INSTITUTE OF RURAL MANAGEMENT ANAND

MANAGERIAL ANALYSIS AND COMMUNICATION (MAC)

PRM-41 | Term - I
Group Name: INSIGNIA
Section - B
Case Study

CIPLA

Executive Summary

With the signing of an agreement on Trade-Related Intellectual Property Rights (TRIPS), the
recognition of Patent laws had become inevitable for India. Cipla which engaged in the
production of drugs by reverse-engineering had started to face the heat due to the
implementation of the upcoming Patent law. The CEO was concerned about the future of Cipla
in light of the new Patent laws. To continue to remain in business, Cipla needs to discuss with
the Indian Government how this new law can be implemented considering the low income of
an average Indian consumer and ensuring the availability of cheap life-saving drugs.
Implementing the law would otherwise provide a monopoly to MNCs.

Situation Analysis

Chemical, Industrial & Pharmaceutical Laboratories Ltd- Popularly called Cipla had become
3rd largest drug company by reverse engineering expensive patented drugs and selling them at
very low prices. In India, reverse engineering of patented drugs was allowed since laws
recognised patents on processes and not on the merchandise. In 1995, India joined the WTO;
it became a signatory to Trade-Related Aspects of belongings Rights (TRIPS) and was required
to recognise 20- year-old product patents on most inventions by 2005. Cipla's primary
marketplace for generic medicine was India and other developing countries with similar patent
laws. As compared to 12-15% spending on Research & Development by big multinational
pharmaceutical companies, Cipla is spending a nominal budget of 0.2 % only.
With the introduction of recent patent laws in India and other developing countries, there's a
superb possibility that much of Cipla's wares might become unsaleable. Although the patents
for pharmaceuticals that Cipla was producing generics and API's were all scheduled to expire
between 2003 and 2007, at the identical time, another factor into consideration may be a
practice called "evergreening" adopted by the multinationals to increase the lifetime of their
patents with slight modifications. it absolutely was April 2003, and Dr. Yusuf Hamied, CEO
of Cipla, needed to specialize in Cipla's future

Statement of Objectives

The primary aim of Dr. Hamied is to ensure that Cipla adapts to new patent laws (TRIPS)
effortlessly. His secondary objective is to ensure that the credibility and profitability of the
business do not suffer because of increased competition with the market entry of large
multinational pharmaceuticals. His tertiary goal is to ensure that the Cipla continues to support
the needy people by offering them generic medication at affordable rates.

Problem Statement

Dr. Hamied needs to ensure that Cipla's market share is maintained and to take advantage of
the business opportunities provided by compliance with TRIPS in the least developed WTO
countries where sufficient production facilities are not present.

Defining Criteria

1. Retaining the current market share of Cipla.

2. To provide generic medicines at affordable prices.

3. Focusing on the development of new life-saving drugs and pharmaceuticals by improved

research & development to treat chronic diseases.
Generating Alternatives

1. To persuade the government to exempt food and pharmaceutical from patent law by
lobbying.
2. To take competitive and humanitarian advantage, launch the new AIDS drugs Odivir kit
and Triomune (Single pill triple therapy) at the earliest. In addition, focus on increasing
business in areas that have a null impact on patent law.
3. To manufacture patented drugs by obtaining a legal license for the said patent.

Evaluation of Alternatives

1. To persuade the government to exempt food and pharmaceutical from patent law by
lobbying.

By adopting this alternative, Dr. Yusuf Hamied will retain the existing market share of the
business and be able to satisfy the public's demand for life-saving medicines at reasonable
prices. Though, this is a temporary solution, since there is a risk that pressure from the WTO
or any other international communities will increase. There are also chances that the new
government could withdraw these exemptions and introduce some new policies in line with
TRIPS compliance.

2. In order to gain a humanitarian advantage, Cipla needs to introduce the new AIDS drugs
Odivir kit and Triomune (Single pill triple therapy) as soon as possible and focus on increasing
business in fields that have a null impact of patent law.

By implementing this alternative, Cipla will be able to achieve humanitarian advantage which
will help to neutralize the impact of the implementation of the recent law. With the
advancement in their Research and Development, Cipla will be able to identify several new
market areas. Also, there is a lot of potential for Cipla to specialise in exporting
pharmaceuticals and APIs that are off-patent. These new market areas have a great opportunity
for Cipla because of lower production costs than other multinationals due to lower
manufacturing costs in India.

3. To manufacture patented drugs by obtaining a legal license for the said patent.

Cipla will be able to safeguard its market share by adopting this alternative. But at the same
time, their profitability will decrease. The price of medicine may also be boosted a little by this
practice. And this will reduce their chances for further growth.

Selection of Alternatives

Dr Yusuf Hamied, CEO, Cipla should go with the second alternative as it fulfils all of the above
criteria.

Action Plan

1. The early release of the new Odivir kit and Triomune (Single pill triple therapy) AIDS
medicines.

2. Development of improved research and development facilities for the launch of new drugs
with the null effect of the new patent law.

3. Establishing and developing markets for sufficient manufacturing facilities for the
production of Off-Patent Pharmaceuticals.

4. Be ready to take the opportunity to supply pharmaceutical products to countries without

production facilities for their products.
Contingency Plan

In the case of any problems with the implementation of the second alternative, the third
alternative should be used by Cipla as its contingency plan