Pharmaceutical Sector-Industry Analysis

PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS EXECUTIVE SUMMARY In 1991, the U.S.
International Trade Commission (the Commission) conducted a study on the pharmaceutical industry, Global Competitiveness of U.S. Advanced-Technology Manufacturing Industries: Pharmaceuticals,1 as part of a series on global competitiveness of U.S. advanced-technology manufacturing industries requested by the Senate Committee on Finance. Many of the findings of that study are still valid today, although significant changes have occurred in the industry. The purpose of this report is to describe the principal factors currently affecting the competitiveness of the U.S. pharmaceutical industry, particularly in relation to the industries of Western Europe and Japan. The pharmaceutical industry is complex, dynamic, and highly globalized; moreover, the industry is characterized by high research and development (R&D) expenditures and extensive regulation of its products compared with other manufacturing sectors. The industry has also been affected by a high number of mergers and acquisitions (M&As), which have increased globalization and, arguably, heightened efficiency. In the Commissions 1991 study, the major factors of competitiveness were found to be those that affect a companys ability to develop and deliver new pharmaceutical products or new chemical entities (NCEs), particularly those NCEs successful on a global basis.2 In the United States, changes in U.S. Food and Drug Administration (FDA) policies have led to faster approval times for NCEs, which result in extended periods during which companies can exclusively market their pharmaceutical products. As noted in the Commissions 1991 competitiveness study, longer periods of market exclusivity for pharmaceuticals increase sales revenues, and increased sales revenues in turn lead to greater profits and potentially more funding for R&D. The Commissions 1991 competitiveness study also indicated that changes in Government policies affect the competitiveness of pharmaceutical firms. Sweeping changes in barriers to trade worldwide, from tariffs to intellectual property rights and patent issues have occurred since 1991. An initiative on pharmaceuticals, established during the Uruguay Round, was implemented on January 1, 1995, providing duty-free treatment for about 7,000 pharmaceutical products and pharmaceutical intermediates; another 496 products and intermediates became duty-free on April 1, 1997, and negotiations are currently underway to make further additions. There is KISHINCHAND CHELLARAM COLLEGE 1
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS greater participation of member countries of the World Trade Organization (WTO), formed in 1995, including those of the European Union (EU),3 in agreements relating to intellectual property and patents. In the Western hemisphere, the North American Free Trade Agreement (NAFTA) has resulted in low or no tariff barriers and greater protection of patents and intellectual property rights among Canada, Mexico, and the United States. Overall, the U.S. pharmaceutical industry seems to enjoy a domestic environment conducive to researching and developing drugs, protecting its intellectual property, and obtaining regulatory approval to market its products. There is also a strong trend in the United States to invest those profits in new R&D. Recent improvements to the patent systems and Government regulatory policies in Western Europe and Japan are likely to benefit the U.S. industry as well. Because of the strong international component to this industry, that which benefits the industry in any one of these three areas will likely work to the benefit of the others. Since aging populations will only bring a rise in the demand for drug products, the U.S. pharmaceutical industry, along with the industries of Western Europe and Japan, can expect growing markets for their products.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS PURPOSE AND SCOPE In 1991, the U.S. International Trade Commission (the Commission) conducted a study on the pharmaceutical industry, Global Competitiveness of U.S. Advanced-Technology Manufacturing Industries: Pharmaceuticals, as part of a series on global competitiveness of U.S. advanced-technology manufacturing industries requested by the Senate Committee on Finance. In the Commissions 1991 study, the major factors of competitiveness were found to be those that affect a companys ability to develop and deliver new pharmaceutical products or new chemical entities (NCEs), particularly those NCEs successful on a global basis. While the ability to put innovative products on the market is still considered the key to success in the pharmaceutical industry, pharmaceutical companies are currently affected by several changes, such as lower tariff and nontariff barriers, improved protection of intellectual property rights, and global consolidation. The purpose of this report is to describe the principal factors currently affecting the competitiveness of the U.S. pharmaceutical industry, particularly in relation to the industries of Western Europe and Japan. The original study found that a pharmaceutical companys research and development (R&D) infrastructure is a major contributing factor to its competitiveness. R&D, which by its nature is capital intensive, is necessary to create new, innovative treatments for the market. Sales revenues generate company profits, allowing for more research, which in turn might lead to another successful novel product. A cycle is initiated whereby profits from existing drug sales fund the development and marketing of future drugs. The cycle may potentially be repeated for each new drug developed and marketed. The Commissions 1991 competitiveness study also indicated that Government policies affect the competitiveness of pharmaceutical firms. Sweeping changes in barriers to trade worldwide, from tariffs to intellectual property rights and patent issues have occurred since 1991. There is
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS greater participation of member countries of the World Trade Organization (WTO), formed in 1995, including those of the European Union (EU), in agreements relating to intellectual property and patents. In the Western hemisphere, the North American Free Trade Agreement (NAFTA) has resulted in low or no tariff barriers and greater protection of patents and intellectual property rights among Canada, Mexico, and the United States. In the United States, changes in Government policies have also led to faster approval times for NCEs by the U.S. Food and Drug Administration (FDA). As noted in the Commissions 1991 competitiveness study, Government policies that lead to longer periods of market exclusivity increase the amount of sales revenues; increased sales revenues lead to greater profits and potentially more funding for R&D. Another Government policy examined in this report is the initiative on pharmaceuticals established during the Uruguay Round (see chapter 4). The agreement was implemented on January 1, 1995, providing duty-free treatment for about 7,000 pharmaceutical products and pharmaceutical intermediates; another 496 products and intermediates became duty-free on April 1, 1997, and negotiations are currently underway to make further additions. The cumulative effect of this initiative has not yet been ascertained. The Commissions 1991 competitiveness study examined conditions of competitiveness in world markets. Now, as then, the pharmaceutical industry continues to be global in scope and any distinct delineation between a domestic and foreign firm is further blurred by continued consolidation. In the Commissions 1991 competitiveness study, country and regional data were aggregated based on geographical location of facilities rather than the location of corporate headquarters. The same practice will be used in this report, unless otherwise specified. Overviews of the U.S., Western European, 6 and Japanese industries, similar though less extensive than in the Commissions 1991 report, are provided for assessment of relative competitiveness.
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS HISTORY The earliest drugstores date to the middle ages. The first known drugstore was opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating throughout the medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drugstores in Europe and North America had eventually developed into larger pharmaceutical companies. Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-manufactured and distributed. Switzerland, Germany and Italy had particularly strong industries, with the UK, US, Belgium and the Netherlands following suit. Legislation was enacted to test and approve drugs and to require appropriate labeling. Prescription and non-prescription drugs became legally distinguished from one another as the pharmaceutical industry matured. The industry got underway in earnest from the 1950s, due to the development of systematic scientific approaches, understanding of human biology (including DNA) and sophisticated manufacturing techniques. Numerous new drugs were developed during the 1950s and massproduced and marketed through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, blood-pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine (Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most prescribed drug in history, prior to controversy over dependency and habituation. Attempts were made to increase regulation and to limit financial links between companies and prescribing physicians, including by the relatively new U.S. Food and Drug Administration (FDA). Such calls increased in the 1960s after the thalidomide tragedy came to light, in which the use of a new anti-emetic in pregnant women caused severe birth defects. In 1964, the World Medical Association issued its Declaration of Helsinki, which set standards for clinical research and demanded that subjects give their informed
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS consent before enrolling in an experiment. Pharmaceutical companies became required to prove efficacy in clinical trials before marketing drugs. Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary center of pharmaceutical production without patent protection. The industry remained relatively small scale until the 1970s when it began to expand to a greater rate. Legislation allowing for strong patents, to cover both the process of manufacture and the specific products, came in to force in most countries. By the mid-1980s, small biotechnology firms were struggling for survival, which led to the formation of mutually beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of the smaller firms. Pharmaceutical manufacturing became concentrated, with a few large companies holding a dominant position throughout the world and with a few companies producing medicines within each country. The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation. Drugs for heart disease and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval process. Managed care and Health maintenance organizations (HMOs) spread during the 1980s as part of an effort to contain rising medical costs, and the development of preventative and maintenance medications became more important. A new business atmosphere became institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic increase in the use of contract research organizations for clinical development and even for basic R&D. The pharmaceutical industry confronted a new business climate and new regulations, born in part from dealing with world market forces and protests by activists in developing countries. Animal Rights activism was also a challenge. Marketing changed dramatically in the 1990s. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. In the US, Direct-to-consumer advertising proliferated on radio and TV because of new FDA regulations in 1997 that liberalized requirements for the presentation of risks. The new antidepressants, the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for KISHINCHAND CHELLARAM COLLEGE 6
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS additional disorders. Drug development progressed from a hit-and-miss approach to rational drug discovery in both laboratory design and naturalproduct surveys. Demand for nutritional supplements and so-called alternative medicines created new opportunities and increased competition in the industry. Controversies emerged around adverse effects, notably regarding Vioxx in the US, and marketing tactics. Pharmaceutical companies became increasingly accused of disease mongering or overmedicalizing personal or social problems. IMPORTANCE OF PHAMACEUTICALS Pharmaceuticals are important in all aspects of health care and have been shown to be the most cost-effective means of treating some diseases when compared with surgical procedures. In the United States, emergence of health maintenance organizations (HMOs), coupled with rising private medical care costs and Government management of Medicare and Medicaid health programs, has contributed to a trend toward finding the most cost-effective way of treating illnesses. As a result of these trends, consumption of both ethical8 and over-the- counter (OTC) pharmaceuticals increased during 1993-97. Increases in Western European and Japanese consumption of pharmaceuticals also occurred during the period covered. RESEARCH AND DEVELOPMENT Drug discovery is the process by which potential drugs are discovered or designed. In the past most drugs have been discovered either by isolating the active ingredient from traditional remedies or by serendipitous discovery. Modern biotechnology often focuses on understanding the metabolic pathways related to a disease state or pathogen, and manipulating these pathways using molecular biology or biochemistry. A great deal of early-stage drug discovery has traditionally been carried out by universities and research institutions. Public funding accounts for 80% of the amount spent on basic research for new drugs and vaccines in the United States. Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug KISHINCHAND CHELLARAM COLLEGE 7
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS development are to determine appropriate Formulation and Dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The amount of capital required for late stage development has made it a historical strength of the larger pharmaceutical companies. INDUSTRY ASSOCIATIONS

European Confederation of Pharmaceutical Entrepreneurs (EUCOPE) Drug Information Association (DIA) European Generic Medicines Association European Federation of Pharmaceutical Industries and Associations (EFPIA) European Pharmaceutical Market Research Association (EphMRA) International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) Japan Pharmaceutical Manufacturers Association (JPMA) New York Health Products Council (NYHPC) Pharmaceutical Research and Manufacturers of America (PhRMA) Irish Pharmaceutical Healthcare Association (IPHA)
REGULATORY AUTHORITIES International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH)

European Medicines Agency (EMEA) Therapeutic Goods Administration (Australia) (TGA) U.S. Food and Drug Administration (FDA) Ministry of Health, Labour and Welfare (Japan) Medicines and Healthcare products Regulatory Agency (MHRA) Central Drugs Standards Control Organisation (India) (CDSCO) Ukrainian Drug Registration Agency Medicines Authority (Malta)
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS MARKET ANALYSIS HEALTHCARE SPENDING The total global expenditure for health is now more than US$4.7 trillion a year, according to the World Health Organization, and health expenditure as a percentage of GDP has been increasing among all major economies. Spending on healthcare varies widely from country to country, as do outcomes. Nor is there necessarily a correlation between the amount of money spent and the effectiveness of the healthcare system. The United States spends more on healthcare than any other country, in both relative and absolute terms, yet its healthcare system scores poorly in terms of its overall performance, according to the Commonwealth Fund Commission, a US private foundation that supports independent research on healthcare issues. The Fund produced a report on the performance of the US health system in 2008 (National scorecard on US health system performance). The scorecard aimed to measure and monitor healthcare outcomes, quality, access, efficiency, and equity in the United States. It ranked the United States last out of 19 countries on a measure of mortality amenable to medical care. This poor performance may reflect the nature of healthcare provision in the United States. The country has several types of privately and publicly funded insurance plans that provide healthcare services. However, the private sector dominates healthcare and the United States is the only wealthy, industrialized nation that does not ensure that all citizens have coverage (that is, some kind of insurance), according to the Institute of Medicine, a nonprofit organization for science-based advice on matters of biomedical science, medicine, and health. By contrast, a publicly funded healthcare system, the NHS, dominates healthcare in the United Kingdom, accounting for more than 80% of healthcare spending in the country. Founded in 1948, it aims to provide a free, comprehensive healthcare service, with delivery at the point of need, regardless of the ability to pay. It is the worlds largest publicly funded health service, and claims it is also one of the most efficient, most egalitarian, and most comprehensive. Yet it has many critics, who argue that it is inefficient and overly bureaucratic. KISHINCHAND CHELLARAM COLLEGE 9
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS Other countries fund their health services in a variety of ways. According to Key Note Ltd, a UK-based market-research company, the Netherlands operates a national insurance market for its 16 million residents. Plans may operate on a for-profit or nonprofit basis. The insurance market is highly concentrated, with the top five plans accounting for 82% of enrolment. Plans typically offer coverage in all areas of the country and include all providers, although selective contracting is allowed. Children are covered in full through public funds. Premiums charged for adults represent 50% of the expected annual costs. By contrast, according to Key Note, the Swiss insurance system, which covers 7.5 million people, is highly decentralized. Only nonprofit insurers may participate in the scheme, and Swiss premiums vary widely according to the health risks of insured pools across the country, and within regions. Japan spends around 8.1% of its GDP on healthcare, almost half the amount of the United States. Yet the Japanese have the longest healthy life expectancy on the planet. Diet and lifestyle clearly play a key role, but the countrys universal healthcare system may also be an important factor. Everyone in Japan is required to take out a health-insurance policy, either at work or through a community-based insurer, according to Key Note. The firm adds: The government pays for those who are too poor. However, 80% of Japans hospitals are privately ownedmore than in the USand almost every doctors office is a private business. The Japanese Health Ministry tightly controls the price of healthcare, down to the smallest detail. Every two years, the healthcare industry and the health ministry negotiate a fixed price for every procedure and every drug. The US-based National Bureau of Economic Research conducted a study of ten OECD countries and it points out that healthcare expenditure has been growing at a faster rate, often considerably faster, than per-capita income. In the United States, healthcare expenditure has tripled as a share of GDP since 1950, from 5% to 15% of GDP. The NBERs study found that the primary cause of the continued ramping up of healthcare costs was the provision of increased healthcare benefits. It points out that pushing up health benefits faster than per capita tax and income growth is clearly unsustainable, but that major economies, the United States in particular, currently show little sign of reining in the upward march of benefits, despite KISHINCHAND CHELLARAM COLLEGE 10
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS huge cost increases. If this keeps up the United States will see a doubling in healthcare costs as a percentage of GDP within the next 20 years, and a tripling in the next 40 years. No country could afford that, it points out, so the dilemma of what level of healthcare is appropriate remains to be resolved.
Country Australia Canada France Germany Italy Ireland Japan Portugal Spain Sweden Switzerland United Kingdom United States
Healthcare spending, % of GDP 8.9 10.1 11 10.4 8.7 7.6 8.1* 10.2* 8.5 9.1 10.8 (est.) 8.4 16
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS THE COST OF INNOVATION Drug companies are like other companies in that they manufacture products that must be sold for a profit in order for the company to survive and grow. They are different from some companies because the drug business is very risky. For instance, only one out of every ten thousand discovered compounds actually becomes an approved drug for sale. Much expense is incurred in the early phases of development of compounds that will not become approved drugs. In addition, it takes about 7 to 10 years and only 3 out of every 20 approved drugs bring in sufficient revenue to cover their developmental costs, and only 1 out of every 3 approved drugs generates enough money to cover the development costs of previous failures. This means that for a drug company to survive, it needs to discover a blockbuster (billion-dollar drug) every few years. Drug discovery and development is very expensive; of all compounds investigated for use in humans only a small fraction are eventually approved in most nations by government appointed medical institutions or boards, who have to approve new drugs before they can be marketed in those countries. In 2010 18 NMEs (New Molecular Entities) were approved and three biologics by the FDA, or 21 in total, which is down from 26 in 2009 and 24 in 2008. On the other hand, there were only 18 approvals in total in 2007 and 22 back in 2006. Since 2001, the Center for Drug Evaluation and Research has averaged 22.9 approvals a year. This approval comes only after heavy investment in pre-clinical development and clinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way through this process often incur large costs, while generating no revenue in return. If the cost of these failed drugs is taken into account, the cost of developing a successful new drug (New chemical entity or NCE), has been estimated at about 1.3 billion USD
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS (not including marketing expenses). Professors Light and Lexchin reported in 2012, however, that the rate of approval for new drugs has been a relatively stable average rate of 15 to 25 for decades. Industry-wide research and investment reached a record $65.3 billion in 2009. While the cost of research in the U.S. was about $34.2 billion between 1995 and 2010, revenues rose faster (revenues rose by $200.4 billion in that time). A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five-year period to nearly $1.7 billion in 2003. These estimates also take into account the opportunity cost of investing capital many years before revenues are realized (see Time-value of money). Because of the very long time needed for discovery, development, and approval of pharmaceuticals, these costs can accumulate to nearly half the total expense. Some approved drugs, such as those based on re-formulation of an existing active ingredient (also referred to as Line-extensions) are much less expensive to develop. Calculations and claims in this area are controversial because of the implications for regulation and subsidization of the industry through tax credits and federally funded research grants.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS PRODUCT APPROVAL In the United States, new pharmaceutical products must be approved by the Food and Drug Administration (FDA) as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following IND approval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and Dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. Following the successful completion of phase III testing, a New Drug Application is submitted to the FDA. The FDA review the data and if the product is seen as having a positive benefit-risk assessment, approval to market the product in the US is granted. A fourth phase of post-approval surveillance is also often required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. The FDA provides information about approved drugs at the Orange Book site. In many non-US western countries a 'fourth hurdle' of cost effectiveness analysis has developed before new technologies can be provided. This focuses on the efficiency (in terms of the cost per QALY) of the technologies in question rather than their efficacy. In England NICE approval requires technologies be made available by the NHS, whilst similar arrangements exist with the Scottish Medicines Consortium in Scotland and the Pharmaceutical Benefits Advisory Committee in Australia. A product must pass the threshold for costeffectiveness if it is to be approved. Treatments must represent 'value for money' and a net benefit to society. There is much speculation that a NICE style framework may be implemented in the USA in an attempt to decrease KISHINCHAND CHELLARAM COLLEGE 14
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS CONTROVERSIES Due to repeated accusations and findings that some clinical trials conducted or funded by pharmaceutical companies may report only positive results for the preferred medication, the industry has been looked at much more closely by independent groups and government agencies. In response to specific cases in which unfavorable data from pharmaceutical company-sponsored research was not published, the Pharmaceutical Research and Manufacturers of America have published new guidelines urging companies to report all findings and limit the financial involvement in drug companies of researchers. US congress signed into law a bill which requires phase II and phase III clinical trials to be registered by the sponsor on the clinical trials.gov website run by the NIH. Drug researchers not directly employed by pharmaceutical companies often look to companies for grants, and companies often look to researchers for studies that will make their products look favorable. Sponsored researchers are rewarded by drug companies, for example with support for their conference/symposium costs. Lecture scripts and even journal articles presented by academic researchers may actually be 'ghost-written' by pharmaceutical companies. Some researchers who have tried to reveal ethical issues with clinical trials or who tried to publish papers that show harmful effects of new drugs or cheaper alternatives have been threatened by drug companies with lawsuits. Since 2008, pharmaceutical companies have been increasing the cost of name-brand prescriptions to offset declining revenues as out-of-patent drugs become available as generics. Simultaneously, pharmaceutical manufacturers are taking increasing advantage of tax havens to avoid taxation.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS LEGAL ISSUES Where pharmaceutics have been shown to cause sideeffects, civil action has occurred, especially in countries where tort payouts are likely to be large. The top 20 pharmaceutical cases account for over $16 billion in recoveries. Due to high-profile cases leading to large compensations, most pharmaceutical companies endorse tort reform. Recent involved Vioxx and SSRI antidepressants. PHARMACEUTICAL FRAUD Pharmaceutical fraud involves activities that result in false claims to insurers or programs such as Medicare in the United States or equivalent state programs for financial gain to a pharmaceutical company. There are several different schemes used to defraud the health care system which are particular to the pharmaceutical industry. These include: Good Manufacturing Practice (GMP) Violations, Off Label Marketing, Best Price Fraud, CME Fraud, Medicaid Price Reporting, and Manufactured Compound Drugs. The Federal Bureau of Investigation (FBI) estimates that health care fraud costs American taxpayers $60 billion a year. Of this amount $2.5 billion was recovered through False Claims Act cases in FY 2010. Examples of fraud cases include the GlaxoSmithKline $3 billion settlement, Pfizer $2.3 billion settlement and Merk $650 million settlement. Damages from fraud
controversies
have
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS can be recovered by use of the False Claims Act, most commonly under the qui tam provisions which rewards an individual for being a "whistleblower", or relator (law). Antipsychotic drugs are now the top-selling class of pharmaceuticals in America, generating annual revenue of about $14.6 billion. Every major company selling the drugs Bristol-Myers Squibb, Eli Lilly, Pfizer, AstraZeneca and Johnson & Johnson has either settled recent government cases, under the False Claims Act, for hundreds of millions of dollars or is currently under investigation for possible health care fraud. Following charges of illegal marketing, two of the settlements set records last year for the largest criminal fines ever imposed on corporations. One involved Eli Lillys antipsychotic Zyprexa, and the other involved Bextra. In the Bextra case, the government also charged Pfizer with illegally marketing another antipsychotic, Geodon; Pfizer settled that part of the claim for $301 million, without admitting any wrongdoing. On 2 July 2012, GlaxoSmithKline pleaded guilty to criminal charges and agreed to a $3 billion settlement of the largest health-care fraud case in the U.S. and the largest payment by a drug company. The settlement is related to the company's illegal promotion of prescription drugs, its failure to report safety data, bribing doctors, and promoting medicines for uses for which they were not licensed. The drugs involved were Paxil, Wellbutrin, Advair, Lamictal, and Zofran for off-label, non-covered uses.Those and the drugs Imitrex, Lotronex, Flovent, and Valtrex were involved in the kickback scheme. The following is a list of the four largest settlements reached with pharmaceutical companies from 1991 to 2012, rank ordered by the size of the total settlement. The following is a list of the four largest settlements reached with pharmaceutical companies from 1991 to 2012, rank ordered by the size of the total settlement. Legal claims against the pharmaceutical industry have varied widely over the past two decades, including Medicare and Medicaid fraud, off-label promotion, and inadequate manufacturing practices. KISHINCHAND CHELLARAM COLLEGE 17
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS Laws allegedly violated (if applicable)
Company
Settlem Violation(s) ent
Year
Product(s)
GlaxoSmith Kline
$3 billion
Off-label promotion/fail 2012 ure to disclose safety data
False Avandia/We Claims llbutrin/Paxil Act/FDCA
Pfizer
$2.3 billion
Off-label promotion/kick 2009 backs
Bextra/Geo don/Zyvox/ Lyrica
False Claims Act/FDCA
Abbott Laboratories
$1.5 billion
Off-label promotion
2012
Depakote
False Claims Act/FDCA False Claims Act/FDCA
Eli Lilly
$1.4 billion
Off-label promotion
2009
Zyprexa
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS INDUSTRY REVENUES For the first time ever, in 2006, global spending on prescription drugs topped $643 billion, even as growth slowed somewhat in Europe and North America. The United States accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales followed by the EU and Japan. Emerging markets such as China, Russia, South Korea and Mexico outpaced that market, growing a huge 81 percent. US profit growth was maintained even whilst other top industries saw little or no growth. Despite this, "the pharmaceutical industry is and has been for years the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue." Pfizer's cholesterol pill Lipitor remains a best-selling drug worldwide. Its annual sales were $12.9 billion, more than twice as much as its closest competitors: Plavix, the blood thinner from Bristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill from AstraZeneca; and Advair, the asthma inhaler from GlaxoSmithKline. IMS Health publishes an analysis of trends expected in the pharmaceutical industry in 2007, including increasing profits in most sectors despite loss of some patents, and new 'blockbuster' drugs on the horizon. Teradata Magazine predicted that by 2007, $40 billion in U.S. sales could be lost at the top 10 pharmaceutical companies as a result of slowdown in R&D innovation and the expiry of patents on major products, with 19 blockbuster drugs losing patent. MARKET LEADERS IN TERMS OF HEALTHCARE REVENUE The following is a list of the 20 largest pharmaceutical and biotech companies ranked by healthcare revenue. Some companies (e.g., Bayer, Johnson and Johnson and Procter & Gamble) have additional revenue not included here. The phrase Big Pharma is often used to refer to companies with revenue in excess of $3 billion, and/or R&D expenditure in excess of $500 million.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS

Revenue Rank 2008 Company Country Total Healthcare Revenues R&D 2006 (USD millions)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Pfizer Novartis Merck & Co. Bayer GlaxoSmithKline Johnson Johnson Sanofi HoffmannLa Roche AstraZeneca Abbott Laboratories Bristol-Myers Squibb Eli Lilly Company Amgen Boehringer Ingelheim Schering-Plough Baxter International Takeda Pharmaceutical Co. Genentech Procter & Gamble and and USA Switzerland USA Germany United Kingdom USA France Switzerland United Kingdom USA USA USA USA Germany USA USA Japan 33,547 26,475 22,476 17,914 15,691 14,268 13,284 33,547 26,475 22,476 17,914 15,691 14,268 13,284 10,594 10,378 10,284
Net income/ Employees (loss) 2006 2006 (USD millions)

19,337 11,053 4,434 6,450 10,135 7,202 5,033 19,337 11,053 1,717 1,585 2,663 2,950 2,163 1,057 1,397 2,870 122,200 138,000 74,372 106,200 106,000 102,695 100,735 122,200 138,000 66,800 60,000 50,060 48,000 43,000 41,500 38,428 15,000
(USD millions)
7,599 7,125 4,783 1,791 6,373 5,349 5,565 5,258 3,902 2,255 3,067 3,129 3,366 1,977 2,188 614 1,620
18 19
USA USA
9,284 8,964
1,773 n/a
2,113 10,340
33,500 29,258
SUM AVERAGE
497,519 22,476
70,843 2,255
110,077 1,717
1,342,700 66,800
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS MARKET LEADERS IN TERMS OF SALES The top 15 pharmaceutical companies by 2008 sales are: Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Company
Pfizer GlaxoSmithKline Novartis Sanofi-Aventis AstraZeneca HoffmannLa Roche Johnson & Johnson Merck & Co. Abbott Eli Lilly and Company Amgen Wyeth Bayer Teva Takeda
Sales ($M)
43,363 36,506 36,506 35,642 32,516 30,336 29,425 26,191 19,466 19,140 15,794 15,682 15,660 15,274 13,819
Based/Headquartered in
United States United Kingdom Switzerland France United Kingdom Switzerland United States United States United States United States United States United States Germany Israel Japan
MERGERS, ACQUISITIONS, AND CO-MARKETING OF DRUGS A merger, acquisition, or co-marketing deal between pharmaceutical companies may occur as a result of complementary capabilities between them. A small biotechnology company might have a new drug but no sales or marketing capability. Conversely, a large pharmaceutical company might have unused capacity in a large sales force due to a gap in the company pipeline of new products. It may be in both companies' interest to enter into a deal to capitalize on the synergy between the companies.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS PRESCRIPTIONS In the U.S., prescriptions have increased over the past decade to 3.4 billion annually, a 61 percent increase. Retail sales of prescription drugs jumped 250 percent from $72 billion to $250 billion, while the average price of prescriptions has more than doubled from $30 to $68. PATENTS AND GENERICS Patents have been criticized in the developing world, as they are thought to reduce access to existing medicines.[74] However, without the financial incentive of patents, future innovation of medicines is discouraged. Reconciling patents and universal access to medicine would require an efficient international policy of price discrimination. Moreover, under the TRIPS agreement of the World Trade Organization, countries must allow pharmaceutical products to be patented. In 2001, the WTO adopted the Doha Declaration, which indicates that the TRIPS agreement should be read with the goals of public health in mind, and allows some methods for circumventing pharmaceutical monopolies: via compulsory licensing or parallel imports, even before patent expiration. In March 2001, 40 multi-national pharmaceutical companies brought litigation against South Africa for its Medicines Act, which allowed the generic production of antiretroviral drugs (ARVs) for treating HIV, despite the fact that these drugs were on-patent. HIV was and is an epidemic in South Africa, and ARVs at the time cost between 10,000 and 15,000 USD per patient per year. This was unaffordable for most South African citizens, and so the South African government committed to providing ARVs at prices closer to what people could afford. To do so, they would need to ignore the patents on drugs and produce generics within the country (using a compulsory license), or import them from abroad. The Indian pharmaceutical company Cipla audaciously offered to make the drugs at 350 USD per patient per year, roughly 1/40th of the lowest price available from a patent holder, which stunned the world community. After massive international protest in favor of public health rights (including the collection of 250,000 signatures by MSF), the governments of several developed countries (including The Netherlands, Germany, France, and later the US) backed the South African government, and the case was dropped in April of that year. KISHINCHAND CHELLARAM COLLEGE 22
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS PUBLICATIONS The drug company Merck & Co. publishes the Merck Manual of Diagnosis and Therapy, the world's best-selling medical textbook, and the Merck Index, a collection of information about chemical compounds. MARKETING Pharmaceutical companies commonly spend a large amount on advertising, marketing and lobbying. In the US, drug companies spend $19 billion a year on promotions. Advertising is common in healthcare journals as well as through more mainstream media routes. In some countries, notably the US, they are allowed to advertise directly to the general public. Pharmaceutical companies generally employ sales people (often called 'drug reps' or, an older term, 'detail men') to market directly and personally to physicians and other healthcare providers. In some countries, notably the US, pharmaceutical companies also employ lobbyists to influence politicians. Marketing of prescription drugs in the US is regulated by the federal Prescription Drug Marketing Act of 1987. TO HEALTHCARE PROFESSIONALS Currently, there are approximately 81,000 pharmaceutical sales representatives in the United States pursuing some 830,000 pharmaceutical prescribers. A pharmaceutical representative will often try to see a given physician every few weeks. Representatives often have a call list of about 200-300 physicians with 120-180 targets that should be visited in 1-2 or 3 week cycle. The number of pharmaceutical sales reps has been shrinking between 2008 and 2010, an estimated 30% industry wide reduction has occurred and current estimates are there May only be 60,000 pharmaceutical sales reps in the United States. TO INSURANCE AND PUBLIC HEALTH BODIES Private insurance or public health bodies (e.g. the NHS in the UK) decide which drugs to pay for, and restrict the drugs that can be prescribed through the use of formularies. Public and private insurers restrict the brands, types and number of drugs that they will cover. Not only can the insurer affect drug sales by including or excluding a particular drug from a
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS formulary, they can affect sales by tiering or placing bureaucratic hurdles to prescribing certain drugs as well. In January 2006, the U.S. instituted a new public prescription drug plan through its Medicare program known as Medicare Part D. This program engages private insurers to negotiate with pharmaceutical companies for the placement of drugs on tiered formularies. TO RETAIL PHARMACIES AND STORES Commercial stores and pharmacies are a major target of non-prescription sales and marketing for pharmaceutical companies. DIRECT TO CONSUMER ADVERTISING Since the 1980s new methods of marketing for prescription drugs to consumers have become important. Direct-to-consumer media advertising was legalized in the FDA Guidance for Industry on Consumer-Directed Broadcast Advertisements. Internationally, many pharmaceutical companies market directly to the consumer rather than going through a conventional retail sales channel. CONTROVERSY ABOUT DRUG MARKETING AND LOBBYING There has been increasing controversy surrounding pharmaceutical marketing and influence. There have been accusations and findings of influence on doctors and other health professionals through drug reps, including the constant provision of marketing 'gifts' and biased information to health professionals; highly prevalent advertising in journals and conferences; funding independent healthcare organizations and health promotion campaigns; lobbying physicians and politicians (more than any other industry in the US); sponsorship of medical schools or nurse training; sponsorship of continuing educational events, with influence on the curriculum; and hiring physicians as paid consultants on medical advisory boards. To help ensure the status quo on U.S. drug regulation and pricing, the pharmaceutical industry has thousands of lobbyists in Washington, DC that lobby Congress and protect their interests. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity. KISHINCHAND CHELLARAM COLLEGE 24
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS Some advocacy groups, such as No Free Lunch, have criticized the effect of drug marketing to physicians because they say it biases physicians to prescribe the marketed drugs even when others might be cheaper or better for the patient. There have been related accusations of disease mongering (over-medicalising) to expand the market for medications. An inaugural conference on that subject took place in Australia in 2006. In 2009, the Government-funded National Prescribing Service launched the "Finding Evidence - Recognising Hype" program, aimed at educating GPs on methods for independent drug analysis. It has been argued that the design of the Diagnostic and Statistical Manual of Mental Disorders and the expansion of the criteria represent an increasing medicalization of human nature, or "disease mongering", driven by drug company influence on psychiatry. The potential for direct conflict of interest has been raised, partly because roughly half the authors who selected and defined the DSMIV psychiatric disorders had or previously had financial relationships with the pharmaceutical industry. The president of the organization that designs and publishes the DSM, the American Psychiatric Association, recently acknowledged that in general American psychiatry has "allowed the biopsychosocial model to become the bio-bio-bio model" DEVELOPING WORLD The role of pharmaceutical companies in the developing world is a matter of some debate, ranging from those highlighting the aid provided to the developing world, to those critical of the use of the poorest in human clinical trials, often without adequate protections, particularly in states lacking a strong rule of law. Other criticisms include an alleged reluctance of the industry to invest in treatments of diseases in less economically advanced countries, such as malaria; Criticism for the price of patented AIDS medication, which could limit therapeutic options for patients in the Third World, where most of the AIDS infected people are living. However, a better policy of price discrimination would benefit to both patients and companies.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS SWOT ANALYSIS: Strengths: 1. Cost Competitiveness 2. Developed Industries with Strong Manufacturing Base 3. Well Established R&D infrastructure 4. Access to pool of highly trained scientists, Weaknesses: 1. Low investments in innovative R&D. 2. Lack of resources to compete with MNCs for New Drug Discovery & Research 3. Lack of strong linkages between industry and academia. 4. Low medical and healthcare expenditure in the country Opportunities: 1. Significant export potential. 2. Marketing alliances for MNC products in domestic market and international market. 3. Contract manufacturing arrangements with MNCs 4. Potential for developing India as a centre for international clinical trials. Threats: 1. Product patent regime poses serious challenge to domestic industry unless it invests in research and development 2. R&D efforts of Indian pharmaceutical companies hampered by lack of enabling regulatory requirement. 3. Drug Price Control Order puts unrealistic ceilings on product prices and profitability 4. Export effort hampered by procedural hurdles in India as well as nontariff barriers imposed abroad.
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Power of Suppliers Volume benefits occur Inputs standard, available locally Numerous suppliers-switching cost low Suppliers can go for forward integration Raw material cost constitute more than 50% of the total expenses
Barriers to Entry Very low barriers to entry Government policies supportive For entry price regulation exists Economies of scale exist Proprietory technology and Product will exist after 2005
Industry Competition Highly competitive. Top five players have mere 18% market share Lower fixed cost and high working capital
Threats of Substitutes No substitutes for the medicines Biotechnology is a threat to synthetic pharma products
Power of Buyers End consumers do not have bargaining power Brand identity exists but is in the hands Of Influencer (Doctors) Price Sensitivity is less Highly fragmented market, so buyer Concentration v/s industry is low
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INDIAN PHARMACEUTICAL INDUSTRY The Indian pharmaceutical industry currently tops the chart amongst India's science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian pharmaceutical industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high amongst all the third world countries, in terms of technology, quality and the vast range of medicines that are manufactured. It ranges from simple headache pills to sophisticated antibiotics and complex cardiac compounds; almost every type of medicine is now made in the Indian pharmaceutical industry. The Indian pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The Pharmaceutical and Chemical industry in India is an extremely fragmented market with severe price competition and government price control. The Pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are approximately 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units).The Government has also played a vital role in the development of the India Software Industry. In 1986, the Indian government announced a new software policy which was designed to serve as a catalyst for the software industry. This was followed in 1988 with the World Market Policy and the establishment of the Software Technology Parks of India (STP) scheme. In addition, to attract foreign direct investment, the Indian Government permitted foreign equity of up to 100 percent and duty free import on all inputs and products. KISHINCHAND CHELLARAM COLLEGE 28
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS CURRENT SCENARIO India's pharmaceutical industry is now the third largest in the world in terms of volume and stands 14th in terms of value. According to data published by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry between September 2008 and September 2009 was US$ 21.04 billion. Of this the domestic market was worth US$ 12.26 billion. The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in 2009. The market has the further potential to reach US$ 70 billion by 2020 in an aggressive growth scenario. Moreover, the increasing population of the higher-income group in the country, will open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015. Besides, the domestic pharma market is estimated to touch US$ 20 billion by 2015, making India a lucrative destination for clinical trials for global giants. Further estimates the healthcare market in India to reach US$ 31.59 billion by 2020. Diagnostics Outsourcing/Clinical Trials The Indian diagnostic services are projected to grow at a CAGR of more than 20 per cent during 2010-2012. Some of the major Indian pharmaceutical firms, including Sun Pharma, Cadilla Healthcare and Piramal Life Sciences, had applied for conducting clinical trials on at least 12 new drugs in 2010, indicating a growing interest in new drug discovery research. Generics India tops the world in exporting generic medicines worth US$ 11 billion and currently, the Indian pharmaceutical industry is one of the worlds largest and most developed. Moreover, the Indian generic drug market to grow at a CAGR of around 17 per cent between 2010-11 and 2012-13. Union Minister of Commerce and Industry and Minister for Trade and Industry, Singapore, have signed a 'Special Scheme for Registration of Generic Medicinal Products from India' in May 2010, which seeks to fasttrack the registration process for Indian generic medicines in Singapore. KISHINCHAND CHELLARAM COLLEGE 29

250 large units and about 8000 Small Scale Units. 20,000 registered units all over India. Bengal, Calcutta , Pune, Mumbai, Banglore. Rs.260 billion 10% 7% of the share
Size of the Industry Geographical distribution Output per annum Percentage in world market Market capitalization
MARKET CAPITALIZATION Today in India, Pharma Industry rank's first of India's science-based industries with wide ranges of capabilities in the complex field of drug manufacture and technology. The industry is estimated to be worth $4.5 billion, which is growing at 8-9% annually. It is one of the best and highly organized sectors. The sector specializes in term of technology, quality and range of medicines manufactured. The product of the industry ranges from simple headache pills to sophisticated antibiotics and also complex cardiac compounds. Pharma industry promotes the sustainable development in the vital field of medicines by boosting the quality producers and many units approved by regulatory authorities in USA and UK. The companies associated with this sectors which are international have stimulated, assisted and spearheaded the dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. The growth of Indian Pharma Industry has grown tremendously since 2008-09 in terms of exports. The Indian pharmaceutical industry has grown from a humble Rs 1,500 crore turnover in 1980 to approximately Rs 1, 00,611 in 2009-10. The Indian Pharmaceutical industry consists of more than 20,000 registered units which are highly fragmented. It has been expanding in a tremendous manner in the last two decades and includes 250 pharmaceutical companies which control 70% of the market.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS SIZE OF THE INDUSTRY The Indian Pharma Industry has around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. 250 large units and about 8000 Small Scale Units, form the core of the pharmaceutical industry in India. The units produced have the complete range of medicines which are ready for consumption by patients.
TOTAL CONTRIBUTION TO THE ECONOMY/ SALES The growth of Pharmaceutical industry in India is US$ 3.1 billion with growing rate at 14% year. As India is most advanced countries among the developing countries.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS DOMESTIC AND EXPORT SHARE In India the output of Indian Pharmaceutical industry increased to Rs260 billion in the financial year 2002, which accounts for 1.3% of the global pharmaceutical sector. The bulk drugs accounts for Rs 54 bn (21%), the remaining Rs 210 bn (79%) for formulations, imports were Rs 20 bn while exports were Rs87 bn in year 2002. There is huge expansion of Domestic Pharma sector which estimated US$ 11.72 billion (Rs 55454 crore) in 2008-09 from US$ 6.88 billion (Rs 32575 crore) in 2003-04. India exports its Pharma Products to various countries around the globe including highly regulated markets of USA, Europe, Japan and Australia.
EMPLOYMENT OPPORTUNITIES Career in pharmaceutical industry or in Phamacy requires a candidate to take up D.Pharma or B.Pharma after completion of 12th class. Both PCB and PCM stream students can apply for these courses.

D.Pharma: It's a two-year diploma course in pharmacy. B.Pharma: It's a four-year degree course in pharmacy.
The job opportunities that pharmacy courses offer are as follows:

Pharmacist Drug Therapist Hospital Drug Coordinator Preparing Prescription to Patients Drug Inspector Chemical / Drug Technician Research Officer Pathological Lab Technician R&D Scientist Bio-tech Industries
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS ADVANTAGE INDIA The Indian Pharmaceutical Industry, particularly, has been the front runner in a wide range of specialties involving complex drugs' manufacture, development and technology. With the advantage of being a highly organized sector, the pharmaceutical companies in India are growing at the rate of $ 4.5 billion, registering further growth of 8 - 9 % annually. More than 20,000 registered units are fragmented across the country and reports say that leading Indian pharmaceutical companies control 70% of the market share with stark price competition and government price regulations. Competent workforce: India has a pool of personnel with high managerial and technical competence as also skilled workforce. It has an educated work force and English is commonly used. Professional services are easily available. Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs and exports sophisticated bulk drugs. Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal framework and strong financial markets. There is already an established international industry and business community. Information & Technology: It has a good network of world-class educational institutions and established strengths in Information Technology. Globalization: The country is committed to a free market economy and globalization. Above all, it has a 70 million middle class market, which is continuously growing. Consolidation: For the first time in many years, the international pharmaceutical industry is finding great opportunities in India. The process of consolidation, which has become a generalized phenomenon in the world pharmaceutical industry, has started taking place in India. KISHINCHAND CHELLARAM COLLEGE 33

Company name Cipla Ranbaxy Lab Dr Reddy's Labs Sun Pharma LupinLtd Aurobindo Pharma Piramal Health Cadila Health Matrix Labs Wockhardt Sales in US$ million 1,033.46 951.03 866.44 805.51 603.99 582.27 483.1 354.02 310.06 309.68
RANBAXY Ranbaxy is among the predominant pharmaceutical companies in India and was founded in 1961. Ranbaxy is a research based pharma giant and became a public limited company in 1973. Ranbaxy was recently ranked among the top 10 international pharmaceutical companies in the world have presence across 49 countries. Ranbaxy is also reputed for its 11 state-of-the-art manufacturing facilities in countries like China, India, Brazil, South Africa, and Nigeria. The company has also won several awards and recognitions for its pioneering initiatives in the developing markets of the world. Ranbaxy is also a member of the Indian Pharmaceutical Alliance and Organization of Pharmaceutical Producers of India. In the present scenario Ranbaxy commands more than 5% share of the Indian pharmaceutical market. Ranbaxys product portfolio is diverse and includes drugs that cater to nutrition, infectious diseases, gastro-enteritis, pain management, cardiovascular ailments, dermatology, and central nervous system related ailments. Ranbaxys operations in India are designed under as many as 9 SBUs which take care of the various categories of medicines and drugs that are manufactured by Ranbaxy. The company is especially well-known for having the highest research and development (R&D) budget among pharma companies in the world which is as high as US$ 100 million. Ranbaxy India operations are handled by 2,500 employees and the companys market share in India is worth around US$6 billion. KISHINCHAND CHELLARAM COLLEGE 34
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS DR. REDDY'S LABORATORIES Dr. Reddy's Laboratorie is one of the popular pharmaceutical companies with base in more than 100 countries. The medicines of Dr. Reddy's Laboratories Limited are easily available all across the globe. Dr. Reddy's Pharmaceutical Company is very much customer friendly. It takes care of the fact that maximum people get benefited by the products of this pharmaceutical company. It commercialized various treatments so as to provide high tech treatment to the masses. It tries to meet the medical needs of the people. Though Dr. Reddy's Laboratories is located in various parts of the world, it has its headquarters in India. The subsidiaries of this company are found at various countries like US, Germany, UK, Russia and Brazil. 16 countries have the representative offices of Dr. Reddy's Laboratories Limited. 21 countries have third party distribution. CIPLA Cipla was founded by Khwaja Abdul Hamied in 1935 and was known as The Chemical, Industrial and Pharmaceutical Laboratories, though it is better known by the acronym Cipla today. Cipla was registered in August, 1935 as a public limited enterprise and it began with an authorized capital of Rs. 6 lakh. Though set up in 1935, it was only in 1937 that Cipla began manufacturing and marketing its pharmaceutical products. Today, the company has its facilities spread across several locations across India such as Mumbai, Goa, Patalganga, Kurkumbh, Bangalore, and Vikhroli. Apart from its strong presence in the Indian market, Cipla also has an extensive export market and regularly exports to more than 150 countries in regions such as North America, South American, Asia, Europe, Middle East, Australia, and Africa. For the year ended 31st March, 2007 Ciplas exports were worth approximately Rs. 17,500 million. Cipla is also considerably well-known for its technological innovation and processes for which the company received know-how loyalties to the tune of Rs. 750 million during 2006-07. KISHINCHAND CHELLARAM COLLEGE 35
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS SUN PHARMACEUTICALS: Sun Pharmaceuticals was set up in 1983 and the company started off with only 5 products to cure psychiatric illness. Sun Pharma is known worldwide as the manufacture of specialty Active Pharmaceuticals Ingredients and formulations. However, the company is also concerned with chronic treatments such as cardiology, psychiatry, neurology, gastroenterology, diabetology, and respiratory ailments. Active Pharmaceuticals Ingredients (API) include peptides, steroids, hormones, and anti-cancer drugs and their quality is internationally approved. The international offices of Sun Pharmaceuticals Industries Ltd. are located in British Virgin Islands, Russia, and Bangladesh. There are 3 major group companies of Sun Pharmaceuticals Industries are: Caraco Pharmaceuticals Laboratories (based in Detroit, Michigan) Sun Pharmaceuticals Industries Inc. (Michigan) Sun Pharmaceuticals (Bangladesh) Aurobindo Pharma Aurobindo Pharma, an India-based private pharmaceutical company having presence around the world. Aurobindo Pharma was set up in the year 1986 and started its operations in 1988-89 in Pondicherry, India. Now, the company is headquartered at Hyderabad, India. Further, and the pharmaceutical major markets over 180 APIs and 250 formulations throughout these destinations. This Indian pharmaceutical major has filed over 110 DMFs and 90 ANDAs for the USA market. So far, Aurobindo has received 45 ANDA approvals (both final and tentative) from USA alone. Aurobindo Pharma products cover segments like Antibiotics, Anti-Retro Virals, Gastroenterologicals, Anti-Allergics, CVS, CNS
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS Drug Pipeline The drug pipeline refers to the portfolio of drugs that a company is developing. It is commonly described according to the approval stage that each of the prospective drugs has reached. Investors place more value on drugs that are likely to be approved by the FDA in the near future than they do for drugs that are in an exploratory stage. In addition, a pipeline that contains multiple drug candidates, that are in differing stages of development and targeted at a range of illnesses, tends to be viewed more favorably, since the structure works to increase the odds of regulatory approval and, hence, profitability. Drug Approval Process This multi-year process is highly regulated. It begins with pre-clinical animal trials, which determine if the drug is safe enough to be given to humans. An IND (Investigational New Drug ) application is then filed with the FDA to obtain permission to begin testing the drug on humans. Once the application is approved, clinical trials begin. In Phase I trials, the drug is taken by healthy volunteers for a short period, to ensure that it is safe for human ingestion, to learn more about how the drug is broken down in the body (metabolized), and to determine how long the drug stays in the blood stream (half-life). Phase II requires that the drug be tested in sick patients, to determine if it is effective (efficacy), to obtain more information about the drug's side effects (safety), and to determine the correct dosage and dosing schedule (e.g., 10 mg once per day or 20 mg once per day). In Phase III, the drug is tested in a large number of sick patients, with some trials using up to 5,000 patients. This phase usually contains a control group that receives a placebo, and can take several years to finish. The objective in Phase III is to prove that the drug is effective (it works) and safe (limited side effects). Assuming a successful completion at clinical trial, a NDA (New Drug Application) or BLA (Biologics License Application) is submitted to the FDA. The application contains data from preclinical and clinical trials, how and where the drug will be manufactured, and a proposed label indicating how KISHINCHAND CHELLARAM COLLEGE 37
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS the drug is to be used. At this point, the FDA can approve the drug, reject it, or request more information. Branded Drugs Once approved, a drug is given a "street name" and commercialization begins. Large companies (Big Pharma) spend considerable amounts on advertising and distribution, and often have large sales forces that promote their drugs to physicians to convince them to prescribe the drug. Branded drugs are protected by patents, which sustain profit margins that offset the expenditures required during the expensive R&D and drug approval process. Generic Drugs These copy-cat versions of branded drugs appear when a branded drug's patent protection expires or when the patent is legally invalidated by a competitor. Generic drugs offer equivalent efficacy, but are much less expensive largely because the generic drug company has little R&D expense. Generic drugs present savings to consumers, and are being encouraged by pharmacy benefit management companies as a primary means to reduce healthcare costs. Investment Considerations Investors must examine a number of factors. The revenue potential of each drug or drug candidate is impacted by the size of the target market (the extent of a disease), competition (alternative remedies already on the market, or others about to obtain approval), and a drug's patent expiration (at which time profitability typically drops sharply). The drug development pipeline also must be examined, because it represents potential future revenue and earnings streams. Investors are encouraged to review the pipeline for its breadth, as well as for the timing of possible new drug approvals. Because of the difficulty in judging whether a new drug will meet the rigorous approval requirements, particular attention should be paid to whether there are drug candidates in each of the various approval phases, or if commercial success is solely dependant on approval of a single drug.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS CHALLENGES Over the past decade, pharmaceutical companies have entered a difficult period where shareholders, the market and regulators have created significant pressures for change within the industry. The core issues for most of drug companies are declining productivity of in-house R & D, patent expiration of number of block buster drugs, increasing legal and regulatory concern, and pricing issue. Current global financial conditions and the threat of a broad recession accelerated the timetable for implementing transformational changes in global organizations, as the industry confronts lower corporate stock prices and an increasingly cost-averse customer. Leaders of the largest global pharmaceutical companies recognize the need for transformational change in their organizations, but will need to move swiftly to ensure sustained growth. Transformations in the business model of larger pharmaceutical industry spell more opportunities for Indian pharmaceutical companies. Pharmaceutical production costs are almost 50 percent lower in India than in western nations, while overall R&D costs are about one-eighth and clinical trial expenses around one-tenth of western levels. Riding on better sales in the domestic and export markets, Indian pharmaceutical industry is expected to continue with its good performance. There are opportunities in expanding the range of generic products as more molecule come off patent, outsourcing, and above all, in focusing into drug discovery as more profits come from traditional plays. At the same time, the Indian Pharmacy Industry would have to contend with several challenges particularly the Effects of new product patent Drug price control Regulatory reforms Infrastructure development Quality management and Conformance to global standards. KISHINCHAND CHELLARAM COLLEGE 39
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS POLLUTION World's highest pharmaceutical pollution is measured in India itself. As the researchers analyzed vials of treated wastewater taken from plant where about 90 Indian drug factories dump their residues, they were shocked and surprised. Too much of single, powerful antibiotic was being dumped into the stream each day to treat every person in a city of 90,000. That particular Indian factories produce drugs for much of the world, including many Americans. The result: Some of India's poor population was consuming an array of chemicals that may be harmful, and could lead to the proliferation of drug-resistant bacteria. Last year, The Associated Press reported that concentrations of pharmaceuticals had been found in drinking water provided to at least 46 million Americans. But the wastewater downstream from the Indian plants contained 150 times the highest levels detected in the U.S. POLLUTION HANDLING AND ENVIRONMENTAL ISSUES FACED BY THE INDUSTRY. The Indian Pharma industry is characterized by large plants with highly advanced technology. Usually the cleaner production improvements come from redesigning processes or from recycling of major waste streams such as solvents. Case studies are the best sources of information for these solutions. The low-cost options such as improved housekeeping, dry cleaning, and solvent substitution maintenance can also offer significant savings and reduce waste. Cleaner production requires pollution guides for the chemical industries, for hospitals and medical research organizations which have to renew according to timely gaps. Most of the Environment Health and Safety reports are found in the websites which provide many good ideas by number of the leading pharmaceutical companies. BIO- TECHNOLOGY Bio-Technology is study of Biology and Technology. It deals with pure biological sciences like genetics, microbiology, animal cell culture, molecular biology, biochemistry, embryology, cell biology, and is also dependent on knowledge/methods from outside the sphere of biology like chemical engineering, bioprocess engineering, information technology, biorobotics,
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS etc. It is mainly concerned with many subjects like Agriculture and Animal Husbandry, Immunology, Virology, Cropping system and Crop Management, Ecology, Cell Biology, Soil science and Soil Conservation, Bio-statistics, Plant Physiology, Seed Technology. Biotechnology is process of using micro organisms, such as bacteria or yeasts, or biological substances, such as enzymes, to make specific industrial or manufacturing products. LATEST DEVELOPMENTS Today the Indian Pharmaceutical market is worth US$ 13 billion, with the domestic retail market expected to cross the US$ 10 billion mark in 2010 and reach an estimated US$ 12 billion to US$ 13 billion by 2012. The outsourcing opportunities are on the verge for growth of US$ 53 billion in 2010 from US$ 26 billion in 2006. The industry was estimated to be around US$ 13.2 billion in 2006-07. Out of which the domestic consumption of pharmaceuticals accounted for nearly 57 per cent while the rest 43 per cent was constituted by exports. In 2006, the market of Pharmaceutical witnessed an accelerated growth of more than 17%, primarily on account of increased clarity on tax reforms especially the Value Added Tax (VAT) implementation. The country's pharmaceutical market is expected to maintain a healthy growth rate of 12-13 per cent and expected to cross the US$ 10 billion mark by 2010 and reach approximately, US$ 12 to 13 billion by 2012. Indian Pharma Industry emerged as developing industry which has been able to prepare H1N1 vaccine. The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, funded the scientists and the vaccine was developed. This new vaccine works against the old virus because the 1918 and the 2009 strains of H1N1 influenza share features that allow vaccinegenerated antibodies to recognize both viruses. One more mile stone in the Industry is that India's first domestic vaccine against swine flu was made possible.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS GROWTH The Indian pharmaceutical market reached US$ 10.04 billion in size, with a value-wise growth rate of 20.4 per cent over the previous years corresponding period on a Moving Annual Total (MAT) basis for the 12 months ended July 2010. Cipla maintained its leadership position in the domestic market with 5.27 per cent share, followed by Ranbaxy. The highest growth in the domestic market was for Mankind Pharma, which grew 37.2 per cent. Leading companies in the domestic market such as Sun Pharma (25.7 per cent), Abbott (25 per cent), Zydus Cadila (24.1 per cent), Alkem Laboratories (23.3 per cent), Pfizer (23.6 per cent), GSK India (19 per cent), Piramal Healthcare (18.6 per cent) and Lupin (18.8 per cent) had impressive growth during July 2010, shows the data. The pharmaceuticals industry in India will grow by over 100 per cent over the next two years. The pharmaceutical industry is currently growing at the rate of 12 per cent, but this will accelerate soon. The sale of all types of medicines in the country stands at US$ 9.61 billion, which is expected to reach around US$ 19.22 billion by 2012. India's domestic pharmaceutical market is valued approximately at US$ 12 billion in 2010, and has shown a strong growth of 21.3 per cent for the 12 months ending September 2010. It estimates that over the next 10 years, the domestic market will grow to US$ 49 billion, at a compounded annual growth rate (CAGR) of 15 per cent. The formulations industry is expected to prosper parallel to the pharmaceutical industry. It is expected that the domestic formulations market in India will grow at an annual rate of around 17 per cent in 2009-10, owing to increasing middle class population and rapid urbanization.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS RELATIONSHIP BIOTECHNOLOGY BETWEEN PHARMACEUTICALS AND
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India. Bio-tech there still plays the role of pharmas little sister, but many outsiders have high expectations for the future. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in number of biotechs. In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1 billion. The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales. Biologics and large-molecule drugs tend to be more expensive than smallmolecule drugs, and India hopes to sweep the market in biogenerics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities. Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. At last count there were 265 firms registered in India, over 75% of which were incorporated in the last five years. The newness of the companies explains the industrys high consolidation in both physical and financial terms. Almost 50% of all biotechs are in or around Bangalore, and the top ten companies capture 47% of the market. The top five companies were homegrown; Indian firms account for 62% of the biopharma sector and 52% of the industry as a whole. The Association of Biotechnology-Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible. COMPARISON WITH THE U.S. The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies. Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable KISHINCHAND CHELLARAM COLLEGE 43
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS for years. Pharmaceutical companies in both countries have recognized the potential effect that biotechnology could have on their pipelines and have responded by either investing in existing start-ups or venturing into the field themselves. In both The India and the U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential. RELATIONSHIP WITH IT Many analysts have observed that the hype around the biotech sector mirrors that of the IT sector. Biotech colleges have been popping up around the country eager to service the pools of students that want to take advantage of a growing industry. The International Finance Commission, the private investment arm of the World Bank, called India the centerpiece of IFCs global biotech strategy. Of the $110 million invested in 14 biotech projects investment globally, the IFC has given $43 million to 4 projects in India. According to Dr. Manju Sharma, former director of the Department of Biotechnology, the biotech industry could become the single largest sector for employment of skilled human resource in the years to come. British Prime Minister Tony Blair was similarly impressed, citing the success of Indias biotech industry as the reason for his own countrys own biotech opportunities. Malaysia is also looking to India as an example for growing its own biotech industry. GOVERNMENT SUPPORT The Indian government has been very supportive. It established the Department of Biotechnology in 1986 under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. Indias science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large animals as part of the ministers initiative. States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities. KISHINCHAND CHELLARAM COLLEGE 44
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS MAJOR INDUSTRY TRENDS Healthcare and pharmaceuticals are two distinct industries, but they are interdependent and are subject to similar trends, which is why they are covered together in this profile. Both are benefiting from ageing populations in many advanced economies, and various developing countries, such as China. In addition, important medical discoveries, including the decoding of the human genome, are fueling scientific advances, and facilitating the release of new drugs and treatments. The Impact of the 2008 Recession and Growth through 2011 The investment community generally regards healthcare and pharmaceutical companies as defensive stocks, because they tend to be relatively immune to the vagaries of the economic cycle. While consumers may cut back on purchases of many discretionary items during a recession, most people regard their health as a priority. In addition, while individuals may cut back on private healthcare in times of economic hardship, this simply increases demand for healthcare services provided by the public sector. Most healthcare spending in the Western world is funded by governments, and such spending is highly sensitive in political terms. Most democratically elected governments prefer to find savings in areas other than healthcare for fear of losing votes. Clearly, however, even healthcare spending comes under pressure during a severe economic recession. In both Europe and the United States, spending on health and government support for healthcare for the vulnerable and the elderly is cited, along with state pension commitments, as one of the more intractable drivers behind growing and unsustainable public sector deficits. AGEING POPULATIONS Ageing populations are driving demand for healthcare services and pharmaceutical products around the globe. Older people tend to require more healthcare and are subject to higher levels of chronic illness than younger people. In 1950, 4.9% of Japanese were over the age of 65. By 2000 that figure had grown to 17.2%, and by 2050 it is expected to reach 32.3%. The latest US Census shows that the median age of the US KISHINCHAND CHELLARAM COLLEGE 45
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS population has risen from 35.3 in 2000 to 27.2 in 2010. The percentage of the US population now aged between 45 and 64 is 26.4% of the total population, with the rapid growth in this segment being down to the ageing of the Baby Boomer generation (the 77 million Americans born after the war, between 1946 and 1964). Moreover, one of the ironies of democracy is that as the gray vote grows in numbers, with increased longevity playing an ever-more-important role, the chances of governments being able to rein in spending on health and pensions, both key elements for ageing citizens, dwindles to zero. This is, of course, good news for the healthcare and pharmaceuticals sector, but until and unless old age ceases to be synonymous with the growing impairment of the individuals ability to be economically active and productive, the growing mismatch in the ratio between young and old poses huge problems for governments everywhere. The problem even exists in some emerging economies, such as China, which introduced a strict one-child policy in 1979 in an attempt to control its booming population. Family size has dropped dramatically since the 1970s, when the average Chinese woman had five to six children. Today, Chinas fertility rate is 1.5 children per woman. Consequently, Chinas population will peak at 1.4 billion in 2026 and then start shrinking, according to the US Census Bureau. By the end of this century, Chinas population would be cut almost in half to 750 million, In just 10 years, the number of people in China aged 2024 is expected to be half todays figure of 124 million, a shift that could hurt Chinas economic competitiveness by driving up wages. Over the same period, the proportion of the population over 60 is expected to climb from 12% or 167 million peopleto 17%. According to a UN report published in March 2009, 22% of people in the more developed countries are aged 60 and over, and that proportion is expected to reach 33% in 2050. Furthermore, while just 9% of the population of developing countries today is aged 60 or over, that proportion will more than double to 20% by 2050. KISHINCHAND CHELLARAM COLLEGE 46
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS SCIENTIFIC AND TECHNOLOGICAL ADVANCES Enormous progress has been made over the past decade in developing drugs that treat previously incurable illnesses. The BBC reported in April 2010 that scientists at the University of Leeds had found that viruses can be modified to find and destroy cancer cells. Their research found that proteins could be added to a virus to allow it to recognize unique markers that appear on the surface of cancer cells, and the virus can then deliver gene therapy to the cells. During the same month, researchers at Strathclyde University in Glasgow said that they may have made a breakthrough in using gene therapy to treat cancer tumors. They said that they had identified a technique for delivering genes to hard-to-reach tumors without harming healthy tissue. Advances such as these are taking place all around the world, and are adding to the pressures on health spending, since many new drugs are very costly. For example, a drug to treat kidney cancer called Sunitinib was approved for use in the United Kingdom in 2009. But the average daily cost of Sunitinib is about 75, with an average six-week cycle costing in excess of 3,000. Health services around the world are seeking to contain costs with the use of information technology, and by advanced screening of patients. In the latter case, it is believed that identifying illnesses early means that the patient is more likely to make a recovery, and cost savings will also occur. In April 2010, for example, scientists in the United Kingdom published research that said that a five-minute, one-off screening test could prevent thousands of people dying from bowel cancer every year in the country. However, adapting modern IT systems to healthcare systems has proved expensive and difficult. A project to computerize patient records in the United Kingdoms NHS has been dogged by delays and cost overruns. Originally planned to be completed in 2006, 2015 is the latest estimate for full implementation. In December 2009, the government said that it planned KISHINCHAND CHELLARAM COLLEGE 47
PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS to scale back the project. The electronic patient record system is thought to have cost about 12 billion (US$16 billion) so far. Its a similar story in the United States. According to a study published in the New England Journal of Medicine, only 4% of US physicians have a fully functional electronic health-records system. Yet the coordinators of a federal government healthcare IT initiative have said developing a national health IT network would be extremely difficult. PHARMACEUTICAL INDUSTRY UNDER PRESSURE FROM PRICE CAPS AND GENERIC DRUGS The pharmaceutical industry regularly tops surveys of the most profitable corporate sectors. Certainly, many of the companies involved in the industry are highly profitable. Ageing populations and scientific advances that are creating new drugs (and new demand) are propelling revenues and profits. However, according to the Association of the British Pharmaceutical Industry (ABPI), prescription medicines are the subject of government controls and intensive competition. The ABPI adds that pharmaceutical prices have grown at a slower rate than consumer prices as a whole and, in real terms, are 21% lower than they were 10 years ago. Similar trends can be seen in other parts of the world, where governments cap price rises for drugs. In Japan, for example, healthcare providers, are currently reimbursed using a points system, determined by a government-sponsored committee. Points are given for every type of medical procedure or service. Yet year-by-year the authorities have reduced the number of points awarded in the case of every procedure, as medical costs have risen along with the ageing population. So while a healthcare provider in the United States would reimburse a patient requiring an MRI examination at a rate of around US$4,000, a provider of the same service in Japan would receive the equivalent of just US$500.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS FINANCIAL YEAR 2012
1. FY12/CY11 was a challenging on domestic front. The companies witnessed a sluggish growth in the 1HFY12, on the back of severe competition in the acute segment. Increasing competition from MNCs and unlisted companies impaired the growth of local players. Though the Indian Pharma Industry grew by 16% vs 18% in FY11, large part of the growth was contributed by the chronic segment.
2. MNC pharma companies continued to excel during FY12/CY11. Of the 25 top selling brands, 13 were from the MNCs. On the margin front, performance was not good. Most of the companies saw increase in raw material and employee costs. Companies continued to increase their MR strength and expand their reach to rural areas.
3. In the US, generic companies witnessed robust growth, as billion dollar products like, Lipitor, Zyprexa, Plavix came off patent. On the other hand Europe continued to face pressure.
4. Rupee depreciation was one important aspect which helped the industry. Many companies benefited due to rupee depreciation, especially the companies who had not hedged their receivables.
5. Many companies had received warning letters from the USFDA in the past. The year saw some green signals from US regulator. While Aurobindo, Cadila and Claris got USFDA clearances, Ranbaxy entered into a consent decree with USFDA in order to gets its two manufacturing facilities re-approved by the US authorities.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS PROSPECTS The product patents regime heralds an era of innovation and research resulting in the launch of new patented product launches. In the longer run, domestic companies would face fresh competition from MNCs, as they would make aggressive new launches. However, the latter would most likely be subject to price negotiation. Drugs having estimated sales of over US$ 80 bn are expected to go off patent between CY12 and CY15. With the governments in the developed markets looking to cut down healthcare costs by facilitating a speedy introduction of generic drugs into the market, domestic pharma companies will stand to benefit. However, despite this huge promise, intense competition and consequent price erosion would continue to remain a cause for concern. The developing markets viz; Brazil, Turkey, Mexico, Russia etc are expected to witness growth of around 25% during 2014-15. Like India, emerging markets are also Branded by nature, thus Indian companies are well poised to capitalise on the opportunities in these markets as well. The life style segments such as cardiovascular, anti-diabetes, antidepressants and anti-cancers will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyle patterns. High growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment as the lifestyle diseases like hypertension, congestive heart failure, depression, asthma, and diabetes are on the rise. Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. Indias competitive strengths in research services include English-language competency, availability of low cost skilled doctors and scientists, large patient population with diverse disease characteristics and adherence to international quality standards. As for contract manufacturing, both global innovators and generic majors are finding it profitable to outsource production. Although the scenario has yet not improved for this space after the financial crisis, it is expected to improve going forward as the pressure to prune costs increases. As per the McKinsey report, Indian pharmaceuticals market is expected to grow to US$ 55 bn in 2020 and has a potential to reach US$ 70 bn by 2020.
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS CONCLUSION The Indian pharmaceutical industry is the world's fourth-largest by volume and is likely to lead the manufacturing sector of India. The Indian pharmaceutical market is highly competitive and remains dominated by low priced, domestically-produced generics. Despite having the second largest population in the world and a growing middle class with high healthcare expectations, India accounts for less than 2% of the world pharmaceutical market in value terms. In the financial year 2010-11, the Indian pharmaceutical industry grew more than 14 per cent, according to ORG IMS and this growth was mainly driven by the top 50 companies. During the year, the industry also witnessed Indian pharma companies selling out to the multinationals. As per newspaper reports, it appears that the Government of India is planning to bring under price control all the drugs which are listed in the National List of Essential Medicines. More than 350 drugs are expected to be covered. This will have an adverse impact on the Indian Pharmaceutical Industry which is already reeling under high inflationary pressures. During the financial year, the following are some of the companies were acquired as subsidiaries: Cipla (Mauritius) Limited, Cipla (UK) Limited, Cipla-Oz Pty Limited, Four M Propack Private Limited, Goldencross Pharma Private Limited, Medispray Laboratories Private Limited, Meditab Holdings Limited, Meditab Pharmaceuticals South Africa (Pty) Limited, Meditab Specialities New Zealand Limited, Meditab Specialities Private Limited, Sitec Labs Private Limited and STD Chemicals Limited. The Companies introduced many new drugs and formulations during the year. Some of them are Entavir , Febucip , Flosoft , Foracort The Indian pharmaceutical industry is the world's fourth-largest by volume and is likely to lead the manufacturing sector of India. KISHINCHAND CHELLARAM COLLEGE 51
The Pharmaceutical industry in India meets around 70% of the countrys demand for bulk drugs, chemical tablets, capsules, orals and injectibles. The Indian pharmacy market is expected to reach US 55$ billion in 2020.The market has potential to reach US 70$ billion in an aggressive growth scenario.
BIBLIOGRAPHY
http://en.wikipedia.org/wiki/Pharmaceutical_industry http://www.corporatewatch.org/?lid=312 http://www.equitymaster.com/research-it/sector-info/pharma/PharmaceuticalsSector-Analysis-Report.asp http://www.valueline.com/Stocks/Industry_Report.aspx?id=7236 http://libguides.stanford.edu/pharmaceutical-industry http://www.indianmirror.com/indian-industries/2012/pharmaceutical-2012.html http://www.scribd.com/doc/49475663/Pharmaceutical-Sector-Rohit http://en.wikipedia.org/wiki/Pharmaceutical_industry_in_India http://www.qfinance.com/sector-profiles/healthcare-and-pharmaceuticals
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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS EXECUTIVE SUMMARY In 1991, the U.S.

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