introduction of

product patents in January 2005.

New product development

Pre 2005: New product development efforts of Indian pharmaceutical companies in process

patents era were limited to reverse engineering molecules discovered by other companies.

Thanks to absence of product patents, Indian companies did not have to go through long

winded drug development process. Nor did Indian companies have to expend any effort on

research focus. Indian companies simply zeroed in on blockbuster drugs and tried to come up

with an alternative process as fast as they could. The focus of the Indian companies was to

launch a copy of a blockbuster drug ahead of their rivals in India and abroad.

Key areas to focus on R&D for Indian companies:

1. Potential product identification

Complex API

Complex finished product

Commercial potential of products

Out-licensing opportunity to MNCs

2. Novel Drug Delivery System (NDDS)

3. New Drug Development

Post 2005: A large number of drugs are going “off patent” in the next few years. According

to IMH Health, more than $60 billion worth of drugs are going “off patent” by 2011. Thus,

Indian companies will not be short of new products for at least another two years. In the long

run, however Indian companies may find it hard to make money from drugs coming off

patent. Already competition in generic market is intense and likely to increase further in the

future. Hence, new molecules rather than generics will drive revenues and profits in the

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product patents area. Indian companies need to discover new drugs either through their own

efforts or research alliances. Perhaps licensing deals with multinationals could also provide

Indian companies access to new drugs. Focus on basic research will come with its own

issues. Indian companies will have to acquire the skills of identifying research areas that offer

excellent revenue and profit potential. This will entail a closer tracking of disease profiles and

related therapies as well as keeping a close tab on the research programmes of rivals. Besides,

Indian companies will have to pay more attention to economics of drug development process.

A product patent is granted for a period of 20 years

Therapeutic coverage

Pre-2005: In the absence of product patents, Indian pharmaceutical companies did not feel

the need to focus on specific therapeutic areas. Most Indian pharmaceutical companies

eschewed narrow focus and tried to cover as many therapeutic areas as possible. Now the

product portfolio of many Indian companies has considerable breadth and depth. Given the

price controls in the market, diversification worked to the advantage of companies in the

domestic markets. In the export markets, a wider product portfolio gave companies the

option of picking and choosing from an array of opportunities.

Post 2005: Opinion is divided over the therapeutic strategy that Indian companies should

pursue in product patent era. Some companies believe that focus on select therapeutic

segment will fetch them greater dividends in terms of new chemical entities and market

share. Other companies believe such a strategy is risky given the size of Indian companies

and that a big setback in research could sink the company. Instead such companies are

pursuing a de-risking strategy of building a wide product portfolio. In the domestic market,

such a strategy will result in economies of scale at production and marketing stage, putting

the company in a better place to weather competition from multinationals. In the export

markets even after the introduction of product patents, products under patent protection will

comprise only 15 percent of the market. So a vast chunk of the market will be still open for

competition although margins will be wafer thin.

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Exports

Pre-2005: Most Indian companies focused on exports. Exports improve the valuation of

companies owing to higher margin in overseas markets. Indian companies built fortunes by

making cheaper versions of blockbuster drugs and selling them in domestic and export

markets. Indian companies built especially strong position in manufacture of bulk drugs. Out

of the total exports, formulations constituted 55 percent and bulk drugs constituted 45

percent. Success in export market allowed some Indian companies to build a strong position

in the domestic market organically and through acquisitions of brands and companies.

Post 2005: Exports has continued to be a priority for Indian companies. Major blockbuster

drugs will come off patent in the near future, creating a big generic opportunity for Indian

companies. Also, a growing demand for anti-AIDS drugs in Africa will keep Indian

companies busy. Exports have and will continue to provide Indian companies with the

strength to withstand the onslaught of multinationals in the domestic market.

Low cost production through scale

Pre-2005: Indian pharmaceutical companies have mastered the science of producing drugs

cheaply. Thanks to benign patents regime, Indian companies have developed a high level of

chemical synthesis skills. The absence of development costs together with efficient

production has enabled Indian companies to establish a solid position in bulk drug

manufacturing. But scale did not receive as much importance as it should have, because the

cost of Indian pharmaceutical companies was already low owing to aforesaid reasons. Many

Indian companies did not find the return on investment of world class plants compelling

enough.

Post 2005: By 2011, drugs worth $60 billion will come off patent, presenting a huge generic

opportunity to Indian companies. But the competition in the generic market will be brutal,

resulting in thin margins. The cost of production will hold the key to success in the generic

market. The production cost in turn depends on scale. Indian pharmaceutical companies need

to build global scale to stand a chance in the generics market.

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FACTORS WHICH MAKE INDIA MOST FAVORITE OUTSOURCING

HUB:

India is a fast growing custom manufacturing outsourcing destination with a growth rate of

43% that is thrice the global market rate. This is driven by its ability to create a differentiating

cost value proposition powered by its lower manufacturing costs, skilled manpower and

strong technical capabilities

Assurance, quality and service are the ticket to play in the custom manufacturing space while

cost and innovation serve as differentiating criteria for selection. The India story is driven by

its offering of a „cost value proposition‟ comprising cost efficiency along with skilled

manpower and technical capabilities.

1. India is rated highest in terms of its cost efficiency attractiveness among six countries

– India, China, Eastern Europe, Puerto Rico, Singapore and Ireland. Approximately

67% of the respondents have rated India as “excellent” and rest 33% have rated it

“above average”.

2. India‟s cost efficiency is driven by its low manufacturing costs which are only 35-40%

of the cost of manufacturing in the US supported by its low installation and manpower

cost.

3. Around 90% of the respondents have rated India either “excellent” or “above average”

for its technical capability attractiveness. This is demonstrated by the following:

4. It has manufacturing prowess in both APIs, where India is the 3rd largest player in the

world with 500 different APIs and in formulations where it manufactures 60,000 packs

across 60 therapy areas.

5. India currently accounts for 8% of the global pharmaceutical production making it the

world‟s 4th largest pharmaceutical producer.

6. Vertically integrated model of Indian players to offer end to- end services across

development and manufacturing in both formulations and API‟s.

7. It has around 119 USFDA and 84 UK MHRA approved plants and accounts for one

third of DMFs and highest number of ANDAs in the US.

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8. Approximately 90% of the respondents have rated India either “excellent” or “above

average” for its skilled manpower attractiveness.

9. India offers a large pool of English speaking skilled manpower. Every year, around

1.6 million graduates and 0.4 million post graduates qualify in science courses.

10. While the growth in the North American and European markets is expected to slow

down to -1 to 2% and 2 - 5%

11. respectively over 2008-2013, the growth of emerging markets would be 11-14%.This

increasing influence of the emerging markets will position India in the proximity of

the markets driving growth of the pharmaceutical industry.

12. Share of emerging markets in clinical trials has been increasing and India is emerging

as a hot spot as compared to most emerging markets, with a robust growth of 31% p.a.

over the last four years. This trend will increase India‟s proximity to the clinical trial

supplies market.

13. 67% of respondents have rated India “above average” both on project management

attractiveness and response time attractiveness indicating that India has developed

strong project management capabilities with reduced turnaround time

14. While India needs to improve its IP perception Indian companies are adopting various

business models to ensure partnering with global companies and have been successful

in doing so.

15. In order to further strengthen India‟s position in the pharmaceutical manufacturing

outsourcing market, government has taken or planning to take several initiatives such

as

16. Streamlining and reducing time frame for approvals involving NOC manufacturer and

NOC export licenses from 8 – 12 weeks to 2 weeks.

17. Providing infrastructure support such as building “Pharmazones”, a separate dedicated

temperature and atmosphere controlled area to maintain the safety, efficacy, and

quality of imported and export drugs/ pharmaceutical products at international airports

at Delhi, Hyderabad and Mumbai.

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18. Building capabilities through collaboration with western countries such as MoU with

US FDA, WHO, Health Canada, South Africa and EMEA.

19. All the above factors have been instrumental in the Big Pharma conducting their

sourcing operations from India and attracting global CMOs like Lonza, Patheon, DSM

and Albany Molecular Research Institute to set up base or collaborate in India.

20. India is thus well poised to become the strategic partner of choice in the arena of

contract manufacturing

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PEST Analysis of Pharmaceutical Industry:

Political Factors

1) Stable government: government at the state and the central level is very unstable

and both have different policies for the development of the Industry.

a. State level.

b. Central level.

Both the Levels of government must support for the manufacturing and R&D in the industry.

2) Taxation policy

a. Pollution clearance tax

b. Service Tax

c. R&D Tax and Patenting Tax

d. Excise duty

e. Custom duty

f. License Fees

g. Hazardous substance (Storage & Handling) license

GOI is supporting the Pharmaceutical industry in the form of 200% weighted deduction on in-

house research and development (R&D) expenses on an average it amounts to no less than 40-

45% of the costs. FDI is 100% allowed in this sector but it depends on the central government

to decide.

3) Strong legal policies :

a. Environmental pollution – due to microbial stains, chemicals, biomolecules

etc…

b. Safety measures –once the new product had been manufactured by a

company, the government institutes check the safety and effectiveness of

the vaccine/medicine. It must not harm the consumer.

c. To protect the biodiversity- policies to save the Rare biodiversity of the

country. ( micro organisms and plant and animal species)

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4) Subsidies by government are not sufficient as there are less SEZ‟s for supporting

the companies in this sector.

5) IPR- Indian Patent act 2005 has made a lot of difference in this industry in each

and every prospectus as discussed before.

6) Relations with the officials – the company must have good relations with the

higher authorities in government for the support.

7) Wage legislations of the officials.

Economic Factors

1) Nation‟s GDP, GNP – only 1% of the National income is spending on the industry

and research.

2) Population growth: Indian population is increasing at a good rate and also the level

of diseases in the urban and rural areas.

3) Literate population: still 70% of the population lives in the rural areas so the

literacy level is low and the penetration of pharma is very low in this these areas.

4) Pricing strategy –

a. Pricing strategy depends on the economic conditions of the country.

b. Also if the price is too low then the rich people may think it is not of good

quality and if prices are very high then it is a problem for the poor people

to buy those products.

5) Unemployment rate – to produce a highly technical product and to sell it in a

country the population must be employed so that they can buy that product.

6) Buying capacity of people-

7) Infrastructure and Transportation cost - these facilities are not so good in India so a

company have to invest more in infrastructure and transport.

8) Financing options- interest rates

9) Pay scales of the scientist – the pay scale of the scientists are very low as

compared to western countries so Brain drain takes place.

10) Export base – if the country has a good export base then it attracts other players

and in India domestic consumption is low as compared to Exports.

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11) Mergers & Acquisitions – company must look at the economic conditions to

merger with the companies in India.

12) Venture funding – is very less in India which is much needed for the biotech

companies.

13) Business cycle stage – this industry is at the growth phase of its cycle.

14) Quality standards – there are only a few laboratories where GLP and GMP

practices are followed, so the number of such labs has to be increased.

15) No proper marketing

Social Factors

1. Lifestyle

(a) Change in the lifestyles of a growing middle class population marked with a

change in the socio-economic composition,

(b) increase in disposable income,

(c) increasing urbanization, with access to medical care as well as awareness about

diseases

2. Low insurance penetration

(a) Currently the market penetration is only 2% of the total population in India

(b) According to World Bank Report 99% of Indians will face shortage of finance in

case of any critical illness

3. Genetically modified food and human health

(a) In future will the genetically produced medicine cause any harm to human health

is a big issue in India

4. Bioethical issues

5. Lack of knowledge and awareness in rural areas: people living in rural areas due to

poverty and illiteracy, enroll their self for clinical trials and it may lead to death of

many poor people.

6. In rural India people prefer using household treatments handed down for generations

for common ailments.

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7. Superstition – Because of superstition, the rural people hold themselves back from

using medicines and go for black magic

8. Poverty – With increase in urbanization, urban poverty and urban slums have also

increased and this class of people is not able to buy even the basic medicines.

9. Local perception (Groups perceive risks differently depending on their culture,

scientific background, perception of government, and other factors.)

10. Reference groups – Most people use reference from people who they know while

using medicinal products, so they don‟t get much idea about new drugs

Technological Factors

1. Technology: India is still lacking in the availability and development of latest

technology needed for the drug discovery and the research processes. Most of the

latest technology for the research purposes is imported from western countries.

Because latest technology not only saves time and cost but will also help to retain the

educated pool of India, which go abroad due to lack of latest technology.

2. Risk involved: there is a high risk involved while importing new technology from the

western countries:

(a) If India, imports a technology to manufacture a product or for the research

purposes and the technology is not user friendly, then the company will loose huge

amount of money.

(b) Success rate of the product: as we know the success rate of the drug discovery

pipeline is dried up, and due to stringent regulation by USFDA, Indian

Pharmaceutical companies are bound to use latest technology.

3. Lack of specialized disciplines and capabilities in various areas, especially in R&D

and aspects related to product quality.

4. The production process brought in from a totally different economic context may be

disastrous for the economy that imports it, if it is unchanged and unadapted.

5. Redesign – the technology imported from a different country has to be redesigned

according to the need of that particular company and country requirement adding cost

to the company

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6. Availability of Quality raw Materials – before importing a new technology, it has to be

made sure that quality raw materials are available for that technology

7. Education

(i) Mismatch between academic curriculum and industry

(ii) Biopharma in India also lack the academic collaboration that is crucial to drug

development in the West

(iii) Lower number of post graduates and PhDs

(iv) Commercial Expertise

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SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY

The SWOT analysis of the industry reveals the position of the Indian pharmaceutical

industry in respect to its internal and external environment.

Strengths

1. India with a population of over a billion is a largely untapped market. In fact the

penetration of modern medicine is less than 30% in India. To put things in perspective,

per capita expenditure on health care in India is US$ 93 while the same for countries

like Brazil is US$ 453 and Malaysia US$189.

2. The growth of middle class in the country has resulted in fast changing lifestyles in

urban and to some extent rural centres. This opens a huge market for lifestyle drugs,

which has a very low contribution in the Indian markets.

3. Indian manufacturers are one of the lowest cost producers of drugs in the world. With

a scalable labour force, Indian manufactures can produce drugs at 40% to 50% of the

cost to the rest of the world. In some cases, this cost is as low as 90%.

4. The fact that despite the low level of unit labor costs India boasts a highly skilled

workforce has enabled the country's pharmaceutical industry at a relatively early stage to

offer quality products at competitive prices. Each year, roughly 115,000 chemists

graduate from Indian universities with a master‟s degree and roughly 12,000 with a

PhD.4 The corresponding figures for Germany – just fewer than 3,000 and 1,500,

respectively – are considerably lower. After many chemists from India migrated to

foreign countries over the last few years, they now consider their chances of

employment in India to have improved. As a result, a smaller number is expected to go

abroad in the coming years; some may even return.

5. Indian pharmaceutical industry possesses excellent chemistry and process

reengineering skills. This adds to the competitive advantage of the Indian companies.

The strength in chemistry skill helps Indian companies to develop processes, which are

cost effective.

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Weakness

1. The Indian pharmaceutical companies are marred by the price regulation. Over a

period of time, this regulation has reduced the pricing ability of companies. The NPPA

(National Pharmaceutical 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.

2. Indian pharmaceutical sector has been marred by lack of product patent, which

prevents global pharmaceutical companies to introduce new drugs in the country and

discourages innovation and drug discovery. But this has provided an upper hand to the

Indian pharma companies.

3. 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.

4. Due to very low barriers to entry, Indian pharma industry is highly fragmented with

about 300 large manufacturing units and about 18,000 small units spread across the

country. 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 10.4% but

due to price competition, the growth in value terms was 8.2% (prices actually declined

by 2.2%)

Opportunities

1. The migration into a product patent based regime is likely to transform industry

fortunes in the long term. The new patent product regime will bring with it new

innovative drugs. This will increase the profitability of MNC pharma companies and

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will force domestic pharma companies to focus more on R&D. This migration could

result in consolidation as well. Very small players may not be able to cope up with the

challenging environment and may succumb to giants.

2. Large number of drugs going off-patent in Europe and in the US between 2005 to

2009 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.

3. 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.

4. Being the lowest cost producer combined with FDA approved plants; Indian

companies can become a global outsourcing hub for pharmaceutical products.

Threats

1. There are certain concerns over the patent regime regarding its current structure. It

might be possible that the new government may change certain provisions of the

patent act formulated by the preceding government.

2. 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.

3. The short-term threat for the pharma industry is the uncertainty regarding the

implementation of VAT. Though this is likely to have a negative impact in the short-

term, the implications over the long-term are positive for the industry.

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From the above PEST analysis, we have found out 20 projections, which are further divided

in to 8 outcome projections and 12 enabler‟s projections. The main 8 projections have very

low co-relation between them and enabler‟s projections are highly co-related to these 8 main

projections and these are listed below as:

Projections:

Outcome Projections:

Projection PO1: 2020: Pharma/biotech companies conducting research projects in India

focusing on diseases of high relevance for the Indian population receive substantial tax

benefits.

Projection PO2: 2020: A stringent regulatory environment for new drug approvals is strictly

enforced in India.

Projection EO1: 2020: The research focus of the pharma/biotech industry in India is to 90%

on priority diseases for the domestic market (e.g. Malaria, Diabetes, and Dengue).

Projection EO2: 2020: The manufacturing focus of the pharma/biotech industry in India is to

90 % on export markets.

Projection SO1: 2020: Consumers in India expect to be provided with the best and latest

drugs at the globally lowest prices.

Projection SO2: 2020: Large-scale clinical trials for export-focused drugs are widely

accepted in the Indian society.

Projection TO1: 2020: Pharma/biotech research organizations funded by the GOI

(Government of India) own all necessary world-class, state-of-the-art research equipment for

innovative drug discovery projects.

Projection TO2: 2020: The innovation and drug discovery capabilities of pharma/biotech

researchers in India are the best in Asia.

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(P- Political, E- Economical, S- Social and T- Technological).

Enabler Projections:

CUSTOMERS:

Projection CuE1: 2020: The rural population of India is ready to invest a substantial part of

their income into the prevention and treatment of febrile diseases like Malaria, Diphtheria etc.

Projection CuE2: 2020: Indians widely prefer to fight their lifestyle diseases (e.g. obesity,

depressions etc.) with reactive approaches such as drugs than to proactively invest into any

preventive activities (e.g. sports, healthy food etc.).

SUPPLIERS:

Projection SuE1: 2020: India‟s rich biodiversity (flora and fauna) has been identified as key

investment criteria for R&D centers of global pharma/biotech companies in India.

Projection SuE2: 2020: The number of PhDs at CSIR, JRF, and NET for research positions

in the pharma/biotech industry is 24‟000 candidate‟s p.a.

COMPETITORS

Projection CoE1: 2020: Pharma/biotech companies have established a common packaging

technology reducing the faked drug market sector in India by 50% compared to 2010.

Projection CoE2: 2020: Global pharma/biotech companies have tripled their API (Active

Pharmaceutical Ingredients) production volumes in India compared to 2010.

GOVERNMENT

Projection GoE1: 2020: The GOI allows free market mechanisms to determine the pricing of

essential drugs.

Projection GoE2: 2020: The regulatory system for the pharma/biotech in India is essentially

the same as US FDA regulatory system.

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Projection GoE3: 2020: The weighted tax deduction for the R&D expenditure of the

pharma/biotech industry in India is 300%.

Projection GoE4: 2020: The GST (Goods and Service Tax – expected to be implemented in

2011) on pharma/biotech products and medical equipments is more than 20%.

SOCIETY AT LARGE

Projection SoE1: 2020: The financial attractiveness of clinical trials for the less privileged

part of the Indian society has lead to a global market share of clinical trials in India of more

than 20%.

Projection SoE2: 2020: The Indian society is largely convinced that physical health is a key

factor for monetary wealth.

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Factor Analysis:

Impact on Industry:

I have done Factor analysis of all the 8 outcome projections by data collected from Experts,

regarding their opinion on Impact on Industry values given by them for these main 8

outcome projections. The experts had rated the impact from 1 to 5. 1 is low impact and 5 is

the high impact on industry. This is done to reduce the attributes in to components to capture

the patterns seen in the data. It will help the experts and the industry to see the factors which

are inter

The main benefits of factor analysis are that the analyst can focus their attention on the unique

core elements instead of the redundant attributes, and as a data “pre-processor” for regression

models.

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure

of Sampling Adequacy.

.551

Bartlett's Test of Sphericity Approx. Chi-Square 62.259

df 28

Sig. .000

Value of KMO statistic (.551) which is more than .500 so it is good for the Factor Analysis

and it is an appropriate technique for analyzing the above correlation matrix.

Communalities

Initial Extraction

Po1 1.000 .655

Po2 1.000 .800

Eo1 1.000 .497

Eo2 1.000 .600

So1 1.000 .714

So2 1.000 .531

To1 1.000 .725

To2 1.000 .689

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Communalities

Initial Extraction

Po1 1.000 .655

Po2 1.000 .800

Eo1 1.000 .497

Eo2 1.000 .600

So1 1.000 .714

So2 1.000 .531

To1 1.000 .725

To2 1.000 .689

Above results indicate the amount of variance in each variable that it accounted for. Initial

communalities are estimates of the variance in each variable accounted for by all components

or factors. This is always equal to 1.0 for correlation analyses. Extraction communalities are

estimates of the variance in each variable accounted for by the components. As above tables

shows that communalities in this table are all high, which indicates that the extracted

components represent the variables well.

Total Variance Explained

Compo

nent

Initial Eigenvalues

Total % of Variance Cumulative %

1 2.416 30.205

2 1.666 20.823

3 1.129 14.107

4 .797 9.965 75.100

5 .746 9.326 84.426

6 .563 7.039 91.465

7 .394 4.926 96.391

8 .289 3.609 100.000

Extraction Method: Principal Component Analysis.

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The variance explained by the initial solution, extracted components, and rotated components

is given in the above table. 2nd

3rd

and 4th

Column of the table shows the Initial Eigen values

i.e. total variance attributed to that factor. Number of factors for that should be used in the

analysis is determined based on the Eigen values. (Only the factors with Eigen value greater

than one is retained i.e. first three factors in with Eigen value of 2.416, 1.666 and 1.129).

We can intemperate from the last column that nearly 75.1% of the variability is explained by

three extracted variables , so you can considerably reduce the complexity of the data set by

using these components, with only a 24.9% loss of information.

Scree plot:

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A Scree Plot is a plot of the Eigen values against the number of factors in order of extraction.

The shape of plot is used to determine the number of factors. The plot has distinct break the

steep slope of factors, with large Eigen values and a gradual trailing off associated with the

rest of the factors. In the total variance explained table we can see that Eigen values more than

one i.e. 2.416, 1.666 and 1.129 are extracted. From this graph we can tell that these three

factors will effect the Biopharmaceutical industry the most and in a significant way. And the

distinct break in the Scree plot occurs at other five variables. Finally, from the cumulative

percentage of variance accounted we can see that these two factors accounted for 75.1 % of

variance and the gain achieved in going to these factors is marginal.

Rotated Component matrix:

Rotated Component Matrixa

Component

1 2 3

Po1 .668 .456 .040

Po2 .709 -.258 .480

Eo1 .562 .424 .031

Eo2 .086 .770 .021

So1 .046 .769 .348

So2 -.016 .350 .640

To1 .756 -.044 -.390

To2 -.026 .045 .828

But by Rotated Component Matrix we know that how these variables are related i.e.

positively or negatively correlated. So we can see that Factor analysis has got three

components and all the Political, Economic, Social and technological factors are covered

under these 3 components. The factors P01, P02, E01 and T01 are positively correlated and

are covered under component 1. The factors E02 and S01 are positively correlated and

covered under component 2 .The factors S02 and T02 are positively correlated and are

covered under component 3. The positive correlation signifies that all the projections

48 | P a g e


developed will have positive impact on the industry i.e. if one of the component had positive

had positive effect other will also had positive effect.

49 | P a g e


EXPLANATION OF THE OUTCOME PROJECTIONS AND 6

ENABLER’S PROJECTIONS with EXPERT COMMENTS

Outcome projections

1. Po2

2. Eo2

3. So2

4. To2

Enabler projections:

1. CuE2

2. SuE2

3. CoE1

4. GoE2

5. GoE3

6. SoE2

P- Political, E –economical, S- social, T- technological.

Cu- Customers, Su- suppliers, Co- Competitors, Go- Government, So – Society at large

50 | P a g e


Ex

perts

' C

om

men

ts

“India has a large market for the

spurious drugs which is around 40%,

a strict regulatory environment will

reduce this market if not terminate

completely.”(P)

“To compete globally and increase its

market share globally, regulatory

environment should be strict and

stringent.”(P)

“Since the large illiterate population

is vulnerable to being exploited by

the pharma companies there will be

increased pressure on the lawmakers

to make a stringent regulatory

body.”(P)

“It will speed up the research and

commercialisation of the drug and

help save cost. This will have a direct

impact on quality of drugs and will

even lead to decline of counterfeits in

the country”.(I)

“It will encourage foreign companies

to launch newer drugs in India and

compete in the price sensitive

market.”(D)

Probability Impact Desirability

58.02 3.88 3.84

Projection PO2: 2020 – A stringent regulatory environment for new drug approvals is strictly

enforced in India.

Reasons:

Increased failure rate of Indian drugs in western countries

Bureaucracy.

It reduces the time taken to approve a drug.

Spurious drugs.

Patent Act 2005: after the acceptance of patent act 2005 India has started to shift its focus

from Reverse-engineering to Innovation and Drug discovery.

Increased outsourced manufacturing projects.

Increased profits due to high acceptance.

“French Custom authorities seized at Paris airport

another consignment of Indian generic drugs 0f

1.74 million tablets of anti-platelet drug,

Clopidogrel, which were shipped by Mumbai

based Macloeds pharma to Venezuela.”

This was 18th

time Generic drugs meant for

developing countries has been confiscated during

transit within the EU, although the manufacture

of the drug in India and sale in the destination

countries.

In February and March, the Netherlands has

confiscated blood pressure control and HIV-Aids

drugs of Dr. Reddy‟s laboratories and Aurobindo

Pharma to Brazil, Columbia and Nigeria on

grounds of alleged patient infringement.

51 | P a g e


Ex

perts

' C

om

men

ts

“Drug patents worth $100bn will expire

in 4 years, this will be a huge advantage

to India to manufacture and export these

drugs due to its competitive advantage

in the generic drugs market.” (P)

“The production cost of generics in

India is approximately 50% lower than

that of U.S. and EU markets.” (P).

“Local companies can put back profits

for expansion, R&D, Up gradation And

Training And Development.” (I).

“Outsourcing of manufacturing to India

should increase. This will help to

generate cash flows to fund research

work.” (D)


60.98 3.65 3.19

Projection EO2: 2020 – The manufacturing focus of the pharma/biotech industry in India is to 90 %

on export markets.

Reasons:

Drug patents worth $60bn to expire in 4 years.

Cheap labor.

GOI providing medicines at subsidized rates for the domestic population.

Increased profits.

Increase in the no of players in the industry.

Increased manufacturing outsourced projects in India due to low cost and high returns.

“According to Ministry of health in India, 36

major Drugs are going to be unpatented.

These drugs have a market share of around

400000 Crore. So it is a big opportunity for

the generic producers of India which makes

the 66% of the total Indian Pharma industry,

to produce these drugs and it will be

available at very cheaper prices.”

52 | P a g e


Ex

perts

' C

om

men

ts

“India has a huge population that is

relatively naive for treatment. Along

with cost benefits will spur growth in

this segment.”(P)

“This segment is a significant

revenue contributor. It will also

demand to put the infrastructure in

place with longstanding bill on

clinical establishment.” (I)

“It will increase the awareness and

safety issues speciality in the rural

population

in relation with the clinical trials.”(D)

“High growth in the number of

Principal investigators for clinical

trials.” (P).


50.3% 3.51 3.09

Projection SO2: 2020 – Large-scale clinical trials for export-focused drugs are widely accepted in

the Indian society.

Reasons:

Large patient pool.

Easy to retain the patients.

High growth in the number of Principal investigators for clinical trials.

Low cost.

Highest number of US F.D.A approved plants outside India.

53 | P a g e


Ex

perts

' C

om

men

ts

“India is still behind in the curve

when it comes to pure drug discovery

and innovation and Pharmaco

genomics and Proteonomics. But

surely, we are thriving to climb up

the curve with returned scientists and

Government incentives to step up

drug discovery in the country. We are

though best when it comes to

manufacturing skills.”(P)

“With increasing cost of drug

discovery, almost all MNCs are

looking at India for its high quality

and low cost manufacturing base.”(I)

“Strategic partnership with global

companies is on the rise after the in

India after the Patent Act 2005.”(D)


55.44% 3.88 4.07

Projection TO2: 2020 – The innovation and drug discovery capabilities of pharma/biotech


Reasons:

Availability of highly skilled and trained workforce.

Strong Manufacturing Base.

Availability of high standard R&D centers.

Rich biodiversity

With increasing cost of drug discovery, almost all MNCs are looking at India for its high

quality and low cost manufacturing base.

54 | P a g e


Ex

perts

' C

om

men

ts

Indians are more prone to sedentary

lifestyle. Partly due to lack of facilities at

work or open spaces for jogging etc. The

Asian population is genetically more prone to lifestyle diseases due to their

food habits over generations. I see a

higher number of people using the medicines to treat these diseases.” (P).

“Indians will never change their lifestyle, be it in 2020 or 2060. Indians are always

reactive & largely not proactive.” (P)

“It will impact the industry as cost of the

disease would go up and it will increase the burden on GDP numbers. Cost of

treating diabetes is US$ 420 per person

per year. If these costs remain the same then by 2025 India's total bill for

diabetes would be US$ 30 billion.

Prophylaxis alone can prevent 10% from

getting diabetes and save nearly US$ 8 billion a year.” (I)

“Government need to promote healthy lifestyle habits by making more

playgrounds, parks within city limits as

wells as promote healthy food habits on TV etc- popular TV commercials in 80's

featured ads for milk, eggs.(D


56.28% 3.47 3.05

Projection CuE2:2020–Indians widely prefer to fight their lifestyle diseases (e.g. obesity,

depressions etc.) with reactive approaches such as drugs than to proactively invest into any

preventive activities (e.g. sports, healthy food etc.)

Reasons:

Western lifestyle.

Eating habits. ( fast food)

Lack of physical exercise in daily routine.

Increase in the income level in the rural areas.

Indian Pharma companies are more concentrated on producing low cost drugs for Lifestyle

diseases to gain maximum profit.

55 | P a g e


Ex

perts

' C

om

men

ts

Out of the total research scholars,

80% of the Biotech/ pharma

Postgraduate want to pursue research

as their career according to the

survey by the DBT (Department of

Biotechnology).”(P)

“Increased outsourced projects and

increased availability of USFDA

approved labs lure western countries

to do research.” (P)

“We don't have the infrastructure &

Government impetus to arrive at this

number. Even in 2020, the situation

will remain the same.” (P)

“A huge talent pool will engage in R

& D & new drugs can be discovered

at low cost as it will boost drug

discovery in the country.” (I)

“Adequate utilization of talent pool

in India which will help to stop brain

drain to the western countries.” (D)


54.3% 3.63 3.65

Projection SuE2: 2020 – The number of PhDs at CSIR, JRF, and NET for research positions in the

pharma/biotech industry is 24‟000 candidate‟s p.a.

Reasons:

Increasing investment in R&D by big MNC‟s.

Outsourced projects due to low cost in India.

80% of the Biotech/ pharma Postgraduate want to pursue research as their career.

Requirement of Highly skilled researchers in the industry.

GOI giving enough incentives for the R&D sector of this industry.

The Government has taken commendable

initiative in fostering the Pharmacy Education

in the country as it announced establishment of

6 more National Institutes of Pharmaceutical

Education and Research (NIPER) in the

country i.e. at Ahmedabad, Hyderabad,

Hazipur, Kolkata, Guwahati and Rae Bareli by

allocation 50 crores for their establishment in

the interim budget in order to address the issue

of setting up educational institutes par

excellence to meet the challenges of Pharma

industry, Academia and Research.

56 | P a g e


Ex

perts

' C

om

men

ts

“With increased investments in

advanced technology, and advanced

of IT this is bound to happen.” (P)

“Lack of infrastructure and political

influence will not help to counter the

menace of counterfeit drugs. As most

of the Government hospitals are most

important hub for these drugs.”(P)

“This will change the healthcare

scenario in India and increase the

credibility of the Indian

pharmaceutical sector multi fold and

also it will increase alliances and

profitability of the Indian

companies.”(I)

“It is most desirable as it will

eradicate spurious drug market and

save lives of many poor and illiterate

people which are mostly dependent on

Government hospitals.” (D)

Awareness among the end users

should be created to identify that the

brand is authentic. Besides these

measures, training for the related

agencies needs to be initiated to

identify the spurious products."(D).


52.77% 3.77 3.81

Projection CoE1: 2020 - Pharma/biotech companies have established a common packaging

technology reducing the faked drug market sector in India by 50% compared to 2010 i.e. from 40%

to 20 %.

Reasons:

40% of the spurious drug market is in India.

Increased no of deaths due to spurious drugs.

Strict and stringent regulatory policies.

Stiff competition from the spurious drug market.

More profits for the generic manufacturers.

Lack of belief of customers in the domestic market and western market.

The main problem with this issue is that there is no law or

no punishment for the people who sell spurious drugs. In

the year 2003, the Mashelkar committee had suggested

some harsh punishments to spurious drug offenders. In

this scenario, the packaging industry could turn out to

be the biggest rescuer for the pharma industry. Government in this aspect should act strongly against any

activity by any agency or individual engaged in spuriosity

of drugs," says Umesh Joshi, General Manager,

Packaging Development, Wockhardt. It can also

conduct regular audits or surprise inspections at pharma

plants, dealers or retailers etc. Most crucial is to bring the

packaging material manufacturer associated with only the

pharma industry under regulation ie, only authorised and

licensed packaging vendors can supply to a pharma

company." Santosh Das, Head, Packaging

Development, Aurobindo Pharma,"First, a proper

mandatory guideline needs to be put in place so that

across the industry, whether it is for export or domestic

market, product and packaging should include anti-

counterfeiting features and track and trace technology.

57 | P a g e


Ex

perts

' C

om

men

ts

“Increasing demand of high quality

drugs, also increasing outsourced

projects by western countries will

force Indian government to follow

USFDA.” (P)

“The entire regulatory mechanism in

the lines of US FDA will take more

than 10 years considering the lack of

efficiency of the GOI run DCGI as

there is high corruption in the

bureaucracy & drugs control

department can never enforce the

USFDA type regulatory discipline.”

(P)

“If at all this happens (which is a

distant dream), it will be a very good

thing as foreign companies cannot

use Indian population to test their

new drugs, before launching them

globally.” (I)

“The time for introduction of drugs

would increase and so would the

investment needed.”(I)


47.37% 3.6 3.65

Projection GoE2: 2020 - the regulatory system for the pharma/biotech in India is essentially the same

as US FDA regulatory system.

Reasons:

Increase in the demand of quality drugs.

To reduce spurious drugs.

To reduce time of new drug discovery process.

Less transparency in the Indian regulatory system.

Low acceptability of drugs in the developed market.

Failure of many drugs manufactured in India, in the U.S market.

58 | P a g e


Ex

perts

' C

om

men

ts

“Government will introduce a model,

which mobilizes funds from investors

who are willing to share the fortunes

of the high-risk high-reward game of

drug research and funnel it to

companies with promising

experimental new drugs.”(D)

“After the Patent act 2005, most of

the MNC‟s are concentrating on

R&D to have competitive edge and

also increase in the advancement of

drug discovery and innovation.”(P)

“Industry will move up its value

chain from generic makers to

innovation.” (I)

“GOI will be compelled to take this

step for growth and motivate industry

players.”(D)

“The weighted tax deduction will not

reach 300% as there is lack of

communication between Industry and

GOI and low infrastructure to support

R&D in India.”(P)


53.84% 3.88 3.63

Projection GoE2: 2020: The weighted tax deduction for the R&D expenditure of the pharma/biotech

industry in India is 300%.

Reasons:

Increased failure rate of Indian drugs in western countries

Bureaucracy.

It reduces the time taken to approve a drug.

Spurious drugs.

Patent Act 2005: after the acceptance of patent act 2005 India has started to shift its focus from

Reverse-engineering to Innovation and Drug discovery.

Increased outsourced manufacturing projects.

Increased profits due to high acceptance.

According to trade Estimates, top

25 companies in India spend

around 6% of their sales on R&D

in the last fiscal as compared to

Global average of 13%. Currently,

India spends around 0.8% of its

GDP on R&D compared with

1.23% with China.

On the other hand, developed

countries spend around 3% of the

GDP on R&D.

59 | P a g e


Ex

perts

' C

om

men

ts

“There is some benefit to the lesser

privileged society due to the lowered

cost of drug and “hopefully better”

version of drugs. However in order

not to be exploited as guinea pigs, the

government needs to come with

stricter regulations for conducting the

clinical trials.”(P)

"More investment by the foreign

players in India will boost for the

clinical research industry as India has

the highest number of USFDA

outside USA which is around

120."(I)

Regulations in India being very poor,

this step will give a good rope to

companies to engage in more clinical

trials.”(I)

“It will encourage foreign companies

to launch newer drugs in India and

compete in the price sensitive

market.”(D)


55.74% 3.74 3.16

Projection SoE1: 2020 – The financial attractiveness of clinical trials for the less privileged part of

the Indian society has lead to a global market share of clinical trials in India of more than 20%.

Reasons:

Large patient and genetic pool.

Low cost.

Availability of high standard Clinical trials centers in India.

Availability of manpower in the form of PI. (Principal investigators).

GOI support. (CTRI a separate government body for conducting Clinical trails in India).

Average cost in U.S

Average cost in India

60 | P a g e


Short Stories Which Will Support the Above Projections:

Lifestyle Diseases: DIABETES in India

October 2009 2025 (P) 2030 (P)

50.8 million 73.5 million 87 million

• Indians are more prone for diabetes than almost any other population in the world.

Since very long, Indians believed that diabetes and heart disease are exclusive to the

affluent societies. But as the living conditions improved in India in both the rural and

the urban areas, Indians are increasingly following western dietary habits unsuited for

their environs, adopting sedentary life style, and exposed to psycho-social stress. This

has resulted in an unprecedented rise of diabetes to epidemic proportions during last

few decades in the country.

• The number diabetes in India is expected to go up from 50.8 million1 in October 2009

to 73.5million by 2025 and reach 87 million by 2030, i.e. 8.4% of the country's

adult population will be diabetic by 2030.

• The costs of treating diabetic patients are currently about $420 per person per year. If

these costs remained the same as they are now, India‟s total bill for diabetes would be

about $30 billion by 2025. But as its economic wealth grows and standards of care

improve, treatment costs are likely to rise. The US spends an average $10,844 per year

on each patient with diabetes. If India‟s per capita expenditure rose to just one-tenth of

this level, the total cost of treating all patients with diabetes would be around $79.7

billion by 2025.

1 http://indiatoday.intoday.in/site/Story/67143/Health/India+is+world+diabetes+capital.html

61 | P a g e


• Demand for medicines that treat diabetes formerly associated exclusively with the

developed world is thus expanding in the developing world especially India and India

at the same time becoming increasingly affluent.

“In 1995, every 7th diabetic person in the world was an Indian & by 2025 every 5th2

diabetic person will be an Indian.”

BRANDED PILL BITTER DOSE

PRICE WARS

DRUG BRAND, MANUFACTURER QUNATITY

PRICE

(RS.)

Risperidone Risperdal, johnson & Johnson 2mg, 10 tab 270

Respidon, Torrent Pharma 2mg, 10 tab 17

Risedronate Actonel, Sanofi Aventis 35 mg, 4 tab 2000

Risofos, Cipla 35 mg, 4 tab 110

Letrozole Femara, Novartis 2.5mg, 10tab 1815

Oncolet, Biochem 2.5mg, 10tab 99

Clopidogrel Plavix, Sanofi Aventis 75 mg, 10 tab 1020

Noklot, Zydus 75 mg, 10 tab 78

Pregabalin Lyrica, Pfizer 75 mg, 10 tab 768

Pregabit, Intas Pharma 75 mg, 10 tab 69

Zoledronic Acid Zometa, Novartis 4mg, 1Vail 13900

Zolodria, Cipla 4mg, 1Vail 2800

Levofloxacin Tavanic, Sanofi Aventis 500mg, 5 tab 475

2 Survey conducted by WHO. (World Health Organization)

62 | P a g e


Leeflox, Centaur Pharma 500mg, 5 tab 37

3

This chart shows that there is a huge difference between the Branded pill and Generic drugs

and government have to take steps so that the poor customers can get the drugs at premium

prices. So NPPA has to regulate the prices of the drugs.

Chronic diseases cost India more than $ 1 billions.

Government support

National Rural Health mission (NRHM) was bestowed with monetary favours in the budget

by a minimal increase form the last year from Rs 12050 to Rs 12070 crore in order to give

thrust to the healthcare oriented development programmes of the Government for the

upliftment of economically weaker sections of the society.

In the area of biotechnology, the Central plan of the budget has earmarked Rs 340 crore for

R&D and Rs 200 crore for autonomous R&D institutions.

The Government has taken commendable initiative in fostering the Pharmacy Education in

the country as it announced establishment of 6 more National Institutes of Pharmaceutical

Education and Research (NIPER) in the country i.e. at Ahmedabad, Hyderabad, Hazipur,

Kolkata, Guwahati and Rae Bareli by allocation 50 crores for their establishment in the

interim budget in order to address the issue of setting up educational institutes par excellence

to meet the challenges of Pharma industry, Academia and Research.

With the Indian traditional medicines making headway into the Global market, the

government has provided support of Rs 354 crore in the kitty of AYUSH and Rs 134 crore for

the support of Ayurveda.

3 http://pharmaceuticals.gov.in/

A joined report by WHO (world health organization) and WEF (world economic

forum) says, India will incur an accumulated loss of $236.6 Billion by 2015, due to

unhealthy lifestyles and faulty diets.

The income loss to Indians because of these diseases, which was $8.7 billion in 2005,

is projected to rise to $54 billion in 2015.

63 | P a g e


REGRESSION ANALYSIS

Impact on Industry:- This report consist Regression analysis conducted on major 4 outcome projections. The

analysis will help to identify which are the key enabler‟s projection and the outcome

projections that will influence our selected outcome projections PO2, EO2, SO2 and TO2.

In these Coefficients table attached below, we have noticed the value of beta. The higher the

value of beta, high is the influence on the main outcome projections.

After doing Regression analysis we can get two types of values i.e. either positive or negative.

The positive value of Beta shows that the factors are positively co-related i.e. if the

probability of one of these increases then the probability of the other will also increase and

both will have positive impact on the industry. The negative value signifies that these factors

are negatively correlated i.e. if probability of one of the projection will increase the

probability of the other will decrease simultaneously. The negative beta value shows that

these will act as a disabler for the outcome projections.

It is carried out as each time the main projection is the dependent variable and the rest of the

main projections and the all the outcome projections are taken as independent variables.

Projection PO1: 2020 – Pharma/biotech companies conducting research projects in India

focusing on diseases of high relevance for the Indian population receive substantial tax

benefits.

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

B Std. Error Beta T Sig.

1 (Constant) -2.554 1.424

-1.793 0.087

Eo1 0.235 0.185 0.236 1.271 0.217

64 | P a g e


To1 0.387 0.184 0.42 2.104 0.047

GoE1 -0.212 0.236 -0.213 -0.895 0.381

GoE2 0.25 0.238 0.271 1.051 0.305

a. Dependent Variable: Po1

The regression analysis of the Projection Po1 shows that if the above outcome projection i.e.

Eo1 and To1 and enabler projections GoE1 and GoE2 will highly drive the main outcome

Projection i.e. Po1

Dependent variable Po1 (Substantial Tax benefits)

Important Independent variables Eo1 (Research focus on domestic market)

To1(World of art Research equipments)

GoE1(Free market for pricing of drugs)

GoE2 (UF FDA)

The regression analysis of the data signifies that if GOI will give tax benefits to the MNC‟s,

then the focus of the companies will be increased towards the domestic diseases and they will

focus their research on Domestic diseases will benefit both the consumers and the companies.

Also to do research, world of class research equipments are necessary to produce high quality

drugs at worldwide cheap prices. If the GOI will provide tax benefits to the companies it will

not provide free market for pricing of drugs because it will make the price of the drug very

high that adds to the pocket of the customer and the poor population of India, is able to get

cure. To produce high quality drugs India and to earn maximum profits must follow US FDA

because it will increase their credibility in the western market like EU and U.S.

Projection EO2: 2020 – The manufacturing focus of the pharma/biotech industry in India is

to 90 % on export markets.

Model



B Std. Error Beta T Sig.

1 (Constant) -0.013 1.551

-0.009 0.993

To1 0.2 0.19 0.22 1.05 0.305

65 | P a g e


So1 0.561 0.252 0.559 2.224 0.037

Eo1 -0.521 0.255 -0.485 -2.04 0.054

GoE4 0.466 0.286 0.37 1.627 0.118

a. Dependent Variable: Eo2

The regression analysis of the Projection Eo2 shows that if the above outcome projection i.e.

To1, So1 and Eo1 and enabler projections GoE4 will highly drive the main outcome

Projection i.e. Eo2.

Dependent variable Eo2 (Manufacturing Focus on Exports)

Important Independent variables So1 ( High Quality drugs at Worldwide low cost)

To1(World of art Research equipments)

Eo1(Research focus on the domestic market)

GoE4 (GST will be 20%)

The projection signifies that focus of the major companies will be on Export market because

to earn maximum profits as there is no regulation i.e. NPPA for the pricing of the drugs for

the export market. The above regression analysis tells the important factors which actually

drive the growth of Exports in 2020. Firstly there is increasing demand of high quality drugs

at low cost as India is the major producer of generics, so the export focus has to be increased.

Secondly main driving force will be the latest research equipments, which will act as a

catalyst for the formation of high quality drugs and increase the output. Also the GST will

affect the manufacturing focus i.e. the manufacturer have to thing for maximizing profits it is

good to produce for the domestic market or export market.

Projection SO1: 2020 – Consumers in India expect to be provided with the best and latest

drugs at the globally lowest prices. Coefficients

a

Model



B Std. Error Beta t Sig.

1 (Constant) -0.247 1.184

-0.208 0.837

Eo2 0.327 0.147 0.328 2.224 0.037

So2 0.329 0.16 0.316 2.061 0.051

66 | P a g e


SuE1 0.408 0.194 0.381 2.101 0.047

GoE1 -0.282 0.177 -0.312 -1.59 0.126

a. Dependent Variable: So1

The regression analysis of the Projection So1 shows that if the above outcome projection i.e.

Eo2 and So2 and enabler projections SuE1and GoE1 will highly drive the main outcome

Projection i.e. So1.

Dependent variable So1 (High Quality drugs at worldwide low cost)

Important Independent variables Eo2 ( Manufacturing focus for Export market)

So2 (Clinical Trails are widely accepted in society)

SuE1(Rich Flora and Fauna)

GoE1 (Free market for the Pricing of Drugs)

The regression analysis of So1 shows that there are many driving factors i.e. India is moving

up the value chain from Reverse engineering to production of innovative drugs, consumers

want drugs of high quality and at low cost for which right utilization of Flora and Fauna

should be done for the research purposes. GOI should take steps to increase awareness about

the clinical trials and also maintains strict rules and regulations and also takes care of the

safety of the people. As the consumers still don‟t believe to spend money for branded drugs

and believe in low cost generics so GOI can allow free market mechanism for the pricing of

drugs because it will make the price of the drugs 10 times higher than the drugs under control

of NPPA( National Pharmaceutical Pricing Authority). So this projection will act as a disabler

for the production of low cost drugs because free market will allow the manufacturers to

quote high price for the drugs.

Projection TO2: 2020 – The innovation and drug discovery capabilities of pharma/biotech


67 | P a g e


Coefficientsa

Model



B Std. Error Beta t Sig.

1 (Constant) 3.787 1.398

2.709 0.013

Po1 0.433 0.206 0.399 2.104 0.047

CuE1 -0.422 0.253 -0.328 -1.667 0.11

SuE1 0.29 0.283 0.226 1.025 0.317

CoE2 0.361 0.328 0.281 1.101 0.283

a. Dependent Variable: To1

The regression analysis of the Projection To1 shows that if the above outcome projection i.e.

P01 and enabler projections CuE1, SuE1 and CoE2 will highly drive the main outcome

Projection i.e. To1.

Dependent variable To1 (World of art Research Equipments)

Important Independent variables Po1 (Substantial Tax benefits)

CuE1 (Increase in investment by consumers on

febrile diseases like malaria, dengue etc)

SuE1( Rich diversity of Flora and Fauna )

CoE2 (High production of API production)

This projection To1 signifies that India to become a leader in the Pharmaceutical industry

have to acquire all necessary world of art research equipments for drug discovery. GOI should

support the MNC‟s by giving necessary and substantial tax benefits so that manufacturers can

get these equipments at subsidized rates and invest in R&D. It will increase the production of

Active Pharmaceuticals Ingredient. The research equipments are necessary because of

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increasing investment by the consumers as Indian consumers still believe in investing their

income in medicines rather than investing in good food and sports.

CONCLUSION

Environmental Variables Political Influences

Economic Influences

Social Influences Technological

Influences

PO1, 59.26%

PO2, 57.05%

EO1, 51.91%

EO2, 60.76%

SO1, 60.14%

SO2, 49%

TO1, 44.05%

TO2, 55.41%

Political Influences

PO1, 59.26% 82.51 80.41 83.78 77.21 PO2, 57.05% 82.51 82.88 78.1 81.08

Economic Influences

EO1, 51.91% 80.41 81.13 EO2, 60.76% 81.13

Social Influences

SO1, 60.14% 83.78 82.88 79.7 SO2, 49% 78.1 79.7

Technological Influences

TO1, 44.05% 77.21 75.06 TO2, 55.41% 81.08 75.06

Prominent scenarios

Perfectly correlated Scenarios

Non Prominent Situations

The above format provided a close idea about the probability of happening of the most

important Scenarios in future i.e. 2020.

According to my research, the two most important scenarios for the better future of the Indian

Pharmaceutical industry are – (Po2, So1) and (Eo1, Eo2). These scenarios are (Stringent

regulations and High quality drugs at low cost) and (Research focus on domestic drugs

and Manufacturing focus on Exports)

The percentage of occurrence of these scenarios is 82.88 and 81.13 respectively. This

percentage represent the 3 quadrant out of the 4 formed by two by two matrix formed by cross

of these projection mentioned above. These are two scenarios Indian Pharmaceutical

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companies have to maintain balance and also GOI must support by maintaining stringent and

strict regulations so that MNC‟s benefit the Indian society in a positive way.

APPENDIX

Experts Rating regarding Impact on Industry

Po1 PO2 Eo1 Eo2 So1 So2 To1 To2 3 4 3 2 2 3 3 3

2 4 4 3 4 4 3 4

4 3 4 4 4 4 4 3

3 4 4 4 4 3 3 3

4 5 4 4 4 4 4 5

4 5 5 5 5 5 3 4

2 4 3 3 3 3 2 4

3 4 2 4 4 4 3 5

3 2 3 4 3 3 3 3

4 3 2 3 4 4 4 4

4 4 4 4 4 3 4 4

2 2 4 4 4 3 3 3

3 3 3 4 4 3 3 4

3 3 4 3 3 4 3 4

3 5 3 4 2 3 5 2

4 3 4 4 4 4 4 4

3 3 3 4 4 3 4 4

4 4 4 4 5 3 4 4

3 4 4 4 4 3 3 4

3 3 2 4 4 3 3 3

4 3 3 2 4 3 3 4

3 4 3 4 2 3 3 4

4 4 4 4 4 4 4 4

4 4 4 4 4 3 5 4

3 5 4 4 4 4 4 4

5 5 5 5 5 5 2 5

4 5 3 4 4 4 4 4

4 4 4 4 4 3 4 4

4 5 4 3 3 3 5 5

4 5 4 3 4 3 4 4

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3 4 4 3 3 3 4 4

3 4 5 3 4 2 3 4

4 4 4 3 4 4 4 4

2 3 2 3 4 5 1 5

4 4 4 3 3 3 3 4

3 3 3 3 4 3 4 4

3 5 3 3 4 4 4 5

5 4 4 3 4 4 5 2

4 3 4 5 4 4 4 4

2 5 3 3 3 4 4 3

4 4 3 5 2 4 3 4

3 4 4 3 4 3 2 4

2 4 3 4 3 4 3 4

4 4 4 4 4 4 4 3

Calculations for Conclusion:

This is the way we come out with the two by two matrixes i.e. Po2 and So1. The non

occurrence of these two projections is (100 – 56.63 %) and (100 -62.21%). When we multiply

both these values we will get the probability percentage of non-occurrence of these scenarios

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(17.12%) or the present scenario where there is absence of both i.e. Stringent regulations and

availability of low cost drugs. So the probability of occurring of these scenarios is 82.88%.

References:

1. http://pharmaceuticals.gov.in/

2. http://www.pharmaoutsourcingindia.in/press-a-media.html

3. Report by E&Y and OPPI

4. Report by YES Bank

5. http://www.ibef.org/GenericMessage.aspx

6. Experts comments from the Industry.

7. http://www.acrohealth.org/cro-market.php

8. http://appliedclinicaltrialsonline.findpharma.com/appliedclinicaltrials/article/articleDet

ail.jsp?id=506847&sk=&date=&pageID=2

9. http://appliedclinicaltrialsonline.findpharma.com/appliedclinicaltrials/article/articleDet

ail.jsp?id=522049&sk=&date=&pageID=2

10. http://license.icopyright.net/user/readingRoom.act

11. http://www.indiaonestop.com/pharmaceuticals.htm

12. http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-associations/

13. http://cii.in/Publications.aspx?enc=fSTC8XiYaIuWcrOJ/n1U2Q==

14. Some Magazine articles given by experts.

http://pharmaceuticals.gov.in/

http://www.pharmaoutsourcingindia.in/press-a-media.html

http://www.ibef.org/GenericMessage.aspx

http://cii.in/Publications.aspx?enc=fSTC8XiYaIuWcrOJ/n1U2Q