A STUDY ON THE PHARMACEUTICAL INDUSTRY IN INDIA

By:

Group-1

Basavraj Masuti

Bhupesh Dasgupta

Niket Kumar Soni

Nikita Aggarwal

Robin Rathi

Shweta Punj

INTRODUCTION

OVERVIEWPharmaceutical Industry is world’s largest industry estimated at about 773$billion.

India ranks third in terms of manufacturing pharmaceutical products by volume.

A high technology and knowledge-intensive industry.

Characterized by a highly risky and lengthy R&D process.

For the year 2008-2009 the total turnover of Indian pharmaceutical industry was US$21.04 billon

For the year 2008-2009 the total domestic market worth was US$12.26 billion

For the year 2008-2009 the total exports were US$ 8.7 billon

The Indian Pharmaceutical Industry stands 3rd in the world in terms of volume and 14th in terms of value.

Industry has over 60,000 generic brands across 60 therapeutic categories and manufactures more than 500 different active pharmaceutical ingredients (APIs).

Present Scenario of Indian Pharmaceutical

IndustryThis industry is concentrated at the top and highly fragmented at the bottom, with about 24,000 players.

Major Players:

Type Major Players

Pharmaceuticals-Gelatine CapsulesNatural CapsulesMedi CapsSunil Healthcare

Pharmaceuticals - Indian - Bulk DrugsLupinJubilant lifeOrchid Chemicals

Pharmaceuticals - Indian - Bulk Drugs & Formula Lrg

Dr. Reddy’s LabCiplaRanbaxy Labs

Pharmaceuticals - Indian - Bulk Drugs & Formula M/S

Intas PharmaAlkem labAdityaMedisales

Pharmaceuticals - Indian – Formulations

Arvind RemediesAjanta Pharm Ankur Drugs

Pharmaceuticals - I V Fluids

Parenteral DrugsVenus RemediesAhlcon Parent(I)

Pharmaceuticals - Multinational Abbott IndiaGlaxosmit PharmaAventis Pharma

The Indian pharmaceutical market is expected to grow at a CAGR of 14.5% between 2009 and 2019, from $17.1billion to $66.3 billion, respectively.

OBJECTIVES OF THE STUDY

To study the market share of the major players in the Indian Pharmaceutical Industry.

To find the nature of competition in Indian Pharmaceutical industry (i.e. Measures of concentration)

To identify the customer pattern (buying) / market segments.

To study different type of drugs and provisions related to them.

To conduct the PESTLE analysis of the Indian Pharmaceutical Industry.

To study the mergers and acquisitions in Indian Pharmaceutical Industry and its benefits to the companies

To study the international exposure ( import-export initiatives)

To examine the technological advancement (R & D)

Contd…To study marketing initiatives taken by Indian Pharmaceutical Companies.

To foresee future outlook of Indian Pharmaceutical Industry.

To study Indian Pharmaceutical Industry in comparison to other countries (USA, Germany, China etc).

INDUSTRY ANALYSIS

MARKET SHARE OF MAJOR PLAYERS

It is seen that Piramal has the largest share (6.2 per cent) with revenue of USD 717 million during F Y10.

During F Y10, Lupin posted the highest growth in revenue among the major players.

Ranbaxy, with a revenue base of USD524 million.The top four firms account for just over one-fifth of the market share.

NATURE OF COMPETITION

The Indian pharmaceutical market is highly competitive and remains dominated by low-priced, domestically-produced generics.

There is huge competition based on the price of the product resulting in shrinking profit margins

The market is divided among the top 10 pharma companies accounting for 36.1% of the overall R&H sales

The domestic market is very competitive with a large number of players and is characterized by several market segments

PORTER’S FIVE FORCESRivalry among existing firms: It is highly competitive market as top 4 firms account for over 20 per cent of the market share and lower fixed cost and high working capital is involved.

Bargaining power of buyers: The buyers are scattered and they as such does not wield much power in the pricing of the products. However, government with its policies plays an important role in regulating pricing through the NPPA (National Pharmaceutical Pricing Authority).

Bargaining power of suppliers: The suppliers have very low bargaining power and the companies in the pharma industry can switch from their suppliers without incurring a very high cost.

Barriers to entry: Pharma industry is one of the most easily accessible industries as the capital requirement for the industry is very low, creating a regional distribution network is easy, since the point of sales is restricted in this industry in India. The patent regime has raised the barriers to entry.

CONTD…Threat of substitutes: This is one of the great advantages of the pharma industry as demand for pharma products continues and industry thrives independent of whatever happens. However, in recent times, the advances made in the field of biotechnology, can prove to be a threat to the synthetic pharma industry.

CONCENTRATION RATIO It is measured by Herfindahl-Hirschman Index.

India's Domestic Pharmaceutical Market (12 Months Ended January 2009)

Source: ORG IMS

Company Size ($ Billion) Market Share (%) Growth Rate (%)

Total Pharma Market

6.9 100.0 9.9

Cipla .36 5.3 13.4

Ranbaxy .34 5.0 11.5

GlaxoSmithkline .29 4.3 -1.2

Piramal Healthcare .27 3.9 11.7

ZydusCadila .24 3.6 6.8

The HHI is expressed as:

HHI = s1^2 + s2^2 + s3^2 + ... + sn^2 (where sn is the market share of the ith firm).

A Herfindahl Index with a result of less than 1,000 to be a competitive marketplace; a result of 1,000-1,800 to be a moderately concentrated marketplace; and a result of 1,800 or greater to be a highly concentrated marketplace.

HII for pharmaceutical industry = 5.3^2 + 5^2 + 4.3^2 + 3.9^2 + 3.6^2

= 99.72

HII is very less than 1000 which indicates it to be a low concentrated market place.

TYPES OF DRUGSConsumer or prescription products

Institutional market products

Industrial market products

OTC (Over the counter) or non-prescription products

PEST ANALYSIS• The main regulatory body in

India is CDSCO • 100% FDI regime in

pharmaceutical sector• IPR regime, popularly known

as the patent act was brought into action in January 2005

• Govt. decided to impose excise duty on the maximum retail price of all drugs

• The price in India is controlled by National Pharmaceutical Pricing Authority (NPPA)

• Indian pharma market slowed down to 13.5% in 2011

• Reasons for slowdown –• a.) rise in interest rate• b.) home loans and EMIs are

going up, salary growth has slowed down as a result disposable income has also got impacted.

• Pharmaceutical companies are using IT across various functional areas like R&D, QC, QA, clinical development etc.

• A number of software solutions are commonly used in the pharmaceutical industry

• Some of the software's are ERP, LIMS, SFA, CRM etc.

• As a result of huge population the demand for healthcare product in India is very high.

• Healthcare infrastructure is poor, the quality and availability of medicines in rural area is dubious

• Healthcare is a low priority when it comes to income allocation, with average consumer expenditure on healthcare at just 7%.

Political Economic

Technological

Social

MERGERS AND AQUISITIONS

Abott laboratories-Piramal

Pfizer Animal Health Ltd – Vetnex Animal Health Ltd

Abbott laboratories – Wockhardt (Nutrition Business)

Sanofi Aventis – Shantha Biotech

Fresenius Kabi AG – Dabur Pharma

Ranbaxy Daiichi – Sankyo

INTERNATIONAL EXPOSURE

Ranbaxy has an expanding international portfolio of affiliates, joint ventures and representative offices across the globe

The Indian government has encouraged private and public sectors as well as foreign investors to increase investments in pharmaceutical industry

RESEARCH AND DEVELOPMENT

The R&D activity in the Indian Pharmaceutical industry had its growth with the enactment of the Product Patent Act in 2005

The process of research and development is done in form of new drug discovery, contract research or clinical trials

The R & D expenditure by the Indian pharmaceutical industry is estimated to be 1.9% of the industry’s turnover

It is very low as compared to expenditure made by foreign research-based pharmaceutical companies which is approximately 10-16% of the turnover on R & D.

MARKETING INITIATIVESMarketing is done through different ways like :

Direct Marketing

B2B Marketing

Companies are using different method for promotion like television, hoarding, and free sampling and distributor sales representatives for spreading awareness among the consumers

Marketing is mostly done in electronic media and print media which are effective tool for marketing for mass

FUTURE OUTLOOK

• Indian people are becoming more careful regarding their health • Healthcare grew from 4 percent of average household in 1995 to

7 percent in 2005 and is expected to grow by 13 percent by 2015• Indian Pharmaceuticals market growth will be well distributed

between rural and urban centers• By 2015 India is projected to be the 10th largest market just

behind U.S, Japan, France ,Germany, China, Spain, Italy, Canada, Currently it Ranks 14th

COMPARISON WITH OTHER COUNTRIES

India is the third most important pharmaceutical market in Asia after China and Korea

Indian pharmaceuticals sales is expected to rise by 8 percent per annum to around EUR 20 billion as compared with 6 percent in whole world

Per-capita sale of pharmaceuticals amount EUR 400 per year in Western countries which is forty times higher than in India

Drugs manufacturing in India is up to 50 percent cheaper than Western countries because of low development cost

CONCLUSIONIndia is in process of becoming major pharmaceutical location. The main drivers of growth are growing population which is around 1.5 billion and may overtake Chinese population by 2025,and also the growing number of older people with markedly higher demand for medicine

Cheap skilled workforce, attractiveness towards industry and a steady demand in the market will help India take a respectable position in the global pharmacy market.

Pharmaceutical industry is reorienting itself and focused on self developed medicine and/or contract research and production for western drugs company