India's pharmaceutical industry is now the third largest in the world in terms of volume and stands 14th in terms of value. India has a strong US $ 22 billion pharmaceutical industry, grossing in about US $ 10 billion from exports and growing at over 15%. According to an Ernst & Young and industry body study, the domestic pharma market is estimated to touch US$ 20 billion by 2015. Further, a RNCOS report titled 'Booming Pharma Sector in India' projects the industry to continue growing at a CAGR of around 13 % during 2010-11 to 2012-13. A series of buyouts by foreign heavyweights, which started with takeover of Ranbaxy by Daiichi Sankyo in 2008 for US$ 5.45 billion, followed by Delhi-based Dabur Pharma bought by German’s Fresenius Kabi, then Shantha Biotech by France’s Sanofi Aventis and most recently Piramal Healthcare (domestic formulation business) being taken over by Abbott Laboratories for US$ 3.7 billion has also resulted in foreign MNCs taking three slots among the country’s top-five drug makers. This shows the growing interest and the presence in the Indian market in a big way by the MNCs-something they used to command in the 70s. Their market share has grown to about 25% from 15% in just two years. Indian generics companies are an attractive target for overseas multinationals, which are faced with loss of revenues due to the expiry of patents worth $70 billion by 2013 and a squeeze on margins. Overseas drug firms are aggressively ramping up business in emerging markets, which are projected to drive the $837 billion global pharma industry in the years ahead. Emerging markets are estimated to grow at more than 15% a year, compared with 4-6% growth for developed markets. Among those seen as potential targets for global drug companies are the Ahmedabad-based Torrent Pharma, Cadila Healthcare, Mankind Pharma, Dr. Reddy’s Laboratories and Elder Pharma. India’s drug retail market grew 19.6% in the first six months of the year, headed by new leader American company Abbott Laboratories, as foreign drug makers strengthen their dominance among the top 10 brands sold in the country. According to market research firm ORG IMS, by June end, Abbott held a market share of 7% followed by domestic heavy weight Cipla that controlled 5.3% of the market, Ranbaxy Laboratories, now owned by Japan’s Daiichi Sankyo, having a market share of 4.83% is ranked third, followed by UK’s GlaxoSmithKline that controls 4.28% of the market. Ahmedabad-based Zydus Cadila is fifth with a 3.8% market share. Road Ahead According to a report by PricewaterhouseCoopers (PwC) in April 2010, India will join the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total value reaching US$ 50 billion. According to the All India Organisation of Chemists and Druggists (AIOCD), the pharmaceuticals industry in India will grow by over 100 per cent over the next two years.
Technological StrengthsThe following form the basis of the technological strengths of the Indian pharmaceutical industry: -
1. Self-reliance : Displayed by the production of 70% of bulk drugs and almost the entire requirement of formulations within the country
2. Low cost of production: Due to low cost of production and availability of quality manpower our domestic production costs are almost 50% less compared to developed countries and in some cases as low as 90%. Not surprisingly, one-fourth of the world's generics come from India. This has ensured easy availability of life-saving medicines particularly where affordability has been an issue especially in third world countries.
3. We have excellent and world-class national laboratories specialising in process development and development of cost effective technologies.
4. Innovative Scientific manpower
5. An excellent centre for clinical trials in view of the diversity in population-making India a lucrative destination for clinical trials for global giants.
6. Low R&D costs: Indian pharma industry possesses excellent chemistry & process reengineering skills. This adds to the competitive advantage of the Indian companies and helps them to develop processes, which are cost effective. India is emerging as the most favoured destinations for collaborative R&D bioinformatics, contract research and manufacturing and clinical research as a result of growing compliance with internationally harmonized standards such as Good Laboratory Practices (GLP), current Good Manufacturing Practices (cGMP ) and Good Clinical Practices ( GCP)
7. After India became a signatory to the WTO and TRIPS agreements it was obliged to introduce product patent on pharmaceuticals with effect from 1st January, 2005. Our patent law has now been made TRIPS compliant by fulfilling various commitments under the TRIPS agreement. This has brought a new challenge to the Indian pharmaceutical industry as it would no longer be able to freely continue with the production of generics of the new patented molecules without licence/payment of royalty to the innovator company. With this, it is now imperative for the Indian industry to accelerate its efforts in R&D in this sector.The present level of spend on R&D (about 5%of turnover ) is much lower as compared to most of the developed countries (15 to 20%)
Other aspects:
The penetration of modern medicine is still 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 but growing rapidly owing to increasing middle class population and rapid urbanization.
Further, the industry now produces bulk drugs belonging to all major therapeutic groups. It ranks 13th in terms of export value of bulk actives and dosage forms. Indian exports are destined to more than 200 countries around the globe including highly regulated markets of US, Canada, European Union, Japan and Australia.
Indian drugs manufacturers will continue to seize larger market share of generic drugs in the overseas market particularly those of US and Europe and emerging continent of Africa with NPPA in place (fixing drugs prices). Further, with migrations into a new regime of product patent, the fortunes of domestic pharma industry will undergo a change in the long term and would bring with it new innovative drugs. Though this will increase profitability of MNC pharma companies, it will force domestic players to focus on research and development, besides moving towards consolidation of small players who may not be able to cope up with the challenging environment.
Apart from the generic opportunity in the product patent age, there are also other avenues to fuel business in the pharma industry. The first and foremost chance and challenge is to take the pharma business to those geographies where Indian presence is not well represented. Indian firms can take advantage of its low cost to score over others to grab a huge market size of African countries in generic drugs market also. This will be so because Africa in future will provide huge opportunity to Indian drugs manufacturers’ particularly following withdrawal of the patent suit filed by 39 global pharma companies against the South African government which allowed the sale of cheaper branded generic drugs.
It is true that we have a strong generic industry. But over time, some of the major generics companies that in the past were simply hostile to intellectual property (IP) are rapidly changing. Generics is a growing opportunity in some countries like US where there is a large market and billions of dollars of products that will go generic in next five years.
On the other hand, the scope for Indian generics companies to supply other developing countries is becoming limited because of the growing adoption of patents in the countries, especially in Asia. There are a very few countries in Asia today that do not have product patents. Also registration is rapidly becoming necessary to market the drugs in every country, be it CIS or even African countries.
It is really testing time for Indian Pharma Industry. Opportunities are huge for the capable ones as the country is attracting a lot of foreign capital and India is being considered as an emerging manufacturing base, and knowledge based sector like pharma is among the forefront and we are still favorites in comparison with China and may continue to do so in near future. But this is also a time when men will be separated from boys. Survival of the fittest.
Technological StrengthsThe following form the basis of the technological strengths of the Indian pharmaceutical industry: -
1. Self-reliance : Displayed by the production of 70% of bulk drugs and almost the entire requirement of formulations within the country
2. Low cost of production: Due to low cost of production and availability of quality manpower our domestic production costs are almost 50% less compared to developed countries and in some cases as low as 90%. Not surprisingly, one-fourth of the world's generics come from India. This has ensured easy availability of life-saving medicines particularly where affordability has been an issue especially in third world countries.
3. We have excellent and world-class national laboratories specialising in process development and development of cost effective technologies.
4. Innovative Scientific manpower
5. An excellent centre for clinical trials in view of the diversity in population-making India a lucrative destination for clinical trials for global giants.
6. Low R&D costs: Indian pharma industry possesses excellent chemistry & process reengineering skills. This adds to the competitive advantage of the Indian companies and helps them to develop processes, which are cost effective. India is emerging as the most favoured destinations for collaborative R&D bioinformatics, contract research and manufacturing and clinical research as a result of growing compliance with internationally harmonized standards such as Good Laboratory Practices (GLP), current Good Manufacturing Practices (cGMP ) and Good Clinical Practices ( GCP)
7. After India became a signatory to the WTO and TRIPS agreements it was obliged to introduce product patent on pharmaceuticals with effect from 1st January, 2005. Our patent law has now been made TRIPS compliant by fulfilling various commitments under the TRIPS agreement. This has brought a new challenge to the Indian pharmaceutical industry as it would no longer be able to freely continue with the production of generics of the new patented molecules without licence/payment of royalty to the innovator company. With this, it is now imperative for the Indian industry to accelerate its efforts in R&D in this sector.The present level of spend on R&D (about 5%of turnover ) is much lower as compared to most of the developed countries (15 to 20%)
Other aspects:
The penetration of modern medicine is still 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 but growing rapidly owing to increasing middle class population and rapid urbanization.
Further, the industry now produces bulk drugs belonging to all major therapeutic groups. It ranks 13th in terms of export value of bulk actives and dosage forms. Indian exports are destined to more than 200 countries around the globe including highly regulated markets of US, Canada, European Union, Japan and Australia.
Indian drugs manufacturers will continue to seize larger market share of generic drugs in the overseas market particularly those of US and Europe and emerging continent of Africa with NPPA in place (fixing drugs prices). Further, with migrations into a new regime of product patent, the fortunes of domestic pharma industry will undergo a change in the long term and would bring with it new innovative drugs. Though this will increase profitability of MNC pharma companies, it will force domestic players to focus on research and development, besides moving towards consolidation of small players who may not be able to cope up with the challenging environment.
Apart from the generic opportunity in the product patent age, there are also other avenues to fuel business in the pharma industry. The first and foremost chance and challenge is to take the pharma business to those geographies where Indian presence is not well represented. Indian firms can take advantage of its low cost to score over others to grab a huge market size of African countries in generic drugs market also. This will be so because Africa in future will provide huge opportunity to Indian drugs manufacturers’ particularly following withdrawal of the patent suit filed by 39 global pharma companies against the South African government which allowed the sale of cheaper branded generic drugs.
It is true that we have a strong generic industry. But over time, some of the major generics companies that in the past were simply hostile to intellectual property (IP) are rapidly changing. Generics is a growing opportunity in some countries like US where there is a large market and billions of dollars of products that will go generic in next five years.
On the other hand, the scope for Indian generics companies to supply other developing countries is becoming limited because of the growing adoption of patents in the countries, especially in Asia. There are a very few countries in Asia today that do not have product patents. Also registration is rapidly becoming necessary to market the drugs in every country, be it CIS or even African countries.
It is really testing time for Indian Pharma Industry. Opportunities are huge for the capable ones as the country is attracting a lot of foreign capital and India is being considered as an emerging manufacturing base, and knowledge based sector like pharma is among the forefront and we are still favorites in comparison with China and may continue to do so in near future. But this is also a time when men will be separated from boys. Survival of the fittest.
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