Global Animation Industry

Indian Pharmaceutical Industry: Issues and Opportunities

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 Global Animation Industry
Indian Pharmaceutical Industry: Issues and Opportunities
ABSTRACT
Indian pharmaceutical industry is
undergoing fast paced changes. The Indian
Generics market is witnessing rapid growth
opening up immense opportunities for firms.
This is further triggered by the fact that
generics worth over $40 billion are going off
patent in the coming few years which is
close to 15% of the total prescription market
of the US. The Indian pharmaceutical
companies have been doing extremely well
in developed markets such as US and
Europe, notable among these being
Ranbaxy, Dr. Reddy’s Labs, Wockhardt,
Cipla, Nicholas Piramal and Lupin. The
companies have their strategies in place to
leverage opportunities and appropriate
values existing in formulations, bulk drugs,
generics, Novel Drug Delivery Systems,
New Chemical Entities, Biotechnology etc.
The industry ranks fourth globally in terms
of volume and in terms of value, it is ranked
thirteenth. The industry has thrived so far on
reverse engineering skills exploiting the lack
of process patent in the country. This has
resulted in the Indian pharmaceutical players
offering their products at some of the lowest
prices in the world. The quality of the
products is reflected in the fact that India has
the highest number of manufacturing plants
approved by US FDA, which is next only to
that in the US. Multinational companies
have traditionally dominated the industry,
which is another trend seeing a reversal.
Currently, it is the Indian companies which
are dominating the marketplace with the
local players dominating a number of key
therapeutic segments. The market is also
very fragmented with about 30,000 entities
and the organized sector consisting of about
300 entities. Consolidation is increasing in
the industry with many local players
building a global outlook and also growing
inorganically through mergers and
acquisitions.
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 Global Animation Industry

Indian Pharmaceutical Industry: Issues and Opportunities

PRESS RELEASES

1. “Indian Pharmaceutical Industry to

cross US $ 10 Billion by 2008” Figure: Break-up of Indian Pharmaceutical &

2. “Market for patented drugs in India Biotechnology Industry

to cross US $ 3 Billion by 2008”

3. “Market for generic drugs in India to Projected break-up of Indian Pharmaceutical &
Biotechnology Industry
cross US $ 7.5 Billion by 2008”
20.0

18.0
Figure: Size of Indian Pharmaceutical and
16.0

biotechnology Industry 14.0

12.0

10.0 Patented
Market Size of Indian Pharmaceutical & Biotechnology
Generics
Industry (US $ Billion)
8.0

16.0 6.0

14.0 4.0

12.0 2.0

10.0 0.0
2003 2004 2005 2006 2007 2008 2009 2010 2009 2010
8.0 Sales
R&D
6.0

4.0

2.0

0.0
2003 2004 2005 2006 2007 2008 2009 2010

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 Global Animation Industry

Indian Pharmaceutical Industry: Issues and Opportunities

SAMPLE PAGES

research (Ranbaxy & DRL), and the top

RESEARCH AND five have announced plans. In the drug
DEVELOPMENT development process in any
pharmaceutical company a typical

The Key to success in this industry is product takes 7-10 years, and $350-500

research & development. R&D is the million internationally but the statistic

starting of the industry value chain and varies greatly with the disease type.

is also the most important value creator. PROCESS RESEARCH OR REVERSE

Companies that involve in R&D do so in
ENGINEERING
specific areas. They chose specific
This entails research on the process by
therapeutic areas to target based on their
which the drug is made and making
strengths in the market, and the
modifications to the process. Here a
commercial potential.
company typically copies the molecule
KINDS OF RESEARCH of another company and develops a
highly cost effective method of
BASIC R&D
producing that molecule. It is much less
This involves discovering new expensive to conduct since they do not
molecules from scratch. It is highly need to conduct any discovery research
capital intensive in nature as it relies on or clinical trials. Till now this has been
a great deal of automation. There are the focus of most Indian players.
only a handful of Indian players that are
able to conduct some form of basic

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 Global Animation Industry
Indian Pharmaceutical Industry: Issues and Opportunities
ANALOGUE OR DISCOVERY RESEARCH
Companies modify an existing molecule
or a new one that has not been
commercialized after accessing
international patent databases, to arrive
at a new molecule.
BIOTECHNOLOGY RESEARCH
It aims at establishing the link between
ones genes and the diseases one has and
could one day determine the best drug
for an individual based on ones genetic
makeup. Most of these companies are
however doing reverse engineering in
the biotech area, and there is very little
basic biotech research in India.
BRINGING OUT A GENERIC DRUG
Bringing a generic product to the market
requires equivalency tests to the product
already in existence in the market. The
process is much cheaper, and takes less
time. This process is known as the
Abbreviated New drug Application
(ANDA) process.
NDDS RESEARCH
NDDS (New drug delivery system)
entails delivering existing drugs in a
novel method. Indian companies are
looking to research NDDS systems to
new drugs being developed. This takes
3 years, at a cost of between US $ 10
and 20 Million. An NDDS could fetch
you a patent if it is a new concept, and if
it is an improvement it could give you
market exclusivity for 3 years in the US.
R&D IN INDIA
The Indian industry has attained cost
advantages in process research used for
generic drugs & value added generics
production, which accounts for 60-80
percent of total sales. This cost
advantage is in the fact that:
• Most infrastructure facilities are
much cheaper in India than in
developed countries.
• Indian scientists can be attracted at
much cheaper rates than their US
counterparts.
The more value added basic research
methodologies are being pursued by
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 Global Animation Industry

Indian Pharmaceutical Industry: Issues and Opportunities

very few players like Ranbaxy & Dr.

Company 2004
Reddys who are willing to take the risk
of investing millions in building research Ranbaxy 6%
capabilities and developing molecules. Cipla 4%
The Table below shows the investment Dr Reddys Labs 4.4%
of various Indian pharmaceutical (DRL)
companies in R&D. As seen below
Sun Pharma 4%
Indian Industrial firms spend 0.57 % of
Torrent Pharma 6.4%
their turnover on R&D expenditure,
compared to an average of 12-18 % Lupin 1%
spent by the top international Workhardt 10.5%
pharmaceutical companies. Nicholas Piramal 0.7%
Industry Average 2%
Investments made in R&D by the Indian
R&D investment of Indian
pharmaceutical companies would yield
pharmaceutical companies
3-4 molecules a year, which is a very
small number. There is very little private
initiative to invest in R&D. The Traditionally the Indian pharmaceutical
government continues to bear the burden, firms have not focused on R&D due to:
with industry chipping in with 10% to
• Lack of Product Patent
12%. This also evident in the data of
protection: The delayed adoption
patent granted in the country where the
of TRIPS in India is cited as the
top firms granted patents are mostly
major impediment to the possible
MNCs. Indian industry instead mastered
investment by international
the art of reverse engineering to gain
companies in India.
competitive advantage, as the industry
structure did not provide incentives to • Inadequate profit base: The price
invest in basic research. control has squeezed the profit
margins making it difficult for
Indian and international

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 Global Animation Industry
Indian Pharmaceutical Industry: Issues and Opportunities
companies to cull out and invest
sizable sums in R&D. The
profitability of Indian companies
is also much lower than
international levels. The pre-tax
profit margin of pharmaceutical
companies in India is much less
than 6% on sales in sharp
contrast to the 18% profit
margins common to international
companies.