Strategic Study on Pharmaceutical Industry

By: Biswajit Prusty Anshuman Satapathy

Industry Information
The Pharmaceutical industry in India is the world's third-largest in terms of volume and stands 14th in terms of value. According to Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry between 2008 and September 2009 was US$21.04 billion.

Micro Environment Analysis (PESTEL)

Political:
In budget 2012 Govt. increase the service tax from 10% to 12% and Excise duty from 4% to 5% on health care product. SEZ to double export from 10.4billion USD to 25billion USD in 2013-2014 Govt.

Economical:
Per capita income in Fy 2011-12 54,527 Per Capita Income in FY 2010-11 Rs.46,492 2008 Spending on Healthcare Rural - 7% of the total monthly income. Urban-6% of the total monthly income. 2011 Rural- 10% of the total monthly income. Urban- 11% of the total monthly income.
(Source: NSSO 66th round survey)

Sociocultural :
Population of India in 2001 100 corer to 103 corer Population of India in 2011 118 corer to 120corer A increase of 1.54% Increase in Literacy rate by 9.22%
(Source: Census India 2011)

Technological
In budget 2012 finance minister declared to double their R&D expenditure in Phama industry. Govt. declared to provide additional fund for Healthcare in budget 2012. Manufacturing bio pharmaceutical proteins from the animal body.

Environmental:
Essential use of CFC for metered does inhalers . National emission standard for hazardous air pollutants. Patent Act. 1970 for waste disposal.

Legal:
To control quality, price National Pharmaceutical Policy 2006 Introduction of Govt. Control in Pharma. Industry by Patent Act 1970 Introduced Global minimum standards for protecting and enforcing all forms of intellectual property rights.

KDC Analysis
Increase in income and healthcare spend. SEZ Increase in Govt. spending on Healthcare Emerging Market

Porters Five Force Framework

Threat of new entrants: LOW

Bargaining power of Supplier:

Medium

Competitive Rivalry: HIGH

Bargaining power of Buyers: HIGH

Threat of substitute:

High

Bargaining Power of Buyers

Generic drugs offer cost effective alternatives to the buyers. So the bargaining power of the buyers are high

Bargaining Power of Suppliers:

API companies with difficult to manufacture products. These companies command premium prices. A majority of API suppliers have low bargaining power since they produce products which are simple to manufacture. So the bargaining power of suppliers as a whole is medium

Competitive Rivalry
Most competitive industries in the country with as many as 10,000 different players. Top player in the country has only 6% market share and top five have 18%. High growth prospects. Very low entry barriers. So the competitive Rivalry is too high

Threat of New Entrants

Entry barriers in the emerging markets are high due to its branded nature. Requires high investment in R&D for product development Require high logistic network So the threat of new entrants are low

Threat of Substitute
The threat of substitution is higher in markets where one medicine can be substitute by another by the pharmacists. It is the doctor or physician who can substitute the drug.

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