CH: 2 MARKETING AND SALES

2.1 ORGANISATION STRUCTURE OF MARKETING DEPARTMENT

2.3 DETAILS OF COMPETITORS
The top competitors in Zydus Cadila's competitive set are Intas Pharmaceuticals, Sun
Pharma, Glenmark, Torrent, Mankind pharma, Aurobindo Pharma, Cadila Pharmaceuticals,
Lupin and Dr Reddys Laboratories. Together they have raised over 155.6M between their
estimated 140.3K employees.

INTAS BIOPHARMACEUTICALS:
The Biologics Business Unit (BU) of Intas Pharmaceuticals Limited was formerly an
independent biotechnology company and was known as Intas Biopharmaceuticals Ltd. Intas
Pharmaceuticals limited is an Indian company headquartered in Ahmedabad, India. The
Biologics BU is located in Moraiya, Ahmedabad and is one of the leading biosimilar product
manufacturers in Asia.
The Biologics BU of Intas Pharmaceuticals has biopharmaceutical operations with R&D
facility and an EU-GMP certified bio-pharmaceutical manufacturing facility.

SUN PHARMACEUTICALS:
Sun Pharmaceutical Industries Limited is an Indian multinational pharmaceutical company
headquartered in Mumbai, Maharashtra that manufactures and sells pharmaceutical
formulations and active pharmaceutical ingredients (APIs) primarily in India and the United
States. The company offers formulations in various therapeutic areas, such
as cardiology, psychiatry, neurology, gastroenterology and diabetology. It also provides APIs
such as warfarin, carbamazepine, etodolac, and clorazepate, as well as anticancers, steroids,
peptides, sex hormones, and controlled substances.

GLENMARK PHARMACEUTICALS:
Glenmark Pharmaceuticals is a pharmaceutical company headquartered
in Mumbai, India that was founded in 1977 by Gracias Saldanha as a generic drug and active
pharmaceutical ingredient manufacturer; he named the company after his two sons. The
company initially sold its products in India, Russia, and Africa. The company went public in
India in 1999, and used some of the proceeds to build its first research facility. Saldanha's son
Glenn took over as CEO in 2001, having returned to India after working
at PricewaterhouseCoopers. By 2008 Glenmark was the fifth-biggest pharmaceutical
company in India.

TORRENT PHARMACEUTICALS:
Torrent Pharmaceuticals Ltd. is the flagship company of the Torrent Group. It is based in the
Indian city of Ahmedabad. It was promoted by U. N. Mehta, initially as Trinity Laboratories
Ltd, and was later renamed Torrent Pharmaceuticals Ltd.
Torrent Pharmaceuticals operates in more than 50 countries with over 1000 product
registrations globally. Torrent Pharma is active in the therapeutic areas of Cardiovascular
(CV), central nervous system (CNS), gastro-intestinal, diabetology, anti-infective and pain
management segments. It has also forayed into the therapeutic segments of nephrology and
oncology while also strengthening its focus on gynecology and pediatric segments.

DR. REDDY'S LABORATORIES:

Dr. Reddy's Laboratories is an Indian multinational pharmaceutical company based
in Hyderabad, Telangana, India. The company was founded by Anji Reddy, who previously
worked in the mentor institute Indian Drugs and Pharmaceuticals Limited, of Hyderabad,
India. Dr. Reddy's manufactures and markets a wide range of pharmaceuticals in India and
overseas. The company has over 190 medications, 60 active pharmaceutical
ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology
products.

MANKIND PHARMA:

Mankind Pharma is a pharmaceutical company in India based at New Delhi. The company
has products in therapeutic areas ranging from antibiotics,
to gastrointestinal, cardiovascular, dermal, and erectile dysfunction medications.
The company was formed in 1991. It started working as a fully integrated pharmaceutical
company in 1995 with the contributions of two brothers, R C Juneja and Rajeev Juneja. The
seed capital for establishing the company was 50 Lakh. The company was started with 20
employees and launched in two states in the 1st year of its operation.
The company acquired Magnet Labs Pvt. Ltd. to enter the antipsychotic segment in
2007.Also it acquired Longifene-an appetite stimulant for children, in January 2010 which
was earlier a brand of UCB Belgium.

AUROBINDO PHARMA:
Aurobindo Pharma Limited is a pharmaceutical manufacturing company headquartered
in HITEC City, Hyderabad, India. The company manufactures generic pharmaceuticals
and active pharmaceutical ingredients. The company’s area of activity includes six major
therapeutic/product areas: antibiotics, anti-retrovirals, cardiovascular products, central
nervous system products, gastroenterologicals, and anti-allergics. The company markets these
products in over 125 countries. Its marketing partners include AstraZeneca and Pfizer.

CADILA PHARMACEUTICALS:
Cadila Pharmaceuticals is a multinational research based pharmaceutical group in India with
more than 5 decades of experience in providing high-quality affordable products. Company's
integrated operations covers entire gamut from manufacturing products ranging from API's-
Intermediates, finished formulations, OTC-Food Supplements, Biotechnology Products and
pharmaceutical Machinery. Cadila Pharmaceuticals manufacturing facilities are approved by
most stringent International bodies like WHO-GMP, UK-MHRA, USFDA-API, TGA-
Australia, and AIFA-Italy. International operation of Cadila Pharmaceuticals is spread across
58 countries including Americas, Japan, Asia, CIS and Africa.

LUPIN LIMITED:
Lupin Limited is a transnational pharmaceutical company based in Mumbai. It is the 12th-
largest company by market capitalization; and the eighth-largest generic pharmaceutical
company by revenue globally. The company’s key focus areas include paediatrics,
cardiovascular, anti-infectives, diabetology, asthma and anti-tuberculosis.

2.4 CUSTOMER SEGMENTATION AND TARGET MARKET

The consumer market can be segmented on the basis of following categories viz. geographic,
demographic, consumer behavioural, psychographic, etc. The following are the most
common forms of market segmentation practices.

1. Demographic Segmentation: Here, marketing manager differentiate the groups of

customers on the basis of demographic variables viz. age, gender, ethnicity, family
size, family life cycle, marital status, education, race, religion, language, income,
occupation, etc. The variables used for demographic segmentation helps in dividing a
large population into specific customer groups and helps an organization to target its
consumers more accurately. With this type of segmentation, an organization can
categorize the needs of consumers. Some of the advantages of Demographic basis are
as follows:
 These are easy to recognize and easy to measure.
 Their data can be easily available.
 These can be easily correlated
Zydus Cadila has a wide range of drugs and medicines that falls into this
categorical segment.

2. Behavioural segmentation: Here, the marketing manager differentiate the groups of

customers according to their knowledge of, attitude towards, usage rate, response,
loyalty status, and readiness stage to a product. Many marketers believe that
behaviour variables are the best starting point for building market segments.
Few consumers are recommended same brand drugs over time again and again
because their body metabolism has learned to respond to particukar medicines in
particular manner.
 3. Geographic Segmentation: It is one of the simplest methods of market segmentation.
Here, marketers can segment the people according to the geographic criteria such as
nations, states, regions, countries, cities, postal codes or neighbourhoods. In it, the
regional differences in terms of topography, climate, population and its density may
be considered as the base for market segmentation. The entire market of a production
may be segmented on geographic basis. The whole market may be divided and sub-
divided on area basis and geographic basis.
A few regions require various ingredient compositions in different proportion so as to
combat diseases prevailing in those regions.

4. Psychographic Segmentation: It describes the human characteristics of consumers. To

define a market segment, psychographic segmentation plays a crucial role. In it,
consumers are classified into market segments on the basis of their personality,
attitude, values, self-image, interests, opinions, lifestyle, etc. According to attitude
towards life, people may be classified as traditionalists, achievers, etc.
Some vitamin supplements are a part of routine life. Also dietary restrictions lead to a
specific target market.

5. Benefit segmentation: The benefit segmentation is a form of market segmentation

based on the differences in specific benefits that different groups of consumers look
for in a product. Here, marketing manager can segment the market based upon
quality, performance, customer service, special features, or other benefits. Many
business enterprises use this type of segmentation such as auto, clothing, furniture,
consumer electronics industries, etc.
The USFDA has given a nod to Zydus Cadila to enter the generic market.

2.5 STP and USP

Segment: Respiratory agents, cardiovascular, haematinics, gastrointestinal, analgesics, anti-
infective and antibiotics, anti- diabetics and immunological.

Target Group: Diagnostic, preventive and curative pharmaceutical and diagnostic product
seeking healthcare professionals

Positioning: Marketing of the pharma products to assuage, identify and thwart diseases.

USP: An integrated healthcare solutions provider, catering to over 45 therapeutic segments.

2.6 DISTRIBUTION NETWORK

Whole channel view, designing international channels that take into account all the necessary
links in distributing the seller’s products to seller’s headquarter organization, channels among
nations, and channels within nations. The three major links between the seller and the final
buyer.

SELLERS

SELLER
HEADQUARTER
ORGANISATION

CHANNEL
BETWEEN
NATIONS

CHANNEL WITHIN
NATIONS

FINAL USER OR
BUYER

2.7 MARKETING MIX

Marketing mix is a blandly of decision in the ‘4ps’.It is a system comprising the subsystem of
price, product, promotion and place. There elements of the marketing mix are interrelated
because decision in one are affect the others. Marketing mix is a dynamic concept as it keeps
on changing with changes in market condition and environment. The major instruments of
marketing in instruments of machinery in the hands of management are

(1)PRODUCTS:

A product means the combination of goods and services the company offers to the target
market. Zydus- Cadila has the largest product kit in India and its product range is vast and
varied. It includes products for CVS, GI, Female Healthcare and Respiratory. The company
provides services like commissioning, plant engineering, consulting and technical know-how
support and transfer. Some of its products include-

 APIs: The Company’s APIs and intermediates’ business is the backbone of the
Company’s formulations business globally as it ensures uninterrupted supply of the
key input materials to the formulations manufacturing plants in a timely and cost
efficient manner which in turn, supplies the finished dosage formulations to different
customers globally. The Company is also a preferred source of API supplies for
various third party customers in India, United States, select markets of Latin America,
the Asia Pacific region and Europe. During the year, the Company continued its thrust
on cost optimisation by undertaking various initiatives so as to improve the bottom-
line and build a sustainable culture of cost efficiency. The Company filed six more
DMFs with the USFDA during the year, taking the cumulative number of filings to
133. The Company’s API business posted sales of `3,656 million during the year,
down 4%.
 Biologics: The Company’s Biologics pipeline comprises 21 biosimilars (both in the
pipeline as well as launched) and six novel products (all in pipeline). During the year,
the Company completed Phase III clinical trials in India and received the marketing
authorisation from the Drug Controller General of India (DCGI) for one more
monoclonal antibody viz. Bevacizumab. Subsequently, the product was launched in
India under the brand name BryxtaTM. Apart from this, the Company received the
marketing authorisation from the DCGI for two more products viz. Follitropin alpha
and Pegasparagase during the year. The Company received the regulatory approval to
initiate Phase III clinical trials in India for one more monoclonal antibody during the
year. On the emerging markets front, the Company continued to file the dossiers of
first generation biosimilars and monoclonal antibodies in various countries of the
emerging markets. During the year, the Company received five product registrations
in different countries of the emerging markets. The Company launched two
biosimilars viz. ‘Colstim’ (biosimilar of filgrastim) and ‘Pegstim’ (biosimilar of
pegylated filgrastim) in the emerging markets of Philippines and Sri Lanka
respectively. On the novel biologics front, the Company initiated Phase III clinical
trials in India for Rabimabs. During the year, the Company received the GMP
certificate from the regulatory authorities of Colombia, Philippines, Turkey, Mexico
and Nepal for its biologics fill and finish manufacturing facility.
 Vaccines: The Company has a portfolio of over 20 vaccines (both in the pipeline as
well as launched) covering both pediatric and adult vaccines. During the year, the
Company successfully completed Phase III clinical trials in India for one more
vaccine and applied for marketing authorisation to the DCGI. The Company initiated
Phase III clinical trials in India for two more vaccines and received regulatory
approval to initiate Phase III clinical trials in India for one more vaccine during the
year.

(2)PRICE:
Price is the amount of money customers have to pay to obtain the product policies regarding
pricing, offering discounts, trade in allowances and credit terms to adjust for the current
competitive situation. Zydus- Cadila is the leading health-care company in India and its aim
is to provide access to high-quality medicines at affordable rates. In order to meet the needs
of its patients, it has decided to keep an economic and reasonable pricing policy. Its aim is to
make life-saving drugs accessible to every needy patient and therefore for those drugs it has
kept a minimum pricing policy. Its efforts have reduced the prices of several vital drugs in the
market. For products that are exported it has maintained a competitive pricing policy, so that
it can successfully compete with its competitors.

(3)PLACE:

Place includes company activities that make the product available to target consumers. Policy
regarding outlets for sales channels of distribution location and layout of stores etc. Zydus
Cadila is headquartered in Ahmedabad, India, and ranks 4th in the Indian pharmaceutical
industry. The group has manufacturing sites and research facilities spread across five states of
Gujarat, Maharashtra, Goa, Himachal Pradesh and Sikkim in India and in the US and Brazil.
Zydus’ global business has a strong presence in the regulated markets of the US, Europe
(France and Spain) and in the high profile markets of Latin America and South Africa. It is
also present in a big way in 25 other emerging markets worldwide.

(4)PROMOTION:

Promotion means activities that communicate the merit the product and persuade target
customers to buy it. Zydus- Cadila group has adopted the Moraiya village, the company
provides free treatment meet to the people of village. The companies also mix arrangement of
operation by well known surgeons for the people suffering from dieses like kidney, stone at
free of cost. The company provides free medicines to different clubs like lion clubs, loyal
clubs, Rotary clubs and Red Cross society as charity. At present the company is planning to
arrange the hypertension programme at different corporate facilities to help the employee
who are suffering from hypertension. Now, in the modern period, there are so many
companies are takes care of sociality. They are giving free services & facilities, which can be
increase in the life-style. Such as Zydus- Cadila is also gives free medicines and other
injectional item to society.

There is another concern however, that is valid it holds that the 4Ps. Concept takes the seller
view of the market, not the buyer’s view. From the buyer’s view point in this age of
connectedness the 4p might be better described as 4Cs

4Ps 4Cs

Product Customer solution

Price Customer cost

 Place Convenience

Promotion Communication

2.8 COMPETITIVE ANALYSIS

Intas Pharmaceuticals is Zydus Cadila's biggest rival. Intas Pharmaceuticals was founded in
Ahmedabad, Gujarat in 1984. Like Zydus Cadila, Intas Pharmaceuticals also competes in the
Pharmaceuticals sector. Compared to Zydus Cadila, Intas Pharmaceuticals generates $1.7B
less revenue.

Sun Pharma is Zydus Cadila's number 2 rival. Sun Pharma's headquarters is in Mumbai,
Maharashtra, and was founded in 1983. Like Zydus Cadila, Sun Pharma also competes in the
Pharmaceuticals space. Sun Pharma generates 217% of Zydus Cadila's revenue.

Glenmark is Zydus Cadila's number 3 competitor. Glenmark was founded in 1977 in

Mumbai, Maharashtra. Like Zydus Cadila, Glenmark also works within the Pharmaceuticals
sector. Glenmark generates $614.3M less revenue than Zydus Cadila.

2.10 PRICING POLICY

General Pricing Approaches

In view of the peculiar characteristics of pharmaceutical industry, we will try to discuss the
different approaches actually applicable and practiced in the industry. Although, the
approaches are same as in case of any other product, but the reasons and implications are
different.

Cost-Plus Pricing

The required profit margin is added to the cost of the product to arrive at the Ex-factory price,
and then Trade Price and Market Retail Price. This type of pricing is usually done for old
molecules where market is very crowded, and a higher price cannot fetch the required market
share. The objective of company in such scenario is to either get some additional volume for
their manufacturing facility, or to complement their existing product range.

Break-Even Pricing

Normally adopted for products being manufactured for government tenders and institutional
business. The concern is not profit, but again either to get volumes, or to get into large
hospital pharmacies so that the positive impact may come from out-of-hospital practice of the
doctors who have to prescribe their brand in hospital because of inclusion in pharmacy.
Normally, this type of pricing policies are never adopted for research based high profile
molecules, so that there may not be a negative impact on their high in-market price.
Value Based Pricing

This approach for pricing is most commonly used by Multinational companies, en-cashing
their good rapport with the doctors, especially in case of new molecules. There are countless
examples where the cost of product has no relevance whatsoever and company has priced a
product as per the perceived value for the doctors in their opinion. However, things are
becoming difficult now, and companies must be very careful while adopting this approach.
They have to not only be careful about the wrong judgment of perceived value that they may
make, and also the possibility of launch of same molecule by a local company with good
reputation and quality. During the last few years, MNCs have for the first time starting to
experience this onslaught by good local companies and now they realize that they cannot
have their own way about pricing the product. Since China & India have emerged as major
producers of bulk drugs, the prices of raw material have calm down drastically, and so the
pressure has increased on MNCs due to launch of low-priced brands of same molecules by
local companies.

Competition Based Pricing

This is what most marketing oriented companies attempt to do these days. They take into
account not only the perceived value, but also the value being offered by competition, and
then arrive at a reasonable price giving them good margin as well as keeping them
competitive in the long run. It is extremely important not only to take into account current
competitors, but also expected competitors, which come with a much lower price and snatch
the market share.

Special Topics in Pharmaceutical Pricing

There is another pricing strategy practiced in pharmaceutical market, which can be termed as
Economy Pricing. The concept is close to cost plus pricing, but the perspective is different:

i) Economy Pricing There are some companies, which focus only on offering
brands of established molecules at the lowest possible price. They base their
price on cost, and keep the margins to bare minimum. The reason this is being
discussed separately is that the molecules selected have no impact whatsoever
on the pricing strategy. They may even pick up a molecule where there is just
one leading brand, and price theirs’ at 75% lower price
ii) Price Determination by Regulatory Authorities It would be interesting to
assess how the Ministry of Health decides upon the price. What they do is that
they ask for the cost structure from the first applicant of any molecule, which
is in 99% of cases a multinational company, which provides a highly inflated
cost due to the element of transfer pricing. On the basis of this cost structure,
the price is determined. The next applicant gets approximately 25-40% lower
price, and this then becomes the reference price for all following applicants.
Since the price allowed to MNC was inflated, all local companies get
sufficient margins even at 40% lower price than the leader. It is just mind-
 boggling to see such approach, as it can be very simple for government
officials to verify costing from neutral source and find out a reasonable price.

Transfer pricing

Unlike consumer products, services and consumer durables, pharmaceutical companies are
not allowed to use the mass media for advertising their products. This closes a very important
expense centre for them, which is traditionally used by all other industries to reduce their
profits and show a higher cost in order to evade taxes and paying dividends to the
shareholders. Besides this, there is a strict code of ethics applicable which refrains them from
spending beyond a certain limit on promoting their products. In this situation, the only area
available for manipulation of cost is the actual cost of product. Companies aim to make the
cost appear as high as possible by buying the raw material at an inflated price, in most of the
cases from their own parent companies.

2.11 PROMOTION AND ADVERTISING POLICY

Promotion Policies:

The core mission of our promotional activities is to provide quality information about the
product presented in compliance with the marketing authorization for that product, and to
promote correct use of the product among healthcare professionals.

Our Regulatory Affairs and Ethics & Business Integrity Departments have established
procedures and directives that comply with international standards:

 On scientific information provided via promotional or non-promotional materials:

best practice guidelines on the use of promotional documents or materials to
communicate information about medicines and healthcare products, and on the
provision of items of medical utility, etc.;
 On using websites to provide scientific and promotional information: our Internet
Validation Committee has established an approval procedure covering all websites
developed by Zydus Cadila and its subsidiaries worldwide; and
 On interactions with healthcare professionals: hospitality rules associated with
scientific events, and rules governing the remuneration and selection of experts with
whom we contract to provide services.

To ensure that our ethical principles are applied in practice, we are also committed to:

 Providing continuing professional education for sales reps, and assessing our sales
visit activities;
 Applying the strictest ethical standards on scientific materials;
 Providing precise, up-to-date and objective scientific information so that our
employees are knowledgeable in their interactions with healthcare professionals and
comply with the relevant regulatory requirements;
  Supplying documentation that enables healthcare professionals to make objective
assessments about the quality of our products and the uses for which they were
developed;
 Ensuring that information about our products is based on scientifically proven results;
and
 Conducting internal audits to ensure that our subsidiaries are in compliance with the
approval procedures for scientific materials, and with internal and external codes of
conduct and currently applicable laws and regulations governing promotion.

Advertising Regulations:

Drugs play a very significant role in the management of ailment and illness in human life and
in this context; medical practitioners are given the responsibility of prescribing the various
drugs required for respective ailments/illnesses for the appropriate treatment and cure of the
same.

In the light of the above mentioned, the Government of India, like most countries of the
world, do not treat drugs as any other consumer products and apart from defined procedures
of its procurement and sale etc., it is also subject to strict limitations in the manner in which
its marketing is to be carried as well.

Current Position in India

In India, the system of regulation, in order to provide checks and balances with regard to the
advertisement of drugs, is provided in the Drugs and Magical Remedies (Objectionable
Advertisements) Act, 1954 ("Act"). Section 3 (d) of the Act provides that "no person shall
take part in the publication of any advertisement referring to any drug in terms which
suggest or are calculated to lead to the use of that drug for the diagnosis, cure, mitigation,
treatment or prevention of any disease, disorder or condition specified in the Schedule, or
any other disease, disorder or condition (by whatsoever name called) which maybe
specified in the rules made under this Act." It can be devised, from the above provision that
publication of advertisement of drugs are subject to scrutiny of the above mentioned section 3
(d) of the Act in India. Therefore, publication of any advertisement referring to any drug in
terms which suggest or are calculated to lead to the use of that drug for the diagnosis, cure,
mitigation, treatment or prevention of any disease, disorder or condition specified in the
Schedule or Rules of the Act are prohibited in India.

Although in countries like the United States of America and New Zealand, drugs to be
prescribed by medical practitioners are allowed to be advertised directly to
consumers/patients and are regulated by the respective department of the Government in
charge of drugs in the country, the same practice is not followed or encouraged in India. It is
very apparent by t he nature of the Act that there is no opportunity to share information
pertaining to a drug with a consumer/patient directly by manufacturers/importers in order to
prohibit self-medication. However, it is suggested that if the Act is amended in a manner to
include activities, which educates the patients about drugs, it will encourage them to
understand the procedure involved in the treatment administered upon them by the medical
practitioners and will ensure patient compliance of the drugs prescribed to them and more
importantly will assist in removing social stigma that is associated with certain diseases.

2.12 STRATEGIES FOR BRAND MANAGEMENT

Zydus Cadila Healthcare has shored up its organic growth plans in an effort to build up a
critical mass to take on the challenges post January 1, 2005.
The company has identified six major growth drivers “consolidating domestic business,
leveraging API strength, encashing on global generics' opportunities, outsourcing, improving
operating efficiencies, and research”.
The Indian pharmaceutical industry is set to change with the product patents coming into
force in 2005.
The group has also been looking at strategic acquisitions to add value to its operations.
Zydus Cadila's success stems from the fact that its growth has been well integrated and
balanced.
The company has recently signed a memorandum of understanding (MoU) with Australia's
Mayane group for setting up a manufacturing joint venture to explore opportunities in anti-
cancer products.
The company acquired the Bangalore based Recon Healthcare Ltd in May 2000. Recon has a
strong portfolio of brands in the pain management, anti-infectives and cardiovascular
segments and a strong presence in southern markets.
Zydus Cadila also acquired German Remedies in 2001. The acquisition presented the right
strategic fit as German Remedies specialised in respiratory, women's healthcare and oncology
segments.
Both Recon healthcare and German Remedies have now been merged with Cadila
Healthcare.
The group has set its sights on France, Europe's fastest growing generic market. The French
generic market, currently estimated at Euro 520 million, is expected to zoom to Euro 2.3
billion in 2005-6.
In 2003, the group acquired Alpharma France, the French affiliate of Alpharma, one of the
world's leading generic companies. The acquisition made it one of the early entrants in the
market and gave Cadila a ready distribution network to jumpstart its business in France.
Deciding to go in for a two-pronged effort, the group set up Zydus Healthcare LLC to market
APIs and Zydus Pharmaceuticals (USA) Inc, to market formulation generics. Zydus Cadila
has already filed 12 API Drug Master Files (DMFs). It has also filed 12 ANDAs with the US
FDA, the largest number of filings by an Indian company in the very first year of filing.
In the $10 billion Latin American market, Zydus has set up base in Brazil with its subsidiary
Brasil Healthcare Limitada.
The plans to tap the generic markets, is expected to gather speed as the group sets up bases in
Spain, Italy and Germany.
An estimated $50 billion worth of molecules will go off patent over the next few years. There
are abundant opportunities to market formulation generics, APIs and intermediates.
With distinct advantage of proven chemistry capabilities, world class manufacturing facilities
and ability to deliver products at highly competitive prices, Indian pharma companies are best
placed to grab a share of the generic pie. Zydus Cadila's plans for growth in the generic
markets are well aligned to these emerging opportunities.
The company strategy focuses on creating value through research. A relative late starter on
this front, Zydus Cadila has been making brisk progress wasting no time in setting up a state-
of-the-art research centre on a sprawling 80,000 square yards of land.
Biotechnology is another area of promise which the group is exploring. It is working in the
areas of biogenerics, Proteomics and receptor binding studies and also plans to launch novel
r-DNA based therapeutic proteins. So far the group has filed 80 patents in India, 68 patents in
foreign countries and 16 PCT applications.
The company has well integrated manufacturing capabilities across the value chain. The
group today has eight state-of-the-art manufacturing plants spread across Gujarat,
Maharashtra, Goa and Himachal Pradesh.
The group also added India's leading anti-hypertensive drug, Aten (Atenolol) to its product
portfolio. This acquisition catapulted Zydus Cadila to the leader in the cardiovascular market.
In 2002, Zydus Cadila acquired Banyan Chemicals, a company manufacturing high value
active pharmaceutical ingredients (API).
Zydus Cadila also manufactures intermediates and APIs leveraging strong capabilities in
chemical synthesis.
With a USFDA approved API plant at Dhabasa near Vadodara, and plants at Ankleshwar and
Patalganga, it is today the largest Indian manufacturer of Paroxetine, Famotidine,
Atorvastatin and Lamivudine.

2.13 TAX LAWS

Income Tax Act, 1961
 It is tax on income imposed by Central Government
 Residents in India are taxed on their worldwide income
 Non- residents are taxed on Indian source of income
 The Indian tax rates applicable to non-residents could be up to 40% (excluding
applicable surcharge)
 If the tax payable by any company, including a foreign company taxable in India, is
less than 18.5% of its book profits, it will be required to pay Minimum Alternate Tax
 Interest received by a non-resident from Indian on foreign currency denominated
loans may be taxable
  Payments towards royalty and fees for technical services is taxable
 Expenditure on scientific research is treated as capital expenditure and is deductible

Transfer Pricing Regulations

 Income tax Act makes provisions for the taxation of income arising from international
transaction between associated enterprises
 Transfer Pricing Regulations lay down that any income arising from such an
"international transaction" shall be computed having regard to the "arm's length price"
 The Regulations also lay down methods for calculation of arm's length price

Research and Development Cess Act, 1986

 All payments made towards the import of technology are subject to a tax of 5% under
the Act
 Technology includes any special or technical knowledge or any special service
required for any purpose whatsoever by an industrial concern under any foreign
collaboration, and includes designs, drawings, publications and technical personnel

Custom Duty
 Import of drugs and pharmaceuticals is liable to basic customs duty and additional
customs duty
 Import of neutraceuticals and health supplements is liable to basic customs duty,
additional customs duty and a special additional customs duty
 There is no additional customs duty on certain drugs (life- saving)
 Import of medical devices is liable for basic customs duty and additional customs
duty

Sales Tax / Value Added Tax (VAT)

 Sales tax / VAT is levied by states on sale of goods within its territory
 Sale of drugs (including bulk drugs) and medical formulations is taxable
 Life- saving drugs are many a times exempt from sales tax
 Central Sales Tax is applicable in case of the sale of goods in the course of inter-state
trade or commerce

CENVAT
 Duty imposed by Central Government on manufacture of goods
  Generic excise duty rate on the inputs (Active Pharmaceutical Ingredients or APIs) is
currently at 10.3%
 Generic excise duty rate on finished formulations is 4.12%

Service Tax
 Under the current service tax regime, all services are taxable unless exempt.
 Exempted services include: 'Health care services' by a clinical establishment, an
authorised medical practitioner or para-medics
 'Health care services' means any service by way of diagnosis or treatment or care for
illness, injury, deformity, abnormality or pregnancy in any recognized system of
medicines in India and includes services by way of transportation of the patient to and
from a clinical establishment, but does not include hair transplant or cosmetic or
plastic surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental abnormalities,
injury or trauma

The impact of GST on the pharma industry will be neutral. Formulations would be charged at
12% under GST while the average rate is 9% under current laws.

Current Tax Law on Pharmaceutical Products

The average VAT rate for most of the pharmaceutical products is around 5% and for the
formulations is 9%. The excise duty charged on pharma products was 12.5%. To be fair
though, the government provides relief on excise to pharmaceutical product manufacturers by
introducing excise-free manufacturing zones.
Prior to the introduction of excise-free manufacturing zones, 40% of the pharmaceutical
product manufacturers were located in Gujrat. Excise-free zones were a crucial step in
providing relief to small manufacturers in remote places to be competitive in the national
market. Manufacturers operating from excise-free manufacturing zones have to pay excise at
the rate of 1.5% in comparison to the 12.5% from every other manufacturer of
pharmaceutical products.
In most of the states, the VAT on the pharmaceutical products is charged on the maximum
retail price and is charged at a single point. Therefore, the distribution channel does not pay
any tax or file tax returns. Payment of timely taxes and filing 37 returns is going to be a
daunting task for the distribution channel.

GST Rate on Pharmaceutical Products

NIL 5% 12%

Human blood Animal or human blood vaccines All goods not specified
and its
components elsewhere:

Medicines made by mixing two

or more constituents for
therapeutic or prophylactic uses.
(including Ayurvedic
medicines)

All types of Diagnostic kit for all types of Medicines made by mixing two
contraceptives hepatitis or more products for therapeutic
or prophylactic uses.
(including Ayurvedic
medicines)

Cyclosporin Wadding gauge, bandages, and

similar articles

Oral Rehydration Salts Forms or packing for retail sale

regarding surgical, dental or
veterinary purposes

Desferrioxamine Injection or Pharmaceutical goods specified

Deferiprone such as sterile laminaria, dental
adhesion barriers etc.

Medicines (including veterinary

medicines) used in bio-chemichal
systems and not bearing any brand
name

Drugs or medicines specified in the

list 3 or 4 of notification 12/2012-
central excise

Formulations manufactured from bulk

drugs listed in the list 1 of notification
12/2012 -central excise

Impact of GST Rate on Pharmaceutical Industry

Most of the drugs mentioned under the 5% bracket are used to cure malaria, HIV-AIDS,
tuberculosis, and diabetes which were previously charged VAT around 4%. Nicotine
polacrilex gum is the only pharmaceutical product to be charged at the rate of 18%. Cipla, the
brand which produces nicotine gums, will probably be impacted from the rate fixed at 18%.
No clarification has been provided by the government on the issue of manufacturers
operating in excise-free manufacturing zones paying more tax under GST. Most of these
manufacturers are competitive in the pharmaceutical industry is due to the excise benefit as
they are situated in remote places.
Earlier, Ayurvedic drugs or medicines were charged an average VAT of 4% and excise of
1.5% due to the excise free manufacturing zone benefit. Under GST, Ayurvedic medicines
could get costlier as they would be taxed at the rate of 12%.
Since the distribution channel was not involved in the payment of tax and filing tax returns,
they will now need to get registered and file the minimum 37 returns annually as required
under GST. A lot of the times, medicines are provided without bills in India. GST would curb
such practices as providing medicine without the bill would not be beneficial for anyone in
the distribution chain.
The government needs to still provide clarification on the inclusion of the current benefit for
the manufacturers under excise for operating from the excise free manufacturing zones. The
pharmaceutical industry is also asking for more information on the implementation of GST
on the MRP of pharmaceutical products.

2.16 EXPORTS
International sales in generic markets contribute to over 33% of revenues. ƒ 60% growth in
formulation exports in last 5 years. Countries where Zydus- Cadila products are exported are:

AFRICA: In the African continent following countries are where the exports from Zydus-
Cadila are done. Ethiopia, Ghana, Mauritius, Tanzania, Uganda, Sierra Leone, and South
Africa.

EUROPE: European countries covered by the exports are Bulgaria, Czech Republic,
Romania, and Malta.

MIDDLE-EAST: Bahrain, Sudan, Sultanate of Oman, Yemen, and Jordan.

SOUTH-EAST ASIA: Cambodia, Hong Kong, Malaysia, Philippines, U.K., Sri Lanka, and
Thailand are countries of South-East Asia where exports are done.

OTHERS: Panama, West India, Mexico, Papua New Guinea, Germany, Belarus, Estonia,
Georgia, Kazakhstan, Latvia, Moldova, Russia, Ukraine, and Uzbekistan.

Source:
https://www.owler.com/company/zyduscadila

https://www.business-standard.com/article/companies/cadila-draws-out-six-point-strategy-
104123101067_1.html

https://zyduscadila.com/public/pdf/Annual-Report-2017-2018.pdf
https://cleartax.in/s/impact-of-gst-rate-on-pharmaceutical-industry

https://www.thehindubusinessline.com/companies/zydus-cadila-gets-usfda-nod-to-market-generic-
anti-diabetic-drug/article26532402.ece

https://www.researchgate.net/publication/265174923_Pricing_strategies_in_pharmaceutical_mark
eting/download

https://www.zyduscadila.com/-/media/project/one-zyduscadila-web/websites/global/zyduscadila-
com/home/common/docs/download-center/promotional_practices_2018.pdf/

http://www.mondaq.com/india/x/265212/food+drugs+law/ADVERTISEMENT+OF+DRUGS+IN+INDIA
+AN+OVERVIEW