Pioneer Institute of Professional Studies, Indore

A
RESEARCH PAPER
ON

Growth of Indian Pharmaceutical Industry

PIONEER

(Since 1996)

Submitted to
Prof. Dr. V K Jain
Prof. Satnam Ubeja

Submitted By
Sanjay Trivedi
MBA 3rd sem
Roll. # 09010135

Pioneer Institute of Professional Studies, Indore

DECLERATION

I hereby declare that this Research Paper entitled GROWTH OF INDIAN PHARMACEUTICAL INDUSTRY
submitted for the extra co curriculum activities for the partial fulfillment of the requirement of Master
of Business Administration (MBA) of PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE is based on
secondary data found by me in various Companies fact sheets, previous research papers, magazines and
websites collected by me in under guidance of Prof. Satnam Kaur Ubeja.

January 2010

Sanjay Trivedi
MBA Semester III
Roll no. 09010135

Pioneer Institute of Professional Studies, Indore

INTRODUCTION
1. Conceptual Framework

Health is defined both as cause and effect of economic development. The pharmaceutical
industry provides significant socio-economic benefits to the society through creation of jobs,
supply chains, and through community development. The industry also plays an important role in
technological innovation, which may reduce costs of economic activity elsewhere in the
economy. Players in the Indian pharmaceutical industry include: branded drug manufacturers,
generic drug manufacturers, firms developing biopharmaceutical products, nonprescription drug
manufacturers, and firms undertaking contract research. In addition, there are also enablers of the
industry such as universities, hospitals and research centers that play a role in R&D activities.
The pharmaceutical industry is an exciting industry worldwide with growth rate of 8% and a
turnover of around US$ 650 billion. In terms of value, the major constituents are the United
States (US) (48% share), European Union (EU) (28%share) and Japan with a share of 12%, and
the rest of the world, including India, contributes around 20%. However, in terms of volume, the
share of the rest of the world is approximately three times larger. An example in this regard, is
India, which ranks 4th in terms of volume with a share of 8% in the world pharmaceutical market
and only 13th in terms of value. The annual turnover of the Indian pharmaceutical industry is
approximately, US$ 19 billion.
The period of the 1995-2008 (i.e. the Post-TRIPS period) saw the strongest performance of the
Indian pharmaceutical industry on several fronts. Not only did the industry improve its
production performance seen in the previous decades, and that too by a significant margin, the
industry turned into a net foreign exchange earner during the decade in question. The Indian
pharmaceutical industry, now a $19 billion industry, has shown tremendous progress.

Structure of the Indian Pharmaceutical Sector

The Indian pharmaceutical sector is one of the largest within developing countries and is
expected to have an overall production value of US$ 14 billion in the year 2015. Presently, it is
the second largest export industry in India, exporting to over a 100 countries in total with main
export regions being USA, Western Europe, Asia (especially China) and the middle-east. India
also has the largest amount of FDA approved drug manufacturing facilities outside of the USA.
The industry growth rate during the 1990s was on an average around 15% for bulk drugs and
20% for formulations (IBEF and Ernst and Young, 2004a).

Pioneer Institute of Professional Studies, Indore

Main triggers and actors for innovation

The pharmaceutical sector employs technological capabilities that are rooted in innovative drug
discovery and development activities (product development), technological capabilities related to
discovering different processes of producing drugs (process development), and finally,
technology related to producing and packaging formulations (manufacturing). Certain limitations
in the macro, meso and micro environment render it hard for developing countries to build these
capacities in the pharmaceutical sector. At the macro level, a disjuncture between demand for
health research and on-going activities in the sector, a lack of scientific culture amongst
scientists and researchers (including emphasis on collaboration), weak public support and
bureaucratic rigidity are some of the main problems that challenge the system. At the meso-level,
there are issues of access to information and technological inputs that are important for health
research, inadequate human capital formation, institutional instability and weak scientific
infrastructure. And at the micro-level, issues of intellectual isolation of researchers and lack of
incentives for collaborative research, such as low salaries, restriction of career opportunities due
to bureaucratic bottlenecks in adequate research budgets, and lack of on-job training possibilities
make it hard to create an efficient innovative environment. Although Indias chosen path to
achieve self-sufficiency in the sector was one of an independent latecomer (Amsden and Cho,
2003), the governments main focus was on achieving local production of all antibiotics needed
by the Indian population.8 From the 1960s until now, policy changes that have had impact on the
sector broadly belong to three identifiable phases.

Nature of innovation and firm groups in the Indian pharmaceutical sector

The Indian pharmaceutical sector is a heterogeneous mixture of firms, both organized and
unorganized. They range from large firms that are either subsidiaries of large multinational firms
or wholly Indian, such as Cipla, Ranbaxy and Dr. Reddy Labs, to medium and small-sized firms
that also extend to garage operations. As against the commonly quoted figure of 20,000
manufacturing units in the pharmaceutical sector, an expert committee set up by the government
of India in 2003 has clarified the number of active units on the basis of drug manufacturing
licenses issued. According to the Committee, the total number of manufacturing units engaged in
the production of both bulk drugs and formulations within India is not more than 5877.13 the
market is highly fragmented with only around 300 companies accounting for almost all of the
domestic market.
The 6000 odd firms that form part of the sector demonstrate significant technological differences
that reflect in their annual sales turnover, export potential, R&D investments and most

Pioneer Institute of Professional Studies, Indore

importantly, the nature of innovative activities. Using country level data collected on these
variables, the firms can broadly be classified into three main categories.
The first group of firms comprises large-scale pharmaceutical firms that are both subsidiaries of
MNCs in India or wholly-owned Indian firms. Group 1 includes firms like Ranbaxy, which is the
largest pharmaceutical company in the country, also ranked in the top 100 companies worldwide;
Cipla, which is the largest producer of generic drugs in India with around 800 products in the
market. Group 1 firms have an annual sales turnover of more than 300 crore rupees (US$
650,000), have extensive brand marketing networks for their brands that help in creating and
promoting brand identity of their products amongst consumers across the
country. The second group of companies comprises medium sized operators who are either
generic producers or specialists in niche areas of contract research and small scale units which
manufacture drugs for the bigger firms within India. These companies supply predominantly to
the Indian market as well as to other semi-regulated and unregulated markets. Firms classified as
group 2 have an annual sales turnover between 100-300 crore rupees (US$ 210,410 to US$
650,000). The third and final group of companies comprises those that mainly perform
manufacturing activities for bigger Indian companies, both local and multinational companies.
Companies that fall into group 3 have an annual turnover of less than 100 crore rupees (US$
210,410) annually. The 6000 odd firms can be broken up into 100 firms belonging to Group 1,
200 firms to group 2 and the remaining 5700 fall into group 3, when both bulk drugs and
formulations are taken into account. This categorization helps pin point the extreme variance in
industry structure because it embodies the vast differences amongst firms in terms of firm size,
employment capacity, innovation potential, R&D investments and exports. Out of the 103 firms
surveyed as part of the empirical investigation, 31 belonged to group 1, 27 to group 2 and 44 to
group.
Group 1 comprises mainly of big pharmaceutical firms, whose pharmaceutical activity can be
classified into two main categories: generics and innovative R&D. These innovative firms
already have large market shares domestically, and are supplying to regulated, semi-regulated
and non-regulated markets. Their R&D activities mainly 18 focused on process development
until recently and the R&D expenditure of the companies is presently around 6% of their annual
turnover, and this is projected to rise up to 10% by the year 2010. Extensive process
development capabilities have enabled these firms to venture into innovative options, such a
specialty generics, and the firms are keenly developing marketing infrastructure abroad to
penetrate foreign (regulated) markets. This has been the driving force behind the recent wave of
international acquisitions and alliances such as Dr. Reddys acquisition of Betapharm in
Germany (the 4th largest generic company locally), Ranbaxys acquisition of RPG Aventis in
France (amongst the top five generic companies) and Terapia in Romania, and Matrix
Laboratories acquisition of DocPharma in Belgium (the second largest generic company locally)
. The experience of group 1 companies has been that while the entry barriers to regulated
markets for the supply of generics are very high, the monetary returns and the ease of business
that follows entry into these markets are both higher than in the semi-regulated and unregulated

Pioneer Institute of Professional Studies, Indore

markets worldwide. These added profits earned by the sale of generic products in regulated
markets allow group 1 firms to increase their R&D spending locally. Group 2 companies have an
annual turnover between 100-300 crore rupees and have much more limited investment
capabilities to indulge in R&D. They are either pure generic suppliers, or are shifting to product
development categories that involve specializations. Companies in group 2 are trying to establish
themselves as niche players in contract research and manufacturing by choosing specific areas
where they can be competitive. Some of these companies that are quite high up in the
profitability chain presently are also planning to expand their activities and gradually move into
regulated markets following the example of group 1 companies, thereby climbing up the industry
value chain. The activities of both group 1 and 2 companies show that R&D efforts and process
and product innovation are not isolated phenomena in the Indian pharmaceutical sector as
projected by many scholars, but well inter-linked. Adaptive and incremental innovation activities
are non-trivial activities. Reverse engineering, for instance, presupposes a deep understanding of
the processes and products in the pharmaceutical industry. As Kline and Rosenberg (1986)
observe, quite often design is the initiating point of innovation. What Indian firms have been
doing falls clearly in this domain. They further note that innovation has three major aspects to it:
(a) innovation is not a linear process but one involving many interactions and feedbacks in
knowledge creation; (b) innovation is a learning process that involves several inputs at the same
time; and lastly, (c) on-going innovation processes can be initiating factors to invention
processes that involve formal R&D. This observation too fully applies to the pattern of
expanding R&D activities of Indian firms. Despite the emphasis on generic filings in regulated
markets to secure higher revenues and the edge in process development, focus on original
product development activities is gradually increasing within the sector. Several large companies
are very good examples of this, but there are also other medium-sized companies that are moving
into niche operations for exports mainly, which help emphasize this transition in the Indian
pharmaceutical sector. Their strengths in process development and manufacturing are helping to
adopt a combination of cooperative and competitive strategies, in order to adapt and as well as
capitalize on opportunities created by the new TRIPS-compliant patent regime. Group 3
companies, contrary to popular misconceptions; are mainly threatened by the standards on
minimum GMPs introduced under the new Schedule M of the Drugs and Cosmetics Act. This
will be the main reason, and not product patent protection, that will force unviable units to close
down in this group subjecting it to maximum consolidation in the next decade. Although many of
the group 3 firms are also strategically aiming to benefit from contract manufacturing, either for
larger Indian firms or even for foreign firms post-2005, only those who can upgrade their plants
to at least the GMP standards contained in the Schedule M of the Drugs and Cosmetics Act will
tend to benefit. Even such a generalization has to be made with a note of caution, since the
standards contained in Schedule M of the Indian Drugs and Cosmetics Act are much below the
WHO standards on GMPs. In this context, it remains unclear as to whether group 3 companies
that do upgrade their facilities to the standards specified under Schedule M can indeed end target
contracts for manufacturing from MNCs/ firms operating outside India. In order to be able to

Pioneer Institute of Professional Studies, Indore

manufacture for foreign partners from regulated markets,standards of foreign inspectors such as
USFDA will need to be met by group 3 firms, which are much more stringent than both the
Indian and WHO standards on GMPs. It therefore seems more likely that most such companies
which do adhere to GMP standards as specified by Schedule M will perform contract
manufacturing for group 2 companies in India who are looking at filling in the demand for
generics in the unregulated and semi-regulated markets or foreign partners directly from the
unregulated and semi-regulated markets. Alternatively, group 3 companies that comply with
Schedule M will also supply to companies that are targeting the domestic Indian market. The
firms in group 2 qualify to be called niche-operators because they are slowly moving into areas
of clear specialization in the drug discovery and development value chain. There is an enormous
emphasis being laid upon specialized contract research the areas of clinical research, drug
discovery, non-infringing process development and the anufacturing of biogenerics. Several
group 2 companies specialize in developing noninfringing processes for drugs. Apart from
Strides Acrolab India, another group 2 firm that has been a huge success and has even moved
into group 1 in a really short span of six years is Matrix Laboratories. Avaant Pharmaceuticals
main focus is to secure drug development licenses for compounds that were discovered by global
pharmaceutical firms, but subsequently ignored either due to research difficulties, change in
R&D focus or management changes in the company. Avaant presently has licenses for drug
development from several big companies, like Bayer. Several other group 1 companies are
themselves setting up niche R&D centers as standalone organizations, such as the new R&D
centre set up by Sun Pharmaceuticals, called Sun Pharma Advanced Research Company. There
are others who are seeking to specialize in generics business, focusing their attention on the
business opportunities created by the shift of group 1 firms into regulated markets and innovative
drug research. Several group 2 firms are actively supplying off-patent generics to the semiregulated and unregulated markets, by setting up manufacturing plants outside India or
strengthening supplier partnerships. Ajantha Pharmaceuticals is a good example: apart from
having a big presence in Russia, it has set up a manufacturing plant in Ukraine and is seeking
gradual entry into regulated markets. In contrast to such accounts, group 3 firms are not exactly
making headlines, since their activities are basically geared towards surviving by upgrading their
manufacturing facilities, and continuing to manufacture to either supply to big manufacturers
within India, or directly export to unregulated markets in Africa. Most of these firms are
struggling to cope with changes to status quo, although learning continues in those who manage
to upgrade their production activities, hence qualifying to be called manufacturers.

Pioneer Institute of Professional Studies, Indore

\
India now ranks 3rd worldwide in volume and 13th in value. Also country shows excellent
performance in export. Indian exports to more than 200 countries around the globe including the
highly regulated markets of US, Europe, Japan and Australia. India exported drugs worth around
US$ 8 billion in 2008-09, most of which to the US and Europe, followed by Central and Eastern
Europe, Latin America and Africa. The trend of patent filing in our country has tremendously
increased. A total of 35,218 patent applications were filed, 6040 from domestic and 29,178 from
foreign applicants in the last fiscal year. India stood at 18th position according to their number of
PCT international applications (IAs) filed in 2008. Indian pharmaceutical industry is entering an
era in which it is becoming a global hub for R&D activities, which may be in the area of new
drug discovery. Indian pharmaceutical industry has also been increasing the R&D expenditure
significantly in the recent years. With an increase in R&D spending, Indian companies could file
large number of Drug Master Files and Abbreviated New Drug Application (ANDA) with
USFDA. Indian Pharma companies are increasing the number of regulatory filings such as DMF
and ANDA as these enable them to manufacture and market drugs in the regulated market such
as the US and Europe. In the above backdrop, the paper is an attempt to trace the changing
context of innovation and technological developments in Indian pharmaceutical firms in the
recent past. The present paper examines the Performance of the Indian Pharmaceutical Industry
in Post- TRIPS period by evaluating the performance of a few leading pharmaceutical companies
by analyzing a few growth indicators like sales, profits, R&D expenditure, Patents granted by
USPTO, ANDA filings and approvals with USFDA in Post- TRIPS period, DMF filings with
USFDA in Post- TRIPS period and global DMF The global pharmaceutical industry is nowadays

Pioneer Institute of Professional Studies, Indore

made up of thousands of companies contained in this industry. There are an elite ten firms which
are based in Europe and America. These firms alone account for nearly half of the worlds
global drug market on their own. This said the current industrys leader in terms of global sales
is Pfizer and it has only roughly 10% of the market. This shows that there are not only one or a
few dominant players in the market and that competition within the pharmaceutical industry is
severe.
FY10/CY09 was a relatively better year for domestic Pharma companies as they recovered
from the crippling impact of forex volatility in the previous year. There was good growth seen
in generics especially in the US and the semi regulated markets. Europe continued to face
pressure. Companies focusing on custom manufacturing for innovators were not spared from a
slowdown in their business. This is because many of the global innovator companies chose to
rationalize their inventories in wake of the global slowdown. And so there were not too many
orders that were being given out. Further, the efforts of global innovators to entrench in the
domestic market intensified with Abbott Laboratories buying out the domestic formulations
business of Piramal Healthcare. Thus, with Daiichi also having acquired a majority stake in
Ranbaxy, 2 of the top 3 players in the Indian market are MNCs.
The European market posed a set of challenges for Indian generic companies. While the UK
was bogged with severe pricing pressure, the government's of Germany and France undertook
various healthcare reforms, which impacted the revenues of companies having a presence in
these countries. Further, the global economic slowdown only worsened matters.
In the domestic market, FY10 was a decent year for the pharmaceutical industry with most of
the top players managing to clock a double-digit growth. However, it was the chronic therapy
segment, which once again stole the thunder of the acute therapy segment. While the former
recorded a robust 18% YoY growth, the latter grew by 15% YoY.
Continuing with the trend last year, MNC companies did well during FY10/CY09 too. On an
average, they were able to clock top line growth in the range of 10% to 13%. On the margin
front, performance was mixed. While GSK Pharma and Novartis witnessed an expansion in
operating margins, Aventis and Pfizer witnessed declines. Aventis was impacted by the
termination of the agreement with Novartis Vaccines for the sale of the anti-rabies vaccine
'Rabipur'.
The product patents regime heralds an era of innovation and research resulting in the launch of
new patented product launches. In the longer run, domestic companies would face fresh
competition from MNCs, as they would make aggressive new launches. However, the latter
would most likely be subject to price negotiation.

Pioneer Institute of Professional Studies, Indore

Drugs having estimated sales of over US$ 108 bn are expected to go off patent between CY09
and CY13. With the governments in the developed markets looking to cut down healthcare costs
by facilitating a speedy introduction of generic drugs into the market, domestic Pharma
companies will stand to benefit. However, despite this huge promise, intense competition and
consequent price erosion would continue to remain a cause for concern.
The life style segments such as cardiovascular, anti-diabetes and anti-depressants will continue
to be lucrative and fast growing owing to increased urbanization and change in lifestyles. Growth
in domestic sales in the future will depend on the ability of companies to align their product
portfolio towards the chronic segment.
Contract manufacturing and research (CRAMS) is expected to gain momentum going forward.
India's competitive strengths in research services include English-language competency,
availability of low cost skilled doctors and scientists, large patient population with diverse
disease characteristics and adherence to international quality standards. As for contract
manufacturing, both global innovators and generic majors are finding it profitable to outsource
production. Although there has been a considerable slowdown in this area, the scenario is
expected to improve going forward as the pressure to prune costs increases.

Defining industry sector evaluation (growth competence)

The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (around 330
in the organized sector). The top ten companies make up for more than a third of the market. The
Indian Pharma industry grew by a robust 17% YoY in 2009 to '401 bn (approx. US$ 8.5 bn). It
accounts for about 1% of the world's Pharma industry in value terms and 8% in volume terms.
Besides the domestic market, Indian Pharma companies also have a large chunk of their
revenues coming from exports. While some are focusing on the generics market in the US,
Europe and semi-regulated markets, others are focusing on custom manufacturing for innovator
companies. Biopharmaceuticals is also increasingly becoming an area of interest given the
complexity in manufacture and limited competition.
drug price control order (DPCO) continues to be a menace for the industry. There are three
tiers of regulations - on bulk drugs, on formulations and on overall profitability. This has made
the profitability of the sector susceptible to the whims and fancies of the pricing authority. The
new Pharmaceutical Policy 2006, which proposes to bring 354 essential drugs under price
control has not been officially passed as yet and has been stiffly opposed by the pharmaceutical
industry.
e R&D spends of the top five companies is about 5% to 10% of revenues. This ratio is still
way below the global average of 15% to 20% of sales. Indian companies have adopted various
strategies for their R&D efforts. Some have entered into collaboration and partnership
agreements with innovator companies; others have out-licensed their molecules for milestone

Pioneer Institute of Professional Studies, Indore

payments. Hiving off R&D units into separate companies has also become a preferred option for
many Indian Pharma players. That said, given that the research pipelines of Big Pharma are
drying up, they have now begun to dabble in generics. In this regard, these innovator companies
are either buying out Indian firms or are forging alliances with them.
Six trends will influence the growth of the Indian pharmaceutical market over the next decade:
Doubling of disposable income and the number of middle class households
Expansion of medical infrastructure
Greater penetration of health insurance
Rising prevalence of chronic diseases
Adoption of product patents and
Aggressive market penetration led by smaller companies.

Pioneer Institute of Professional Studies, Indore

Rationale
In recent times the pharmaceutical industry has shown high interest in India due to its sustained
economic growth, healthcare reforms and patent related legislation. The spending powers of
Indian have consistently increased since 1990s.Owing to a stressful lifestyle the number of
chronic disease patients have only increased. The market is expected to rise three fold in coming
decade. My research aims to highlight the growth story of Indian pharmaceutical industry
making use available information.

Objective
o To assess the current standing of the Indian Pharma industry
o Analyze the competencies of the of Indian Pharma industry.
o Analyze future growth prospects of the Indian Pharma companies on a global level

Literature Review
In his research titled, People before Patents. The success story of the Indian Pharmaceutical
Industry, Richard Gerster says The Indian pharmaceutical industry is a success story. 500 000
people are employed in this sector, in some 12 000 firms. 2 900 of them are large scale units,
following a recent article by Pradeep Agrawal and P. Saibaba in the renowned Economic and
Political Weekly of Mumbai (29 September 2001). In the pre- and post-production sector, a
further 2.5 million jobs are thought to be involved. Compared to the general price index, drug
prices have risen much less in the last 15 years and remain far below average. Worldwide, India
is a country of very low drug prices while producing high quality medicines", Nihchal H. Israni,
president of the Indian Drug Manufacturers Association (IDMA), states proudly. Selfsufficiency with regard to pharmaceutics exceeds 90 percent in spite of the policy of a more
open economy pursued by India since 1991.
In his research titled Growth of Indian Pharma Industry, Mukul Mukti stated The Indian
pharmaceutical industry has a unique amalgamation of two major critical factors that make it so
attractive
and
thereby
add
impetus
to
its
growth.
These
are:
The process patent regime Price controls. The implementation of Good Manufacturing Practices
has further supplemented the growth of this industry which is now producing bulk drugs for all
the major therapy segments, which are now most in demand. In addition to this, the
competencies that India has achieved in process re-engineering and organic synthesis have

Pioneer Institute of Professional Studies, Indore

helped derive the most cost-effective solutions which are also compliant with the quality
standards. The purpose of this report is to provide an extensive outlook on the pharmaceutical
industry.
According to a new study Booming Pharma Sector in India by RNCOS, the Indian
pharmaceutical sector has posted double digit growth rate in the last five years and is presently
accelerating at a pace twice more than the global pharmaceutical market. In near future, the
potential and opportunities in this market will rise by several folds. In fact, the Indian
pharmaceutical market is expected to grow at a CAGR of 16% between 2007-08 and 2011-12.
Nilesh Zacharias and Sandeep Farias in their report Patents and the Indian Pharmaceutical
Industry stated The Indian pharmaceutical industry is a prime example of an industry that is
being forced to revisit its long-term strategies and business models as India opens its markets to
global trade. Factors such as protection of intellectual property are increasing in significance due
to the growing recognition of the need to ensure protection of valuable investments in research
and development (R&D). Efforts are being made in India to curb problems of weak
enforceability of existing intellectual property legislations, and the Indian government is moving
towards establishing a patent regime that is conducive to technological advances and is in
keeping with its global commitments. The process of liberalization initiated in 1991 has helped
develop policies that are focused on attracting capital from overseas and making India a global
industrial base. The resultant inflows of foreign direct investment and technology transfers have
created an environment for dynamic growth and increased competitiveness of Indian industry.
The current revenues of the Indian pharmaceutical industry are estimated at US$5.5 billion and it
is expected to grow at a compounded annual growth rate of 19% and touch US$25 billion in
revenue by 2010. India is slowly moving into global markets and competing with international
quality standards and prices. Although R&D is an important factor to ensure a competitive edge
in the international arena, the future of the Indian pharmaceutical industry hinges on patent
protection.

Pioneer Institute of Professional Studies, Indore

Research Methodology
Research design
Descriptive Research is the research method used because descriptive studies embrace a large
proportion of market research. The purpose is to provide an accurate snapshot of some aspect of
the market environment Descriptive research design is a scientific method which involves
observing and describing the behavior of a subject without influencing it in any way.
Descriptive research design is a valid method for researching specific subjects and as a precursor
to more quantitative studies. Whilst there are some valid concerns about the statistical validity, as
long as the limitations are understood by the researcher, this type of study is an invaluable
scientific tool. Whilst the results are always open to question and to different interpretations,
there is no doubt that they are preferable to performing no research at all.
Tools of data collection
There are many methods of data collection which can be used according to nature and type of
research. I will use following data for the research purpose.
Secondary data
o
o
o
o
o
o
o

Articles
Factsheet
Management generals
Annual report
Research papers
Internet
News papers

Tools for data Analysis

Graphs and Charts

Pioneer Institute of Professional Studies, Indore

Major Finding and Results

On studying the current trend of the Pharmaceutical industry I present the major findings of the
research with the help of data obtained from other similar papers.

ANDA (abbreviated new drug application) Trend 2007-09

The Indian patent regime before the 2005 amendment granted only process patents on drugs.
This led to creation of a robust generic pharmaceutical industry in India which off late has gained
a strong global presence owing to their strategy of market presence through filing for an
Abbreviated New Drug Application (ANDA) under paragraph IV of the Hatch-Waxman Act of
United States.
In the year 2009, 100 ANDAs were filed by the top 10 companies. The top 10 companies
account for more than 50% of the total filed ANDAs. Some of the top Indian companies which
have driven the growth of the ANDA market are Wockhardt, Glenmark, Dr. Reddy, Aurobindo
and Ranbaxy to name a few from India.The Indian Pharmaceutical Industry accounts for nearly
32% of the total filed ANDAs in the year 2009.
Based on these statistics, it can be definitely predicted that growth of the Indian Pharmaceutical
companies is likely to achieve its desired milestones. This can only happen if the regulatory laws
continue to support the submission rates.

Pioneer Institute of Professional Studies, Indore

INDIAN PHARMA GROWTH BY 2020

A report from the U.S. consulting firm McKinsey & Co. released Friday projects that the Indian
pharmaceutical market will balloon to $55 billion by 2020 if the population continues to grow at
its current rateand the prevalence of illnesses continues its rapid rise.
The 1.3% annual rise in the population, plus a steady increase in disease, will make the patient
pool in India 20% larger in ten years that it is today, the report said.
At $55 billion in annual sales, the pharmaceutical industry will be four times its current $12.6
billion size, according to the report. If things go super well, according to what McKinsey calls
the aggressive growth scenario, the industry could grow even faster to $70 billion by 2020.
But McKinsey also said too many regulatory controls and an economic slowdown could depress
the growth of this key segment of the Indian market and produce only a $35 billion market in ten
years.
McKinsey expects pharmaceutical markets in four developing countriesIndia, China, Russia
and Brazilto spearhead future growth as the industry slow in the U.S., currently the biggest
market in the world.

Pioneer Institute of Professional Studies, Indore

India offers unique challenges and benefits, the report said. It has huge volumes but low price. It
is the third largest market in terms of volume but only the 10th biggest in terms of value.
Between 2000 and 2005, the Indian pharmaceutical industry recorded compound annual growth
of 9%, which has increased to around 13% in the last five years, the report said.

Expanding Exports of Indian Pharma Products

This Chart shows us the Growth of Export of Pharmaceutical Products from India to 200 other
countries. From the Year 2004-2005 till to the Year 2008-2009, India has seen a growth of
104%. The Government of India has progressively invested into the Pharmaceutical Industry.
The growth has occurred through sales in over 200 countries all across the globe.

Pioneer Institute of Professional Studies, Indore

Performance

The Indian pharmaceutical market has shown growth of a little over 20 per cent for the 12
months ended July, above four times the global growth rate of about five per cent.
This unprecedented rate could attract more global companies to enter the domestic drug market,
thus triggering more buyouts of Indian companies by multinational drug makers, said industry
experts.
The Indian pharmaceutical market reached Rs 44,477 crore in size, with a value-wise growth rate
of 20.4 per cent over the previous years corresponding period on a Moving Annual Total (MAT)
basis for the 12 months ended July, according to data from IMS Health India. It tracks drug sales
in the country through a network of nationwide drug distributors.

Pioneer Institute of Professional Studies, Indore

Growth Forecast: 2015

The Indian drug market, currently valued fourth in terms of volume and 13th in terms of value, is
expected to become one of the largest in the world, thanks to the population size. IMS estimates
the healthcare market in India at Rs 1,40,000 crore by 2020. The Indian pharmaceutical market is
expected to touch $40 billion (Rs 1.8 lakh crore) by 2015, predicts the global management
consulting major, Mckinsey & Co.
IMS data said the anti-diabetic therapy segment recorded the highest growth for these 12 months,
at 29 per cent in value, among various therapeutic segments. The genito-urinary and sex
hormone segment recorded a growth of 24 per cent and cardio vascular system and nervous
system medicine showed 22 per cent value growth for the 12-month period.

Pioneer Institute of Professional Studies, Indore

As top Indian pharmaceutical companies sell themselves off, Indias Rs60,000 crore drug
market seems harking back to the 1970s, when it was dominated by foreign multinationals. Just
six of Indias top 10 drug makers by market share are controlled by domestic promoters today,
down from nine in December 2008.At least two more deals (of foreign firms acquiring Indian
drug makers) are likely in the next 18 months, said Tarun Shah, founder, MP Advisors. His firm
advised Japans third largest drug maker, Daiichi Sankyo Co. Ltd in acquiring the stake owned
by promoters in Indias largest drug maker, Ranbaxy Laboratories Ltd. The $4.6 billion
(Rs21,620 crore) acquisition was the first of the three deals that have changed the equations in
the Indian drug industry since December 2008.It was followed by Hyderabad-based Shantha
Biotechnics Pvt. Ltds acquisition by Sanofi-Aventis AG.
Last week, US drugs and nutrition company Abbott Laboratories announced a Rs17,000 crore
acquisition of the domestic formulation business of Mumbai-based drug maker Piramal
Healthcare Ltd, the largest player in the local market with a market share of 7%.
Global acquisitions have also changed the structure of the Indian market. The acquisition of US
multinational Wyeth by the worlds largest drug maker Pfizer Inc. has led sales of their Indian
subsidiary Pfizer Ltd to increase. The combine of Pfizer and Wyeth in India has now become the
eighth largest player with a market share of 3.5%.
And US drug maker Merck and Co. Inc.s acquisition of Schering Plough worldwide has made
the company the 10th largest in India, with a market share of 1.03%, according to retail market
statistics of IMS Health until September 2009.

Pioneer Institute of Professional Studies, Indore

The combined share of top 16 drug makers in the local market is 56%, or worth Rs33,600 crore,
according to retail audit data compiled by IMS Health.Since new acquisitions and mergers have
changed the ownership base in the industry, 23% of this market is now controlled by six
multinational companies.Until December 2008, British drug maker GlaxoSmithKline Plcpromoted GlaxoSmithKline Pharmaceuticals Ltd was the only foreign firm in the top 10, with
about 4% market share in the Indian drug market till 2008.
Till the end of 2008, there were nine companies owned by Indian entrepreneurs out of top 10
with a combined market share of 32.67%. But the new constitution is that top 10 command
41.06% of total market , and four of the them are MNCs (multi-national companies), said Shah
of MP Advisors.
With multinationals interest to grow in this market and Indian entrepreneurs willingness to
encash, there could be more acquisitions happening, which will lead to MNCs increasing their
market share in the domestic market, he said.

Indian Companies in the US Market

Rising share in the US generics market and off-patent opportunities should benefit top Indian
drugmakers.The BSE Healthcare index has been one of the star sectoral performers over the last
year, giving 37% returns compared with the Sensexs 18%. A part of this jump has been due to
strong domestic demand, increased outsourcing activity and favorable rupee movement, all of
which have helped boost revenues and profits of Pharma companies.
Indian companies have cornered about 15 per cent market share of the US generics market. The
market is expected to grow at about 8 per cent annually over the next three-four years. Given that
over a third of the total ANDAs (abbreviated new drug applications) filed in the US are from
Indian manufacturers and the increasing pipeline of off-patent drugs, expect the share of Indian

Pioneer Institute of Professional Studies, Indore

companies to improve further in the time to come. In the next two-three years, about 26
blockbuster medicines worth over $96 billion are going off-patent in the worlds largest drug
market.
Rising market share
Ranbaxy
USFDA approves Ranbaxy ANDA on Alzheimers drug Aricept. The product is expected to
fetch the company over $230 million and $110 million in revenues and profits, respectively, in
the six months following the expiry of patents in November 2010. Its South Africa-based joint
venture, Sonke Pharmaceuticals, has won a 913.5 million rand (USD 133 million) order in that
country for supplying anti-retroviral (ARV) drugs for prevention and treatment of AIDS. Emkay
estimates that given Ranbaxys pipeline and FTF (first-to-file) opportunities, the company could
garner revenues of $1.7 billion (during the exclusivity period) over the next few years for drugs
including Lipitor, Nexium, Diovan and Actos.
Dr Reddys Laboratories
New product launches (about 8-10) and market-share gains from Prilosec (for heart burn) is
expected to help boost the US generic business of Dr Reddys in 2010-11. Its ANDA pipeline
now stands at about 73. Approval of the generic Arixtra (anti-coagulant) in the December quarter
and the launch of a couple of products with limited competition over the next couple of quarters
will help the company boost its revenue growth in the current fiscal. In addition to about 18 per
cent revenue growth in its India and emerging-market business, especially in Russia, the
company expects cost-cutting measures at its German business to help it improve operatingprofit margins.

Sun Pharma
The stock has been in the news after the company acquired management control in Israel-based
Taro Pharma. Taros product portfolio of dermatology, topical and OTC drugs is likely to
complement Suns own generic portfolio in the US market. Further, Taros cumulative ANDA
count for 2009 stands at 123. While Edelweiss estimates Suns core earnings to grow at 34 per
cent over the next two years (including incremental sales from new products in the US generics
space), the biggest hurdle for the company has been the FDA issues at its US subsidiary Caraco.

Pioneer Institute of Professional Studies, Indore

Discussion and Analysis of the result

From the above results by various researchers and outcomes thus obtained it is quite evident that
Indian Pharma industry is all set for a massive share in the global Pharma industry.Indian
pharmaceutical sector has posted double digit growth rate in the last five years and is presently
accelerating at a pace twice more than the global pharmaceutical market. In near future, the
potential and opportunities in this market will rise by several folds. In fact, the Indian
pharmaceutical market is expected to grow at a CAGR of 16% between 2007-08 and 2011-12.
From the graphical representation by the McKinsey report, in the absence of stringent Regulatory
policy the industry could well be a $70 billion industry by 2020 if the aggressive growth policy
is continued. Progress in the developed economies is at a standstill with the BRIC countries, the
so called emerging markets are taking the leap from many fronts.
Indian Pharma companies are on a global acquisition spree, specially gaining importance in the
global generics market. Indian companies are raising funds through FCCB, ADR to finance their
overseas acquisitions.
With strong chemistry skills, and high skilled manpower at cheaper cost, India is in a position to
manufacture at a very low cost compared to Pharma companies in the Western countries. This
has triggered Western Pharma companies to outsource their manufacturing activities to India
which also boosts the production capacity of indigenous industries.
Indias global competitiveness is witnessed by the following achievements:
1. India is the most preferred manufacturing base outside the USA and European countries.
2. India also happens to be the leading country with highest number of US FDA approved
plants 75outside USA followed by Italy with 55 and China having 27.
3. Special Economic Zones (SEZ) to boost manufacturing
4. Aggressive acquisition strategy including but not limited to Betapharm (Germany) by
Ranbaxy for USD 574 and Ranbaxy acquiring Tarapia for USD 324.
5. Product patent regime to attract foreign Pharma companies to set up plants in India.
Israel's Teva is developing an R&D centre at Noida,Ferrign BV, a Dutch major setting
up a plant in Mumbai

The spending on Research and Development has consistently improved by the industry and the
major players as a whole. Ranbaxy spends 10.3 % of their net sales on R& D. Of the other major
players Cadila with 11.7%, Lupin with 11.3%, Dr. Reddys Labs spend 8.9 %, Sun Pharma
spending 8.3% followed by other players. Such a spending still may be less as compared to
Western countries however it has been consistently increasing over the years.

Pioneer Institute of Professional Studies, Indore

Exports keep a high momentum contributing to the companies growth year on year. India being
a low cost manufacturing hub is attracted by foreign Pharma majors to set up plants.

Limitations
The research is limited by the following factors:
o Unavailability of latest data.
o The research done previously by other firms/researchers in limited domains.

Implication
The above study dwells in the existing status of the Indian Pharmaceutical industry and its future
prospects to be a leading global player in the world market. All the data and information
collected indicates a potential success of the industry. Developed markets are on the brink of
saturation paving way for the emerging ones, India being a frontrunner.
In the absence of unsupportive government regulations and policies, growth strategies adopted
by Pharmaceutical companies is sure to prove a successful venture. Acquisitions and Mergers
have strengthened the arms by creating more avenues for revenue and establishing themselves in
foreign territories.
Suggestion
o
o
o
o
o
o

Employing a robust growth strategy is expected to bear fruitful results.

More investments in technology and R & D for drug development hold the key.
In licensing and Out licensing to minimize the risks involved.
Filing for patents regularly.
Marketing on a global level for more visibility.
Backward integration for some of the drug companies to reduce costs.

Pioneer Institute of Professional Studies, Indore

Reference :

o http://www.equitymaster.com/research-it/sector-info/pharma/
o http://www.whoindia.org/LinkFiles/Trade_Agreement_Chapter05_Trade_Agreement_Im
pact_of_TRIPS.pdf
o http://www.ehow.com/how_5188889_analyze-qualitative-data.html
o http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/India_Pharma_2015.pdf
o http://www.merit.unu.edu/publications/wppdf/2006/wp2006-031.pdf
o http://www.cygnusindia.com/Articles/Indian_Pharma_Industry_Quest_for_Global_Leade
rship-09.11.pdf
o http://www.pharmabiz.com/subscription/index.asp?ref=red&fn=/services/USFDAANDA/index.asp
o http://www.pharmabiz.com/article/detnews.asp?articleid=58457&sectionid=45
o http://www.topnews.in/business-news/pharmaceutical-sector
o http://www.newkerala.com/news/world/fullnews-108909.html
o http://www.pharmaceutical-business-review.com/

Pioneer Institute of Professional Studies, Indore

A
RESEARCH PAPER
ON

Growth of Indian Pharmaceutical Indistry

PIONEER

(Since 1996)

Submitted to

Submitted By

Prof. Dr. V K Jain

Sanjay Trivedi

Prof. Satnam Ubeja

MBA 3rd sem

Roll. No. 09010135

Pioneer Institute of Professional Studies, Indore

DECLERATION

I hereby declare that this Research Paper entitled GROWTH OF INDIAN PHARMACEUTICAL INDUSTRY
submitted for the extra co curriculum activities for the partial fulfillment of the requirement of Master
of Business Administration (MBA) of PIONEER INSTITUTE OF PROFESSIONAL STUDIES INDORE is based on
secondary data found by me in various Companies fact sheets, previous research papers, magazines and
websites collected by me in under guidance of Prof. Satnam Kaur Ubeja.

DATE:

Sanjay Trivedi
MBA Semester III
Roll no. 09010135

Pioneer Institute of Professional Studies, Indore