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PHARMA COMPANIES

HISTORY

The first Indian pharma company was established in 1901, and commenced operating in Calcutta
(now Kolkata).3 There then followed four distinct periods:

1911-1970: before 1970 the patent regime was based on the Indian Patents and Design Act, 1911,
which recognized both product and process patents. During this period, foreign companies
dominated the market, with only a limited number of domestic companies.

1970-1995: the Government’s Patents Act 1970 established new recommendations and
amendments to the 1911 Act.4 This new Patents Act recognized process patents, but not product
patents, which meant that the patenting regime was focused solely on manufacturing. It also
enabled domestic pharma companies to reverse engineer the manufacturing process of drugs
without paying royalty to the original patent holders. Consequently, the number of patents granted
between 1970-1971 and 1980-1981, fell by three-quarters. Furthermore, the 1979 Drug Price
Control Order, set a ceiling on the overall profits of pharma companies.5,6 This period saw a huge
rise in the number of domestic pharma companies (from 2,000 in 1970 to 24,000 in 1995), creating a
booming generic drugs industry. It also led to a large-scale exodus of foreign pharma companies.

1995-2005: the experience gained by focusing manufacturing on generic drugs enabled Indian
pharma companies to expand their capacities and gain a global reach, as a number of Indian pharma
companies entered the export market. This period saw an intensification of pharma export growth,
aided by the 1991 economic liberalization of India, which opened the economy to privatization and
globalization

2005-2018: the 2005 Patents (Amendment) Act abolished the process patenting system and
introduced product patents. This prevented Indian pharma companies from producing generic
copies while these drugs were still covered by patent protection, encouraging foreign pharma
companies to return to India. In this post-process patent paradigm, Indian pharma started investing
more in research and development (R&D) to compete with their foreign peers, with some companies
developing their own new molecules, while others entered into R&D joint ventures with foreign
pharma companies.9,10

REFERENCE

https://blogs.deloitte.co.uk/health/2020/03/the-indian-pharmaceutical-industry-the-pharmacy-of-
the-world.html

OVERALL WORKING

The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceutical
drugs for use as medications to be administered (or self-administered) to patients, with the aim to
cure them, vaccinate them, or alleviate the symptoms.[1][2] Pharmaceutical companies may deal in
generic or brand medications and medical devices. They are subject to a variety of laws and
regulations that govern the patenting, testing, safety, efficacy and marketing of drugs.

When a pharmaceutical company discovers a new drug, it files for a patent. Then, the company is
awarded a license for 20 years to exclusively sell the drug. Exclusivity is provided to recoup research
and development expenses incurred during the development of a drug. Patented drugs are patented
by an innovator company.

REFERENCE

https://www.alphainvesco.com/blog/understanding-indian-pharmaceutical-industry-works-part-3/
#:~:text=When%20a%20pharmaceutical%20company%20discovers,the%20development%20of%20a
%20drug.&text=Patented%20drugs%20are%20patented%20by%20an%20innovator%20company.

https://en.wikipedia.org/wiki/Pharmaceutical_industry

CHALLENGES FACED BY PHARMACEUTIAL

A lack of a stable pricing and policy environment-The challenge created by unexpected and frequent
domestic pricing policy changes in India. It has created a vague environment for investments and
innovations. IPA suggests both the government and stakeholders work together to develop a plan to
produce affordable Indian patients’ drugs.

Lack of capabilities in the innovation space-India is rich in its manpower and talent. The government
needs to invest in research initiatives and talent to grow India’s innovation. The government should
support the clinical trials and subjectivity in certain regulatory decision-making removed.

Generics market exporting-Due to price attrition, the success of generic exports to the United States
has started to plateau. Due to increased buyer consolidation and higher competition, this market is
starting to fade.

Effect of external markets-Reports comments that India is heavily dependent on other countries for
active pharmaceutical ingredients (API) and other intermediates. 80% of the APIs are imported from
China. So India is, therefore, at the mercy of supply disruptions and unpredictable price fluctuations.
Implementation of infrastructure improvement in the field of internal facilities is necessary to
stabilize supply.

Quality compliance inquiry-India has undergone the highest number of Food and Drug
Administration (FDA) inspections since 2009; therefore, continuous investment for upgrading quality
standards will distract the capital away from other areas of development and growth is reduced.

RREFERENCES

https://www.drugpatentwatch.com/blog/indian-pharma-some-challenges-and-acceptances/

SWOT ANALYSIS

Strengths:
Indian with a population of over a billion is a largely untapped market. In fact, the penetration of
modern medicine is less than 30% in India. To put things in perspective, per capita expenditure on
health care in India is US$ 93 while the same for countries like Brazil is US$ 453 and Malaysia
US$189.

The growth of middle class in the country has resulted in fast changing lifestyles in urban and to
some extent rural centers. This opens a huge market for lifestyle drugs, which has a very low
contribution in the Indian markets.

Indian manufacturers are one of the lowest cost producers of drugs in the world. With a scalable
labor force, Indian manufactures can produce drugs at 40% to 50% of the cost to the rest of the
world. In some cases, this cost is as low as 90%.

Indian pharmaceutical industry possess excellent chemistry and process reengineering skills. This
adds to the competitive advantage of the Indian companies. The strength in chemistry skill helps
Indian companies to develop processes, which are cost effective.

Weakness:

The Indian pharma sectors are marred by the price regulation. Over a period of time, this regulation
has reduced the pricing ability of sectors. The NPPA (National Pharma Pricing Authority), which is the
authority to decide the various pricing parameters, sets prices of different drugs, which leads to
lower profitability for the companies. The sectors, which are lowest cost producers, are at advantage
while those who cannot produce have either to stop production or bear losses.

Indian pharma sector has been marred by lack of product patent, which prevents global pharma
sectors to introduce new drugs in the country and discourages innovation and drug discovery. But
this has provided an upper hand to the Indian pharma sectors.

Indian pharma market is one of the least penetrated in the world. However, growth has been slow to
come by. As a result, Indian majors are relying on exports for growth. To put things into perspective,
India accounts for almost 16% of the world population while the total size of industry is just 1% of
the global pharma industry.

Due to very low barriers to entry, Indian pharma industry is highly fragmented with about 300 large
manufacturing units and about 18,000 small units spread across the country. This makes Indian
pharma market increasingly competitive. The industry witnesses price competition, which reduces
the growth of the industry in value term. To put things in perspective, in the year 2003, the industry
grew by 10.4% but due to price competition, the growth in value terms was 8.2% (prices actually
declined by 2.2%)

Opportunities

The migration into a product patent-based regime is likely to transform industry fortunes in the long
term. The new patent product regime will bring with it new innovative drugs. This will increase the
profitability of MNC pharma sectors and will force domestic pharma sectors to focus more on R&D.
This migration could result in consolidation as well. Very small players may not be able to cope up
with the challenging environment and may succumb to giants.
Large number of drugs going off-patent in Europe and in the US between 2005 to 2009 offers a big
opportunity for the Indian sectors to capture this market. Since generic drugs are commodities by
nature, Indian producers have the competitive advantage, as they are the lowest cost producers of
drugs in the world.

Opening up of health insurance sector and the expected growth in per capita income are key growth
drivers from a long-term perspective. This leads to the expansion of healthcare industry of which
pharma industry is an integral part.

Being the lowest cost producer combined with USFDA approved plants, Indian sectors can become a
global outsourcing hub for pharmaceutical products.

Threats:

There are certain concerns over the patent regime regarding its current structure. It might be
possible that the new government may change certain provisions of the patent act formulated by
the preceding government.

Threats from other low-cost countries like China and Israel exist. However, on the quality front, India
is better placed relative to China. So, differentiation in the contract manufacturing side may wane.

The short-term threat for the pharma industry is the uncertainty regarding the implementation of
VAT. Though this is likely to have a negative impact in the short-term, the implications over the long-
term are positive for the industry.

REFERENCE

https://www.equitymaster.com/detail.asp?date=6/21/2004&story=5&title=Indian-Pharma-Industry-
SWOT-analysis

GDP contribution by the sector:

• Role of Pharmaceutical Industry in India GDP-Facts

• The Pharmaceutical Industry in India is one of the largest in the world

• It ranks 4th in the world, pertaining to the volume of sales

• The estimated worth of the Indian Pharmaceutical Industry is US$ 6 billion

• The growth rate of the industry is 13% per year

• Almost most 70% of the domestic demand for bulk drugs is catered by the Indian Pharma
Industry

• The Pharma Industry in India produces around 20% to 24% of the global generic drugs

• The Indian Pharmaceutical Industry is one of the biggest producers of the active
pharmaceutical ingredients (API) in the international arena

• The Indian Pharma sector leads the science-based industries in the country
 • The pharmaceutical sector has the capacity and technology pertaining to complex drug
manufacturing

• Around 40% of the total pharmaceutical produce is exported

• 55% of the total exports constitute of formulations and the other 45% comprises of bulk
drugs

• The Indian Pharma Industry includes small scaled, medium scaled, large, scaled players,
which totals nearly 300 different companies

• There are several other small units operating in the domestic sector

• Future large impacts are expected from the widely untapped emerging markets. 5 They offer
vast growth potential made visible through an increase in per capita use of medicine and
growing consumer income: medicine spending in these regions is expected to grow at five to
eight percent through 2023. 6 Therefore, the pharmaceutical industry has and will continue
to have a significant economic impact on the global economy both in terms of the creation
of contribution to GDP and employment

• The global pharmaceutical market made $1.2 trillion (about $3,700 per person in the
US) in 2018.
• Six of the top 10 big pharmaceutical companies are headquartered in the US.

• Big pharmaceutical companies spend a small fortune on R&D.

• There are over 7,000 drugs in development in the world.

• Developing a new drug cost around $2.6 million

REFERENCE : gdp contribution by the pharma contribution reffrence link - Bing

SOME FACTS AND FIGURES REGARDING THAT SECTOR

 As a leading producer of cost-effective and quality-controlled generic drugs, India supplies

around 20 percent of the global pharmaceuticals demand in terms of volume.

 In fact, the Indian healthcare and pharmaceuticals sector was one of the fastest growing in
the world and was expected to grow by a whopping 754 percent between 2017 and 2060.

 Generic drugs have traditionally been India’s stronghold and contributed over 70 percent to
the overall market revenue in 2018 alone.

 In 2015, India earned over 21 billion U.S. dollars through biosimilars in the prescribed drug
market.
REFERENCE : https://www.statista.com/to

GLOBAL PERSPECTIVES

 Many of the leading pharma companies come from the United States, and, therefore, it is no
surprise that the country has the largest pharmaceutical market worldwide.

 China has become one of the main players in the industry, and annual growth rates of the
emerging pharma market have been strong in recent years.

 However, projected pharmaceutical sales show that the established markets of North

America and Europe will still be leading the way in 2023.

 Some of the biggest European companies are Novartis, Roche, GlaxoSmithKline, and Sanofi.

REFERENCE: https://www.statista.com/topics/1764/global-pharmaceutical-industry/
pics/5456/pharmaceuticals-in-india/