PHARMACEUTICAL

INDUSTRY
GROUP:

Aakankshit Kar (2019124)

Aman Trivedi (2019133)
K S Sunil (2019148)
Mansi Kathuria (2019153)
Nikita Chawla (2019158)
Rabprit Singh (2019165)
Sohini Mukhuty (2019177)
 “The pharmaceutical industry comprises of companies involved in the research and development,
manufacturing and supply, and commercialization of new therapeutic products working to bring the
right treatment to the right patient at the right time.”

The discovery, development, manufacturing and

promotion of new medicines is therefore a team effort
combining the talents of many individuals. This means
that there are a wide range of jobs available directly
within, or relating to, the pharmaceutical industry.
NUMBER OF PLAYERS
GLOBALLY

The global pharmaceutical industry reached unprecedented heights in 2018, being estimated at an
astounding $1.11 trillion. By 2020, this figure is set to rise to $1.43 trillion.

REASON FOR HIGH NUMBER OF PLAYERS:

The market for pharmaceutical products continues to grow as new drugs are developed to treat
more and more previously untreatable conditions. The governments doesn’t allow monopoly in this
industry, as with the use of patents the price of medicines can soar high.

INDIA

• The present publication entitled “Directory of Pharmaceutical Manufacturing Units in India present
names and addresses of 10563 Pharmaceuticals manufacturers across India.

• According to the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, domestic

pharmaceutical market turnover reached Rs 129,015 crore (US$ 18.12 billion) in 2018, and exports
revenue was US$ 17.28 billion in FY18 and US$ 19.14 billion in FY19.
TOP PUBLICLY LISTED PHARMACEUTICAL COMPANIES IN INDIA BY
MARKET CAPITALIZATION

SN. COMPANY REVENUE

1 Sun Pharmaceutical Rs 1,55,716 Crore
2 Lupin Ltd Rs 68,031 Crore
3 Dr. Reddy's Laboratories Rs 49,293 Crore
4 Cipla Rs 47,319 Crore
5 Aurobindo Pharma Rs 41,283 Crore
6 Zydus Cadila Healthcare Rs 31,631 Crore
7 Piramal Enterprise Rs 30,975 Crore
8 Glenmark Pharmaceuticals Rs 25,302 Crore
9 Torrent Pharmaceuticals Rs 22,742 Crore
 TOP PHARMAEUTICAL COMPANIES IN THE WORLD

1. Pfizer (US $53.7 billion)

2. Roche (US $45.6 billion)

3. Johnson & Johnson (US $40.7 billion)

4. Sanofi (US $39.3 billion)

5. Merck & Co (US $37.7 billion)

6. Novartis (US $34.9 billion)

SUPPORTING INDUSTRIES
PACKAGING INDUSTRY
• The India pharmaceutical packaging market
was estimated at USD 2.107 billion in 2017
• It constitutes of about 4% of the global
packaging industry
• Coupled with the economic growth in the
country, the purchasing power of India’s
middle-class population in terms of healthcare
services, particularly medicines, has increased.
• Key indicators such as total percentage of
population more than 65 years of age, GDP,
healthcare per capita expenditure,
pharmaceutical demand, and net
pharmaceutical exports influence the market in
the forecast period.
TRANSPORT AND LOGISTICS INDUSTRY
• Current pharmaceutical supply chain scenario in India is extremely complex

• Reason - presence of more than 55,000 retail pharmacies which are spread across India

• Large number of medicines required to be transported to distant areas through poorly

connected routes

• Cost of drugs is much higher than the USA or Europe

• About 1/3rd of the revenues generated by the drugs companies have been spent on
transportation

• Problem becomes even more severe when the temperature sensitive drugs such as polio
vaccines, life saving drugs, etc. are required to be transported to the far flung areas

• Noatum Maritime offer customized transport and integrated logistics solutions for the
pharmaceutical industry in Spain, Portugal, France, Turkey, Morocco, Algeria, Chile and China
through a large net of agents
BEVERAGE INDUSTRY
Water is used extensively in the pharmaceutical industry and it is the most frequently used ingredient
of pharmaceutical preparations. There are a wide range of products and intermediate products
that require a reliable supply of water during their manufacture, including:

• Bulk pharmaceutical compounds/active pharmaceutical intermediates (APIs),

• Over-the-counter products – cough medicines, paracetamol, contact lens cleaners etc.,

• Prescription medicines (tablets, ointments, creams, liquids),

• “Health” foods (vitamin tables, energy drinks),

• “Cosmeceuticals” (antiseptic ointments, concealers),

• Aerosols/inhalers, and

• Injectable drugs
HOW PRICING IS DONE?
Pharmaceutical Industry is not a perfectly competitive market:

• Buyers(patients) do not have perfect information.

• The suppliers do not have an easy market entry.

• Industry is not homogeneous in nature as the quality varies among manufacturers.

Sellers in pharmaceutical markets are focused on: Absolute monopoly and Oligopolistic competition.

• Absolute Monopoly : This situation prevails with many patented medicines, particularly if no alternative
treatments exists.

• Oligopolistic competition : Few sellers operate in the market. Each seller can still influence the sales
without losing all the sales.

Buyers end can be monopsony when only large buyer exists i.e. can be government.
Pharmaceutical product categories:
1. Patented medicines
2. Generic medicines
3. Branded off-patent medicines

Patented medicines can be:

• Patented, innovative, essential medicines or single source medicines (e.g. Herceptin)
• New medicine protected by patents but for which alternatives are available.

Generic medicines: Multisource medicines, not under patent and can be produced using same
process as the originator product.

Branded off –patent medicines: Well known branded medicines goes off patent and the originator
company produces the generic versions.
VARIABLE PRICING OF MEDICINES
Results from:
1. The pharmaceutical manufacturers selling the same product for different prices.
• Buyer’s perspective: a form of market failure.
• Seller’s perspective: Maximizing profits.

– Seller can do this if:

• It has monopoly.
• Varying price elasticities.
• Buyers can’t trade the medicines among themselves.
• An agreement exists to achieve equitable access to essential medicines.
2. The margins charged by supply chains.
• Price from manufacturer.
• Landed price.
• Wholesale selling price.
• Retail price.
• Dispensed selling price.
GOVERNMENT INTERVENTION
• Price controls on manufacturer.

• Profit controls on the manufacturer.

• Reference pricing and brand premiums.

• Comparative pricing controls (International Benchmarking).

• Eliminating tariffs and taxes.

• Fixed margins.

• Digressive markups.

• Capitation systems.
BARRIERS FOR ENTRY AND EXIT
• High investments : There is a huge gestation lag in the pharmaceuticals industry. Companies have

to wait a long time before their investments are converted into returns.

• Number of regulations : There are heavy regulations by the government bodies which approve

the medicines to be sold in the market

• Market access barriers : Fixing of ceiling price for the essential drugs by NPPA, under the Drug

Price Control Order (DPCO) 2013, is cost based policy and it consider simple average of all the

drugs with a market share of 1percent or more.

COMPETITION POLICIES
ROLE OF COMPETITION POLICIES
• In the pharmaceutical industry, competition motivates branded companies to create new and
improved medicines and encourages generic companies to offer less expensive alternatives.
• Competition policies aim to strike a balance between the rights of inventors and consumers by
intervening in pre-grant and post-grant procedures related to patents.
• Sound competition policies along with anti-corruption policies can prevent corruption and collusion
in public procurement in the Industry.
• Consumer empowerment by facilitating access to information to consumers and thereby making
optimal decisions.
• Policies related to horizontal Mergers Between Direct Competitors to identify and restrict
competitively harmful mergers before they occur, while avoiding unnecessary interference with
mergers that are competitively beneficial.
• Policies related to monopolization issues to prevent the abuse of legitimate entry barriers or patents.
• Policies related to abuse of dominant market position.
• Using competition to set prescription reimbursement rates for social or private insurance
• Competition law provides a range of remedies and penalties for certain practices such as price-
fixing.
COMPETITION POLICIES OF VARIOUS COUNTRIES
European Union : Competition policies on -
– Enforcement of anti-trust laws
– EU Merger rules for pharmaceutical industry
– Market monitoring and advocacy

China : The Anti-Monopoly Law (AML) sets out the competition law.

India : The Competition Act 2002 sets out the competition policies for the industry.
Pharmaceutical Mergers and Acquisitions to be scanned by Competition Commission of India.

Korea : Pharmaceutical manufacturers, distributors and pharmacies are subject to the application
of the Monopoly Regulation and Fair Trade Act, Korea’s general competition law enforced by the
Korea Fair Trade Commission.
TRADE BARRIERS
• Primarily 3 types – tariff, non-tariff, quotas
• Tariff - raises prices of finished pharmaceutical products and locally produced with imported inputs
- mostly levied on pharmaceutical active ingredients and finished products
- GATT, WTO, trade agreements facilitate negotiation of lower tariffs ensuring higher
availability of essential drugs across the global health system
- domestic market feels threatened as it has to compete with foreign drug suppliers
• Non-Tariff - measures to restrict trade other than direct imposition of tariff
- increased over the years
- to protect public health and prevent entry of counterfeit products
- can take several forms; lack of comprehensive reference system
- affects import of pharmaceutical products due to administrative, cultural barriers
• Quotas – restrict imports by limiting the quantity or value of goods imported
- not usually prevalent globally in general
 POSITIVE EXTERNALITIES

• Foreign Direct Investment(FDI)

• Government Subsidies
• Research Grants
• Vaccinations Managerial
Availability of
international resources and
market techniques

Govt Subsidies
FDI

Higher volume Financing the

Access to
of drug infrastructure larger
Manufacturing
cost reduced available for the market
consumers
 Negative Externalities

• Drug Abuse
• Patenting of the new drug
Patenting of a new
drug

Increase in
Motivates
cost of the
research
drug.