Economic Analysis Pharma Ppt
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Transcript of Economic Analysis Pharma Ppt
Economic analysis of pharma sector
Pharmaceutical industry
Develops, produces, and markets drugs licensed for use as medications
These companies are allowed to deal in generic and /or brand medications and medical devices
They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs
Unique features of the sector
Research and development
Cost of innovation
Drug testing & development
Me-too drugs
Orphan drugs
Patents
Indian pharma industry
January 1, 2005, of a system of product patents was introduced
World's third-largest by volume and is likely to lead the manufacturing sector of India
India's bio-tech industry clocked a 17 percent growth with revenues of rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal
Factors influencing the sector
The growing population of over a billion A huge patient base Increasing incomes Improving healthcare infrastructure An increase in lifestyle-related diseases such as
diabetes, cardiovascular diseases, and central nervous system
Penetration of health insurance Adoption of patented products Patent expiries and aging population in the US, Europe,
and Japan
Indian pharmaceutical evolution
Phase II
Government Control
• Indian Patent Act –1970
• Drug prices capped
• Local companies begin to make an impact
Phase III Development Phase
• Process development
• Production infrastructure creation
• Export initiatives
Phase IV
Growth Phase
• Rapid expansion of domestic market
• International market development
• Research orientation
Phase V
Innovation and Research
• New IP law
• Discovery Research
• Convergence
1970 1980 1990 2000 2010
Phase I
Early Years
• Market share domination by foreign companies
• Relative absence of organized Indian companies
Economic features of indian pharmaceutical industry
Demand is price inelastic(largely)
Supply is elastic
There is constant returns to scale
Capitalization requirements and return times rival
Product life cycle(dependent on patent norms)
Types of competition
Highly competitive
Top 5 players have mere 18% of market share
Lower fixed cost and high working capital
Concentration ratio is very low
High growth prospects
Entry barriers are very low
Types of competition
End user different from influencer
Govt. Plays important role in price regulation through NPPA
Low bargaining power of suppliers
Advances in biotechnology – threat to synthetic pharma industry
Top 10 Pharmaceuticals in India (as of 2010)
Rank CompanyRevenue 2010 (Rs
crore)Revenue 2010 (Rs
billion)
1 Cipla 4,198.96 41.989
2 Ranbaxy(Taken over by Daiichi Sankyo in 2008)
4,162.25 41.622
3 Dr. Reddy's Laboratories 3,763.72 37.637
4 Sun Pharmaceutical 2,463.59 24.635
5 Lupin Ltd 2,215.52 22.155
6 Aurobindo Pharma 2,081.19 20.801
7 GlaxoSmithKline(British company)
1,773.41 17.734
8 Cadila Healthcare 1,613 16.13
9 Aventis Pharma(Swedish company)
983.80 9.838
10 Ipca Laboratories 980.44 9.8044
The future trend of the market
Currently the market seems like a perfectly competitive market
Markets big players start to leverage on R&D and form cartels or merge
As large players begin to dominate, the competition takes the face of oligopoly with high entry barriers
Indian perspective
BIG BRANDS FORM CARTELS OR MERGE
MARKET IS DIVIDED BY ENTRY BARRIERS
AND R&D
SMALL FIRMS
Imports
The imports of pharmaceuticals are estimated at 10 to 12 percent of the total market.
The major suppliers are Switzerland, China, USA, Germany, Italy, Denmark, France, and UK
USA accounts for 14% of total world imports, followed by Switzerland (4.8%), Japan and Canada (3%)
Imports include raw materials and finished products.
Some major pharmaceuticals which are imported include provitamins and vitamins, cortisones, hydrocortisone, insulin, penicillin, oesetrogen, progesterone and other hormones, erythromycin and other antibiotics, antisera other blood fraction, and glycosides.
The imports from Switzerland, US and Germany primarily consist of finished medicament in dosage forms for retail sales
Exports
Indian pharmaceutical industry ranks 17th with respect to exports value of actives and dosage
Exports constitute nearly 40 per cent of the production, with formulations contributing 55 per cent and bulk drugs 45 per cent
The overall pharmaceutical exports are estimated to increase at a CAGR of 30-32 % and reach us$ 18.3 billion in 2011-2012
Patents amendment act-2005
This act is the third of three amendments to the patents act of 1970, to bring India’s patent regime into compliance with the WTO TRIPS agreement.
The patents (amendment) act, 2005 extends the product patent protection to the areas of pharmaceuticals and agricultural chemicals.
FDI in Pharma
Sought out destination for foreign players Industrial licensing has been abolished Ministry of Chemicals and Fertilizers permits 100% FDI Exemption from DPCO if product is patented under the Indian
Patent Act and developed through indigenous R&D in India
Trend of acquisition of indian companies by mnc’s
Indian Company MNC
Matrix Lab Mylan Inc
Dabur Pharma Fresenius
Ranbaxy Daiichi Sankyo
Shanta Biotech Sanofi Aventis
Orchid Chemicals Hospira
Piramal Health Care Abott
Negatives of acquisition
Reducing domestic availability of drugs Reduce competition Oligopolistic market and cartelization Cases of emergency Sustainable growth of economy
DPCO
The drugs price control order (DPCO), 1995 is an order issued by the government of India under section 3 of the essential commodities act, 1955 to regulate the prices of drugs.
The order inter alia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by government and penalties for contravention of provisions among other things.
Drugs and formulations have been subjected to price control for more than three decades now.