Industry Overview

Accounting for two percent of the world’s pharmaceutical market, the Indian pharmaceutical sector has an estimated market value of about US $8 billion. It’s at 4th rank in terms of total pharmaceutical production and 13th in terms of value. It is growing at an average rate of 7.2 % and is expected to grow to US $ 12 billion by 2010.

Over the last two years the pharmaceutical market value has increased to about US $ 355 million because of the launch of new products. According to an estimate, 3900 new generic products have been launched in the past two years. These have been by and large launched by big brands in the pharma sector. And in the year 2005 Indian pharmaceutical companies captured around 70% of the domestic market.

As in the present scenario, only a few people can afford costly drugs, which have increased price sensitivity in the pharmaceutical market. Now the companies are trying to capture the market by introducing high quality and low price medicines and drugs.

With the Product Patent Act, which came into action in January 2005, this industry is able to attract big MNCs to India. Earlier these big firms had apprehensions in launching new drugs in the Indian market.

At present, a large number of Indian pharmaceuticals companies are looking for tie-ups with foreign firms for in-license drugs. GlaxoSmithKline is among the top choices for the firms that wish to launch their product in India, but do not have any branch over here.

Contract research and pharmaceutical outsourcing are the new avenues in the pharmaceutical market. Contract manufacturing is growing at a very fast pace and is estimated to grow to US $30billion, whereas contract research is estimated to reach US$6-10 billion.

Indian multinational companies like Dr.Reddy’s Lab, Cipla, Ranbaxy, etc have created awareness about the Indian market prospects in the international pharmaceutical market. Approvals given by Foods and Drugs Administration (FDA) and ANDA (Abbreviated New Drug Application)/DMF (Drug Master File) have played an important role in making India a cost-effective and high quality product manufacturer. Furthermore, the changes that took place in the patent law, change of process patent to product patent, have helped in reducing the risk of loss for intellectual property.

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Industry Strengths:

• Capital Investment in Technology: Owing to the availability of advanced technology at low costs, the companies can produce drugs at lower costs.
• Cost Effective: The filing cost of ANDAS and DMFs is comparatively low for the Indian companies.
• Manpower: There is a large pool of technical experts available at modest salaries.
• Contract Research & Contract Manufacturing: There is a good scope for contract research and contract manufacturing.
• Infrastructure: There is a well-developed infrastructure for the pharmaceutical industry.
• Generic Drugs: In the last few years, the generic drug-manufacturing segment has received huge investments, in the process making it more competitive and efficient.

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Indian Pharmaceutical Sector: Economic Value

The Indian pharmaceutical industry, which is now meeting over 95% of the country’s pharmaceutical needs, was almost non-existent before 1970. With the compound annual growth of 19.8% the industry has grown from Rs.4 billion in 1970 to Rs.290 billion in 2003.

The pharma sector has shown tremendous growth over the years. About 250 Indian pharmaceutical companies hold 70% of the market share with top players controlling about 7% of the market share.

On 1st January 2005, the Government of India issued patent ordinance according to which the Indian pharma companies can no longer produce patented drugs.

So now the companies have started exploring new business opportunities, including contract research (drug discovery and clinical trials), co-marketing alliances and contract manufacturing.

A few years ago, investment in R&D was as low as 0.001% of the total R&D worldwide, but now companies are focusing on drug discovery and R&D. They are spending over 5% of their turnover on R&D e.g. Wockhardt (8%), Cipla (4%), Cadila (4.45%).

The value of Indian Over-The-Counter Medicines (OTCs) market is over US$ 940 million and is growing at the rate of 20% per year. There are about 61 US FDA approved plants in India, which will help Indian companies grab the opportunity of contract manufacturing.

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Indian Pharmaceutical Sector: Current Scenario

According to the Economic Survey (2006-07), the pharmaceuticals industry had achieved a turnover of about US$ 12 billion in 2005-06, and is expected to grow by 13% in 2007. Its pharma export value reached about US$ 4.7 billion during 2005-06. Pharmaceutical industry accounts for about 2.91% of total FDI into the country. The FDI in pharmaceutical sector is estimated to have touched US$ 172 million, thereby showing a compounded annual growth rate of about 62.6%.
 
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Indian Pharmaceutical Sector: Future Scenario

The dream of Indian pharmaceutical companies for marking their presence globally and competing with the pharmaceutical companies from the developed countries like Europe, Japan, and United States is now coming true.

The new patent regime has led many multinational pharmaceutical companies to look at India as an attractive destination not only for R&D but also for contract manufacturing, conduct of clinical trials and generic drug research.

With market value of about US$ 45billion in 2005, the generic sector is expected to grow to US$ 100billion in the next few years. The Indian companies are using the revenue generated from generic drug sales to promote drug discovery projects and new delivery technologies.
 
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