Pharmaceutical industry in India

The Pharmaceutical industry in India is the world's third-largest in terms of volume and stands 14th in terms of value. According to Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the total turnover of India's pharmaceuticals industry between 2008 and September 2009 was US$21.04 billion. While the domestic market was worth US$12.26 billion. Sale of all types of medicines in the country is expected to reach around US$19.22 billion by 2012. Exports of pharmaceuticals products from India increased from US$6.23 billion in 2006-07 to US$8.7 billion in 2008-09 a combined annual growth rate of 21.25%. According to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion.

Some of the major pharmaceutical firms including Sun Pharmaceutical, Cadila Healthcare and Piramal Healthcare.

The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970. However, economic liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the then Finance Minister, Dr. Manmohan Singh enabled the industry to become what it is today. This patent act removed composition patents from food and drugs, and though it kept process patents, these were shortened to a period of five to seven years.

The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market, and while they streamed out. Indian companies carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby steps towards drug innovation, the industry as a whole has been following this business model until the present.

India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.

Pharmaceutical Statistics

Top 20 Publicly Listed Life Science companies in India, as of 2010

Rank	Company	Revenue 2011 (USD millions)	Revenue 2011 (Rs crore)
1	Cipla	1348.51
2	Ranbaxy	1327.56
3	Dr. Reddy's Laboratories	1178
4	Lupin Ltd	929.84
5	Aurobindo Pharma	865.19
6	Dabur	700.3
7	Sun Pharmaceutical	673.99
8	Cadila Healthcare	629.45
9	Jubilant Lifesciences	561.03
10	Piramal Healthcare	480.26
11	GlaxoSmithKline Pharmaceuticals Ltd	475.8
12	Ipca Laboratories	390
13	Wockhardt	381.23
14	Torrent Pharmaceuticals	380.2
15	Sterling Bio	358.1
16	Biocon	340.38
17	Orchid Chemicals & Pharmaceuticals Limited	320.62
18	Alembic	270.62
19	Aventis Pharma	263.75
20	Glenmark Pharmaceuticals	260.14

Pharmaceutical industry today

The number of purely Indian pharma companies is fairly low. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in India at lowest cost. In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported, mostly to the United States and Russia[25]. Most of the players in the market are small-to-medium enterprises; 250 of the largest companies control 70% of the Indian market. Thanks to the 1970 Patent Act, multinationals represent only 35% of the market, down from 70% thirty years ago[20].

Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical. Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private enterprise. Although many of these companies are publicly owned, leadership passes from father to son and the founding family holds a majority share.

In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at approximately 10% per year[27]. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. There are 74 U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies[21,27]. Growth in other fields notwithstanding, generics are still a large part of the picture. London research company Global Insight estimates that India’s share of the global generics market will have risen from 4% to 33% by 2007[27]. India has play a greatest role & plate form for world's pharmaceutical company in very cheap price and land. Every pharma company can grow in India very easily.

Biotechnology Statistics

Top 20 Biopharmaceutical & Biotechnology companies in India, as of 2011

Rank	Company	Revenue 2011 (Rs crore)	Revenue 2011 (USD millions)
1	Biocon	1483
2	Serum Institute of India	1041
3	Panacea Biotec	928.41
4	Nuziveedu Seeds Private Limited	610
5	Reliance Life Sciences	490
6	Quintiles	476.25
7	Novo Nordisk	462
8	Rasi Seeds	371.88
9	Mahyco	364.9
10	Trans Asia	350
11	Ankur Seeds	325
12	Syngene International	318
13	Bharat Biotech International	298.34
14	Indian Immunologicals Limited	283
15	Krishidhan Seeds	276.13
16	Shantha Biotechnics	272
17	Novozymes	242
18	Bharat Serums	226
19	Jubilant Lifesciences	210
20	Eli Lilly and Company	204

Patents

As it expands its core business, the industry is being forced to adapt its business model to recent changes in the operating environment. The first and most significant change was the January 1, 2005 enactment of an amendment to India’s patent law that reinstated product patents for the first time since 1972. The legislation took effect on the deadline set by the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which mandated patent protection on both products and processes for a period of 20 years. Under this new law, India will be forced to recognize not only new patents but also any patents filed after January 1, 1995. Indian companies achieved their status in the domestic market by breaking these product patents, and it is estimated that within the next few years, they will lose $650 million of the local generics market to patent-holders[42].

In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The multinationals narrowed their focus onto high-end patients who make up only 12% of the market, taking advantage of their newly bestowed patent protection. Meanwhile, Indian firms have chosen to take their existing product portfolios and target semi-urban and rural populations[45].

Product development

Indian companies are also starting to adapt their product development processes to the new environment. For years, firms have made their ways into the global market by researching generic competitors to patented drugs and following up with litigation to challenge the patent. This approach remains untouched by the new patent regime and looks to increase in the future. However, those that can afford it have set their sights on an even higher goal: new molecule discovery. Although the initial investment is huge, companies are lured by the promise of hefty profit margins and thas a legitimate competitor in the global industry. Local firms have slowly been investing more money into their R&D programs or have formed alliances to tap into these opportunities.

Small and medium enterprises

As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is not as bright. The excise structure changed so that companies now have to pay a 16% tax on the maximum retail price (MRP) of their products, as opposed to on the ex-factory price. Consequently, larger companies are cutting back on outsourcing and what business is left is shifting to companies with facilities in the four tax-free states - Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Jharkhand.[12]Consequently a large number of pharmaceutical manufacturers shifted their plant to these states, as it became almost impossible to continue operating in non tax free zones. But in a matter of a couple of years the excise duty was revised on two occasions, first it was reduced to 8% and then to 4%. As a result the benefits of shifting to a tax free zone was negated. This resulted in, factories in the tax free zones, to start up third party manufacturing. Under this these factories produced goods under the brand names of other parties on job work basis.

As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline for compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this should be beneficial to consumers and the industry at large, SMEs have been finding it difficult to find the funds to upgrade their manufacturing plants, resulting in the closure of many facilities. Others invested the money to bring their facilities to compliance, but these operations were located in non-tax-free states, making it difficult to compete in the wake of the new excise tax.

Challenges

All of these changes are ultimately good for the Indian pharmaceutical industry, which suffered in the past from inadequate regulation and large quantities of spurious drugs. They force the industry to reach a level necessary for global competitiveness. However, they have also exposed some of the inadequacies in the industry today. Its main weakness is an underdeveloped new molecule discovery program. Even after the increased investment, market leaders such as Ranbaxy and Dr. Reddy’s Laboratories spent only 5-10% of their revenues on R&D, lagging behind Western pharmaceuticals like Pfizer, whose research budget last year was greater than the combined revenues of the entire Indian pharmaceutical industry[13, 37]. This disparity is too great to be explained by cost differentials, and it comes when advances in genomics have made research equipment more expensive than ever. The drug discovery process is further hindered by a dearth of qualified molecular biologists. Due to the disconnect between curriculum and industry, pharmas in India also lack the academic collaboration that is crucial to drug development in the West[13].

R&D

Both the Indian central and state governments have recognized R&D as an important driver in the growth of their pharma businesses and conferred tax deductions for expenses related to research and development. They have granted other concessions as well, such as reduced interest rates for export financing and a cut in the number of drugs under price control. Government support is not the only thing in Indian pharma’s favor, though; companies also have access to a highly developed IT industry that can partner with them in new molecule discovery in r&d.

Labour force

India’s greatest strengths lie in its people. India also boasts of well-educated, English-speaking labor force that is the base of its competitive advantage. Although molecular biologists are in short supply, there are a number of talented chemists who are equally as important in the discovery process. In addition, there has been a reverse brain drain effect in which scientists are returning from abroad to accept positions at lower salaries at Indian companies. Once there, these foreign-trained scientists can transfer the benefits of their knowledge and experience to all of those who work with them[13,25]. India’s wealth of people extends benefits to another part of the drug commercialization process as well. With one of the largest and most genetically diverse populations in any single country, India can recruit for clinical trials more quickly and perform them more cheaply than countries in the West[47]. Indian firms have just recently started to leverage.

Corporate Catalyst

Multinational Pharmaceutical Companies ranked as per active presence of sales, marketing and business in India

1. Pfizer
2. GlaxoSmithKline
3. Sanofi Aventis
4. Merck
5. Johnson and Johnson
6. Amgen
7. Novartis
8. Roche
9. Bristol-Myers Squibb
10. Wyeth
11. Eli Lilly
12. Schering-Plough
13. Abbott
14. Takeda
15. Boehringer Ingelheim
16. Astellas

Biopharmaceuticals

Relationship between pharmaceuticals and biotechnology

Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India. Bio-tech there still plays the role of pharma’s little sister, but many outsiders have high expectations for the future. India accounted for 2% of the $41 billion global biotech market and in 2003 was ranked 3rd in the Asia-Pacific region and 11th in the world in number of biotechs.[45] In 2004-5, the Indian biotech industry saw its revenues grow 37% to $1.1 billion.[2,9] The Indian biotech market is dominated by biopharmaceuticals; 75% of 2004-5 revenues came from biopharmaceuticals, which saw 30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of sales[46]. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep the market in biogenerics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities.

Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars in revenues. At last count there were 265 firms registered in India, over 75% of which were incorporated in the last five years.[2,47] The newness of the companies explains the industry’s high consolidation in both physical and financial terms. Almost 50% of all biotechs are in or around Bangalore, and the toop ten companies capture 47% of the market. The top five companies were homegrown; Indian firms account for 62% of the biopharma sector and 52% of the industry as a whole.[4,46] The Association of Biotechnology-Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is possible.[7,47]

Comparison with the U.S.

The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-ups while the majority of the market is controlled by a few powerful companies. Both are dependent upon government grants and venture capitalists for funding because neither will be commercially viable for years. Pharmaceutical companies in both countries have recognized the potential effect that biotechnology could have on their pipelines and have responded by either investing in existing start-ups or venturing into the field themselves.[36] In both India and the U.S., as well as in much of the globe, biotech is seen as a hot field with a lot of growth potential.

Relationship with IT

Many analysts have observed that the hype around the biotech sector mirrors that of the IT sector. Biotech colleges have been popping up around the country eager to service the pools of students that want to take advantage of a growing industry.[7] The International Finance Commission, the private investment arm of the World Bank, called India the “centerpiece of IFC’s global biotech strategy.” Of the $110 million invested in 14 biotech projects investment globally, the IFC has given $43 million to 4 projects in India.[29] According to Dr. Manju Sharma, former director of the Department of Biotechnology, the biotech industry could become the “single largest sector for employment of skilled human resource in the years to come.”[5] British Prime Minister Tony Blair was similarly impressed, citing the success of India’s biotech industry as the reason for his own country’s own biotech opportunities.[22] Malaysia is also looking to India as an example for growing its own biotech industry.[41]

Government support

The Indian government has been very supportive. It established the Department of Biotechnology in 1986 under the Ministry of Science and Technology.[47] Since then, there have been a number of dispensations offered by both the central government and various states to encourage the growth of the industry. India’s science minister launched a program that provides tax incentives and grants for biotech start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large animals as part of the minister’s initiative.[10] States have started to vie with one another for biotech business, and they are offering such goodies as exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities[19].

Foreign investment

The government has also taken steps to encourage foreign investment in its biotech sector. An initiative passed earlier this year allowed 100% foreign direct investment without compulsory licensing from the government1.[6] In April, a delegation headed by the Kapil Sibal, the minister of science and technology and ocean development, visited five cities in the U.S. to encourage investment in India, with special emphasis on biotech.[32] Just two months later, Sibal returned to the U.S. to unveil India’s biotech growth strategy at the BIO2005 conference in Philadelphia.[9] 100%of fdi is allowed in India.

Challenges

The biotech sector faces some major challenges in its quest for growth. Chief among them is a lack of funding, particularly for firms that are just starting out. The most likely sources of funds are government grants and venture capital, which is a relatively young industry in India. Government grants are difficult to secure, and due to the expensive and uncertain nature of biotech research, venture capitalists are reluctant to invest in firms that have not yet developed a commercially viable product.[26] As previously mentioned, India hopes to solve its funding problem by attracting overseas investors and partners. Before these potential saviors will invest significant sums in the industry, however, there needs to be better scientific and financial accountability. India is slowly working towards these goals, but it will be a while before they are up to the standards of Western investors.

India’s biotech firms share another problem with their pharmaceutical cousins: a lack of qualified employees. Biotech has the additional disadvantage of competing against IT for ambitious, science-minded students but not being able to guarantee the same compensation. An aspiring researcher in India needs 7–10 years of education covering a range of specialties in order to qualify to work in biotech. Even if a student does choose to go on the biotech path, the ineffectual curriculum at many universities makes it doubtful as to whether he will be qualified to work in the field once finished. One estimate shows that 10% of upper-echelon biotech recruits have come from foreign countries. While this is not a problem, per se, it drives up cost in a country whose competitive advantage is based on cheap, high-quality labor. Far from ending with scientists, there is also a shortage of people with a knowledge of biotechnology in related fields: doctors, lawyers, programmers, marketing personnel and others.[7,15,17]

While little has been done about the latter half of the employee crunch, the government has addressed the problem of educated but unqualified candidates in its Draft National Biotech Development Strategy. This plan included a proposal to create a National Task Force that would work with the biotech industry to revise the curriculum for undergraduate and graduate study in life sciences and biotechnology. The government’s strategy also stated intentions to increase the number of PhD Fellowships awarded by the Department of Biotechnology to 200 per year. These human resources will be further leveraged with a “Bio-Edu-Grid” that will knit together the resources of the academic and scientific industrial communities, much as they are in the U.S.[5]

See also

• Pharmaceutical marketing
• Pharmaceutical industry
• National pharmaceuticals policy
• Opium and Alkaloid Works
• Contract Research Organization
• Genome Valley

External links

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