Pharmaceutical Industry in India is one of the largest and most advanced among the developing countries.

It provides employment to millions and ensures that essential drugs at affordable prices are available to the vast population of India. Indian Pharmaceutical Industry has attained wide ranging capabilities in the complex field of drug manufacture and technology. From simple pain killers to sophisticated antibiotics and complex cardiac compounds, almost every type of drug is now made indigenously. Indian Pharma Industry is playing a key role in promoting and sustaining development in the vital field of medicines. Around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and vaccines is met by Indian pharmaceutical industry. A number of Indian pharmaceutical companies adhere to highest quality standards and are approved by regulatory authorities in USA and UK. Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units and is very top heavy. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. There are also 5 Central Public Sector Units that manufacture drugs. These units produce complete range of pharmaceuticals, which include medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations. India is largely self-sufficient in case of formulations. More than 85% of the formulations produced in the country are sold in the domestic market. Some life saving, new generation under-patent formulations are imported, by MNCs, which they market in India. Over 60% of India's bulk drug production is exported. The balance is sold locally to other formulators. Pharmaceutical Industry in India has been de-licensed and industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are now free to produce any drug duly approved by the Drug Control Authority. Indian pharmaceutical industry got a major boost with the signing of General Agreement on Tariffs and Trade in January 2005 with which India began recognising global patents. After recognizing the global patent regime the Indian pharma market became a sought after destination for foreign players. India holds the lion's share of the world's contract research business as activity in the pharma market continues to explode in this region. Over 15 prominent contract research organisations (CROs) are now operating in India attracted by her ability to offer efficient R&D on a lowcost basis. Thirty five per cent of business is in the field of new drug discovery and the rest 65 per cent of business is in the clinical trials arena. India offers a huge cost advantage in the clinical trials domain compared to Western countries. The cost of hiring a chemist in India is one-fifth of the cost of hiring a chemist in the West. The future of Indian pharmaceutical sector looks extremely positive. Indian pharma companies are vying for the branded generic drug space to register their global presence. Several Indian pharmaceutical companies have acquired companies in the US and Europe and many others are raising funds to do so. For example, Ranbaxy acquired Romania's Terapia, Ethimed NV of Belgium and GSK's generic business Allen SpA in Italy. Dr Reddy's acquired German generic drug maker Betapharm. Companies like Glenmark Pharma, Lupin, Aurobindo and Jubilant Organosys are on the lookout for lucrative acquisitions. Note: The above information was last updated on 21-07-2007

Pharmaceuticals Sector Analysis Report

The Indian Pharmaceutical industry is highly fragmented with about 24,000
players (around 330 in the organised sector). The top ten companies make up for more than a third of the market. The Indian pharma industry grew by a robust 18% YoY in 2011 to ` 565 bn (approx. US$ 12.5 bn). It accounts for about 1.4% of the world's pharma industry in value terms and 10% 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. The 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. The 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 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.

Key Points
Supply Higher for traditional therapeutic segments, which is typical of a developing market. Relatively lower for lifestyle segment. Very high for certain therapeutic segments. Will change as life expectancy, literacy increases. Licensing, distribution network, patents, plant approval by regulatory authority.

Demand

Barriers to entry

Bargaining power Distributors are increasingly pushing generic products in a of suppliers bid to earn higher margins. Bargaining power High, a fragmented industry has ensured that there is of customers widespread competition in almost all product segments.

(Currently also protected by the DPCO). Competition High. Very fragmented industry with the top 300 (of 24,000 manufacturing units) players accounting for 85% of sales value. Consolidation is likely to intensify. TOP

Financial Year '11

FY11/CY10 was a strong year for domestic pharma companies on back of
strong growth in both domestic and exports sales. 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 did not see a sign of recovery this year as well. Further, the efforts of global innovators to entrench in the domestic market intensified with many strategic tie-ups and small acquisitions of Indian companies. Now with Abbott taking over Piramal's domestic division and Daiichi Sankyo having acquired Ranbaxy, 2 of the top 3 players in the Indian market are MNCs. Another problem which continued to hamper the pharma sector was the stringency of the US FDA while inspecting manufacturing plants. Ranbaxy and Sun Pharma are yet to come to a resolution with respect to their plants with the US FDA. Aurobindo Pharma was new in the list to receive the warning letter for one of its biggest manufacturing unit. In the domestic market, FY11 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 14% YoY. MNC pharma companies did well during FY11/CY10. On an average, they were able to clock topline growth in the range of 10% to 15%. On the margin front, performance was not good. Most of the companies saw increase in costs on the raw material costs and employee costs. The intensifying competition led to higher attrition and the industry is facing huge increase in the employee costs. TOP

Prospects
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. Drugs having estimated sales of over US$ 100 bn are expected to go off patent between CY10 and CY14. 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, antidepressants and anti-cancers will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyle patterns. High growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment as the lifestyle diseases

like hypertension, congestive heart failure, depression, asthma, and diabetes are on the rise. 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 the scenario has yet not improved for this space after the financial crisis, it is expected to improve going forward as the pressure to prune costs increases.