Generic medicines in india promulgating growth & access

KNOWLEDGE PARTNER

GENERIC MEDICINES IN INDIAPromulgating Growth & Access

September 2015

ACKNOWLEDGEMENT

D.S. Rawat

It gives me immense pleasure to watch ASSOCHAM organize the Conference on Generic Medicines in India – Promulgating growth & access, in association with the Department of Pharmaceuticals, Government of India. Indian Pharma market is predominantly a branded generics market, and this segment contributes around 90% of total sales, and also represents one of the key strengths of the market, encompassing the OTC segment as well. Only about 10% of the market constitutes commodity generics sold through institutional sales and innovator products. Government of India has also its focus on boosting the growth of generics within India as well as for exports. Soon to be launched “Jan Aushadhi” scheme is a testament to the importance of generics for public health and well being. This being said, the Generic Medicine industry in India faces challenges in the form of regulatory and licensing issues and ASSOCHAM hopes that through the platform created at this Conference a way forward can be found and initiated.

I extend my heartiest thanks to all the stakeholders including Department of Pharmaceuticals, ICMR, Belco Pharma, CiPi, and HPMA among others for this Conference. I also thank our Knowledge Partner of this Conference “RNCOS” for its wonderful efforts in putting up this report on the subject of Indian Generic Medicine industry.

I also acknowledge the efforts put in by Sandeep Kochhar, Deputy Director and Head-ASSOCHAM Healthcare & Pharma Division and his team members Shagun Ahlawat and Karanveer Singh for organizing this Conference.

I not only wish the Conference a great success but also assume that ASSOCHAM shall continue to organize such programs for larger public benefits with a greater degree of excellence.

(Secretary General)ASSOCHAM

(D.S.Rawat)Secretary General

ASSOCHAM

1. India Demographics 1.1 Ageing Population 1.2 Healthcare Expenditure 1.3 Disease Profile 1.3.1 Cardiovascular Diseases 1.3.2 Diabetes 1.3.3 Cancer

2. India Pharmaceutical Market Outlook

3. Drivers & Challenges 3.1 Drivers 3.1.1 Rising Healthcare Expenditures 3.1.2 Ongoing Patent Cliff 3.2 Challenges 3.2.1 Monopoly of Doctors in Prescribing Branded Medicines 3.2.2 Lack of Price-Control 3.2.3 Weak Supply Chain Management 3.2.4 Lack of Promotion 3.2.5 Quality Control 3.2.6 Lack of Awareness

4. India Generic Overview 4.1 Indian Market Performance relative to the World 4.2 Market Size 4.3 Top Generic Drugs Globally 4.4 Key Therapeutic Areas for Generics

5. Patents Expiry of Blockbuster Drugs

6. Consolidations in Generics Industry

7. Government Initiatives 7.1 Jan Aushadhi Scheme for the Promotion of Generic Drugs 7.2 Free Essential Drug Scheme 7.3 ‘Sehat’- A Telemedicine Initiative to Drive Generic Drug Sales

8. Competition 8.1 Market Share of Major Players

9. Future Outlook

10. Opportunities

11. Recommendations

TABLE OF CONTENTS

LIST OF FIGURES

Figure1-1: Population Age Above 65 years (Million) 2009-2014Figure1-2: Healthcare Expenditure (% of GDP) 2009-2014Figure1-3: Diabetes Population in the Age Group 20-79 years (Million) 2013 & 2030Figure2-1: Breakdown of India Pharmaceutical Market by Value (%) 2009-2014Figure2-2: Domestic Pharmaceutical Market (Billion US$) 2014-2020Figure4-1: India Generics Drug Market (Billion US$) 2009-2014Figure4-2: Revenue Share of Major Generics Segments (%) 2014Figure9-1: Generics Drug Market (Billion US$) 2015-2020

LIST OF TABLES

Table4-1: Similarities and Differences Between Branded And Generics DrugsTable4-2: Top Generic Drugs Globally by Prescription (Million) 2014Table5-1: List of Blockbustor Drugs Losing Patent (2015-2020)Table6-1: Major Consolidations in Indian Generic Industry (2014-2015)Table7-1: Free Drugs Provided by StatesTable8-1: Share of Major Players in Generics Drug Market (%) 2014

LIST OF FIGURES & TABLES

1.1 Ageing Population

India is one of the fastest growing economies in the world, expected to overtake china within the next two years. According to Central Statistics organization India is likely to have 20% of the world’s working-age population in the coming years. Presently, the country is the home to the largest cohort of young people in the world, with about 59% of its population under the age of 33. This provides India a competitive advantage over China and other Asian countries.

However, the country is also witnessing the rise of ageing population (people above 65 years of age). The older age group accounts for 5% of the country’s population. The proportion of the older age group in the country’s population will equal the current US population (300 Million) by 2050. The country will witness a marginal rise in the old age dependency ratio from 13% in 2000 to 32.8% in 2050. Precisely, three Indians in the working age population will have to take care of one elderly by 2050 as compared to eight at present.

A closer look at the ageing trend at the regional level reveals that southern states are ageing faster among all the regions. Presently, states such as Kerala, Tamil Nadu, Andhra Pradesh and Karnataka account for 21% of the population. These states have the total fertility rate (TFR) below 2.1 which states that the median age of the population is declining. These numbers are comparable to fast-ageing countries such as Norway, Australia, Sweden, Germany and Canada. States such as Bihar, Uttar Pradesh and Rajasthan have a TFR of above 3, which is also reflected in their young population. Also, the proportion of people above the retirement age (60 years) in the southern states is 11% as compared to the country’s average 9%. Thus, by observing the current scenario, southern India is likely to age faster than the rest of India.

Figure1-1: Population Age Above 65 years (Million) 2009-2014

1. India Demographics

1,100

1,120

1,140

1,160

1,180

1,200

1,220

1,240

2009 2010 2011 2012 2013 2014

56

57

58

59

60

61

62

Population (Million) Population above 65 years (Million)

04 Generic Medicines In India Promulgating Growth & Access

SOURCE- CSO

1.2 Healthcare Expenditure

The growing burden of an ageing population, will demand for better healthcare facilities including higher investment in medical research and development. The country has underdeveloped geriatric care with geriatric specialists in shortfall. India has the most inadequate medical infrastructure with approximately nine hospital beds per 10,000 people as compared with a global average of 30. Healthcare expenditure has increased from being 4.1% of GDP during 2009 to 6% of the GDP in 2014. India ranks among the bottom five countries globally with the lowest public health spending. Although public healthcare services are subsidized in the country, but meagre infrastructure and services are prompting the majority of the population to switch to better-equipped private providers.

Personal disposable income in India has grown by 9% since 2009. With the rise in income, consumption patterns have changed and a new middle class has emerged, which is growing at a fast pace. The share of middle class in the total population will likely to increase from around 5% in 2005 to 41% in 2025. The rising middle class population will be a predominant factor for more value based healthcare facilities. Additionally, India has limited healthcare insurance coverage (both private and government) than other countries, which leads to nearly 80% of the out of the pocket expenditure on medical facilities. This opens significant opportunities for businesses such as primary healthcare as well as wellness and disease management.

Figure1-2: Healthcare Expenditure (% of GDP) 2009-2014

0.0

0.5

1.0

1.5

2.0

2.5

2009 2010 2011 2012 2013 2014

0%

1%

2%

3%

4%

5%

6%

7%

GDP (Billion US$) Healthcare Expenditure (% of GDP)

05Generic Medicines In India Promulgating Growth & Access

SOURCE- World Bank

1.3 Disease Profile

With the changing urban lifestyles, the prevalence of non communicable diseases such as diabetes, cardiovascular ailments etc. are tightening their grip in India. Apart from sedantry lifestyles, higher consumption of junk food, use of tobacco and alcohol, as well as psycho-social stress are considered key reasons for the increasing disease burden.

Rising obesity among the youth and the middle aged population is contributing significantly to such problems. India is ranked third in terms of the number of obese people. Obese individuals are at high risk of developing health problems, such as heart disease, stroke, diabetes, certain types of cancer, gout (joint pain caused by excess uric acid) and gallbladder disease. Being overweight can also cause problems such as sleep apnea (interrupted breathing during sleep) and osteoarthritis (wearing away of the joints). There were 30 Million obese people in India during 2013.

According to the WHO, one out of four Indians is at risk of dying from non-communicable diseases like diabetes, cardio-vascular ailments or cancer before 70 years of age. These diseases, including respiratory and other nutritional problems claim 60% of the total mortality reported in India. Diseases like cancer, chronic respiratory problems and cardiovascular diseases are amongst the biggest health threats, accounting for 38 Million deaths every year, with 28 Million deaths in low and middle income countries, including India. Heart and vascular diseases, diabetes, common cancers, chronic lung disease, and mental illness are the major NCDs prevalent in India.

1.3.1 Cardiovascular Diseases

Cardiovascular diseases are amongst the deadliest diseases in the world and India is no exception. Such diseases, which affect the heart and the blood vessels, resulting in heart attacks or strokes in extreme cases, account for 26% (2.5 Million) of the total deaths in India. According to the WHO estimates, the total economic loss due to non-communicable diseases in India between 2012 and 2030 is estimated to be US$ 2.17 trillion which is about two and a half times of India’s GDP.

Cardiovascular diseases are expected to be responsible for almost half of the aforementioned loss. The consequence of the deadly disease is the decline in the productivity of the working population ultimately hurting the profitability of businesses. Moreover, higher occurrence of cardiovascular diseases significantly reduces the purchasing power of customers who would have to spend much of their savings on their treatment.

1.3.2 Diabetes

India is one of the fastest growing diabetes markets in the world. With India emerging as the nation with the largest population of diabetics, it is important that an Indian company takes on the disease with cost-effective and easily accessible treatment. India has over 65 Million diabetes patients and by 2030 could comprise over 101 Million diabetes patients. The prevalence of diabetes is predicted to double globally from 171 Million in 2000 to 366 Million in 2030 with the maximum increase in India.

It is observed that the prevalence of diabetes in rural populations is one-quarter that of the urban population for India and other Indian sub-continent countries such as Bangladesh,


Nepal, Bhutan, and Sri Lanka. A lower proportion of the population is affected in states of Northern India such as Chandigarh (0.12 Million), Jharkhand (0.96 Million) as compared to Maharashtra (9.2 Million) and Tamil Nadu (4.8 Million) . The aetiology of diabetes in India is multifactorial and includes genetic factors, coupled with environmental influences such as obesity associated with rising living standards, steady urban migration, and lifestyle changes. The economic burden imposed by diabetes gets magnified because it leads to related complications, including heart, kidney, eye and foot diseases.

1.3.3 Cancer

India is progressively witnessing considerable rise in cancer cases. Some of the major factors associated with the disease are changing lifestyles, unhealthy diet patterns, and use of tobacco and alcohol. Also, skewed doctor to patient ratio, expensive medication and ignorance among the people contribute to high mortality due to cancer. There is a requirement of 1 cancer care unit per 100,000 populations, which is a far cry from the current scenario. With millions of new cases diagnosed every year in the country, the incidence of the disease is likely to rise fivefold by 2025.

According to the Health Ministry, there were around 492,000 cases of cancer in 2014 and this number would grow by 9.4% by 2020, accounting for 845,000 cases. The maximum number of cases registered till date are that of lung and oral cancers among men and cervix and breast cancers among women. Elderly men are more prone to prostate cancer besides kidney, penis and intestine cancer. It has been noted there are more than 300 cancer centres across India, and 40% of them are inadequately equipped with advanced cancer care equipment.

Figure1-3: Diabetes Population in the Age Group 20-79 years (Million) 2013 & 2030

2013

SOURCE- IDF

65.1

101.2

2030f


CAGR 2.6%

Figure2-1: Breakdown of India Pharmaceutical Market by Value (%) 2009-2014

2009e

57.1% 59.2%

42.9% 40.8%

2010e 2011e 2012e 2013e 2014e

SOURCE- RNCOS

Export

Domestic

India ranks 4th in pharmaceutical production in the world with a production output of about US$ 31 Billion in 2014. The country has a 1.4% share by value and 10% by volume in the global pharma industry. India is one of the leaders in pharmaceutical exports. The country exports drugs worldwide to more than 200 countries. During fiscal year 2013-2014, the country reported US$ 14.8 Billion of drug exports.

The major export markets for the country’s pharmaceutical products are Americas, Europe, China, Japan, Africa, etc. The US is single largest export destination. It accounts for nearly 28% of Indian pharmaceutical exports, followed by the European Union (18%) and Africa (17%). The pharma exports to the US market are high due to the large number of approvals from the USFDA. India has been the third-largest exporter of drugs to the US market by volume and it has 370 FDA-approved manufacturing facilities outside the US, which is the second largest in the world. Several Indian manufacturers such as Sun Pharma, Biocon, Cipla, Dr. Reddys, Zydus Cadila and Lupin have been deriving significant revenues from the US market. However, revision of regulatory policies by the US government, consolidations, and quality issues in certain manufacturing facilities of Indian companies will have severe adverse implications on the growth of exports.

Larger exports of Indian drugs in European and African countries are also supported by approvals from the World Health Organization and regulatory agencies from the respective regions. In addition, higher demand for therapeutics under the categories such as anti-malarial and anti-retrovirals are contributing substantially to the export revenue.

2. India Pharmaceutical Market Outlook

55.8% 52.7% 51.2% 51.0%

44.2% 47.3% 48.8% 49.0%


The domestic pharma market was valued at US$ 15.4 Billion in 2014 and is expected to expand at a CAGR of 13.3% to US$ 32.7 Billion by 2020. Driven by favorable demographics including growing aging population, increasing lifestyle diseases, steep growth in disposable incomes, and increasing penetration of Indian drug players in the global market, India is likely to be among the top three pharmaceutical markets by incremental growth and sixth largest market globally in absolute size.

Figure2-2: Domestic Pharmaceutical Market (Billion US$) 2014-2020

2014e

15.417.4

19.6

22.2

25.1

28.6

32.7

2015f 2016f 2017f 2018f 2019f 2020f

SOURCE- RNCOS

CAGR 13%


3. Drivers & Challenges

3.1 Drivers

3.2 Challenges

3.1.1 Rising Healthcare Expenditures

The Indian population has witnessed a steady rise in healthcare expenditure from 3.8% of the GDP in 2011 to 6% of the country’s GDP in 2014. The major chunk of the population (nearly 40% of Indians) live on less than US$1 per day and most of them have to pay out of their own pockets for medical services. Out-of-pocket spending in India is over four times higher than public spending on healthcare. The direct out-of pocket payments have pushed 2.2% of all healthcare users and one-fourth of all hospitalized patients, into poverty during 2014.

Thus, the progressive rise in healthcare expenditures has forced the government and private health insurance players to seek ways to control healthcare costs. Generic drugs play an essential role in alleviating the high costs of the healthcare system. These drugs are priced 80-85% lower than their branded counterparts. This pressure creates an increasing demand for generic drugs versus branded counterparts

3.1.2 Ongoing Patent Cliff

A rise in geriatric population across the globe is making the countries move to cheaper APIs and formulations which are India’s strengths. It is estimated that around US$ 40 Billion worth of drugs in the US and US$ 25 Billion worth of drugs in Europe will be going off patent (series of patent expirations of important prescription drugs) in the coming years. Patent expiry of Lipitor by Pfizer, Diovan by Novartis, Plavix by Bristol-Myers Squibb etc. have already pushed Indian generic players to expand in international markets.

Subsequently, some of the other global pharma majors such as Teva, Glaxosmithkline and Allergen are likely to lose patent exclusivity of several drugs. Therefore, the patent cliff is giving significant opportunity to Indian manufacturers to develop generic versions of respective patented drugs. India is a major market for generic drug manufacturing in the world, followed by South Korea and Japan.

3.2.1 Monopoly of Doctors in Prescribing Branded Medicines

Currently, fast moving branded medicines are manufactured by MNCs or large Indian companies. The branded medicines are usually expensive as they are strongly promoted through doctors and chemists and such promotional costs add to their retail prices, i.e., Maximum Retail Price (MRPs). The practice of bribing doctors by pharmaceutical companies to create more and more prescriptions is one of the major hurdles for the generics demand.


3.2.2 Lack of Price-Control

India is a branded generics dominated market. The companies are very possessive of their Brand Names and Brand Image. Most of them go out of the way to nurture and protect their brand names and hence will always ensure the quality and packing of the product. Hence, most of the drugs sold in the country are branded generics. These medicines are usually expensive as they are strongly promoted through doctors and chemists and such promotional costs add to their retail prices, i.e., Maximum Retail Price (MRPs).

On account of the lack of price control measures, consumers in India end up paying higher price for the majority of branded generics. The higher prices of medicines are a result of the commission being charged by pharmacist/pharmacies for recommending a particular company’s drug to the consumers. If the companies sell their drugs without having to indulge in promotions through pharmacists, patients/hospitals would get the same medicines at lower prices.

3.2.3 Weak Supply Chain Management

Though India has been a manufacturing hub for generic medicines, the majority of the population is unable to get benefits of cheaper drugs. Ee though the central government took initiatives to provide generic medicines through retail stores free of cost, the execution of the programme was limited to a few hospitals as the infrastructure for procurement and distribution is not put in place. There is no equal regional distribution of such stores in the country.

Jan Aushadhi retail chains have been opened only in eight states including Punjab and Rajasthan with Rajasthan having more than half the total Jan Aushadhi stores in India. All Jan Aushadhi stores in Rajasthan are run by Rajasthan State Consumer Co-operative Federation. Stores in other states are mostly operated by the Red Cross. Other states are devoid of JAS stores. States such as Gujarat and Tamil Nadu do not have plan to open such stores in the future. Also, under this programme, 319 generic drugs were identified to be supplied through these stores, but only 85 drugs belonging to 11 therapeutic groups are sold. According to the scheme, there were 112 JAS, out of which 107 have been operational.

More than half of the Jan Aushadis shut down because of fundamental flaws such as a weaker supply chain management system and the huge task of engaging physicians to prescribe generic medicines. Several drug stores have been running out of stock due to poor supply chain and distribution network.

It has been observed that there is a strong lobby between pharmaceutical distributors and district medical officers. The monopoly of providing branded medicines through specified medical stores has been limiting the reach of middle class and poor patients to generic medicines. Furthermore, a majority of the physicians does not prefer generic medicines due to less business offered by these drugs. This adds to the out of pocket expenditure on healthcare facilities.


3.2.4 Lack of Promotion

In several cases, drug companies follow unethical promotional strategies that push consumers to spend heavily on branded medicines. Generic drugs are released only after the originator loses its license. Replacing generics over the branded brings new challenges for the players. Players involved in manufacturing of generic drugs have been unsuccessful in promoting their generic drugs. This is due to the lack of investment in promotion and marketing activities. The government has also been less focused to generate awareness about the potency of generics.

To promote affordable drugs, the Government set up the Jan Ausadhi scheme during 2008, whose objective was to open generic drug stores around the country. However, due to the lack of proper implementation, the scheme failed to meet the target of distributing generics across the country.

3.2.5 Quality Control

Despite the efforts of government to push generic drugs in India, there is less attention paid to their quality. Generic drugs are chemical copies of the originator drugs and don’t go through clinical trials. The country only has a specific set of tests to check the chemical composition of a generic drug, rather than to ensure “bioequivalence” or its efficacy over the pioneer drug. Reportedly, there is no proper authority for testing quality of these drugs.

India’s national drugs regulator, the Central Drugs Standard Control Organization, only has authority for newer drugs. The drugs that have been on the market for over four years are under the regulatory jurisdiction of state-level regulators, who are understaffed and, in some cases, corrupt. For instance Ranbaxy Laboratories Ltd., was pleaded guilty for fabricating data, committing fraud, and selling adulterated drugs in the US market.

Similarly, anti-fungal drug Liposomal Amphotericin B used against kidney failures has been claimed to be of poor quality by ICMR. Furthermore, India does not have a limit on the number of companies that can be allowed to manufacture the generic version of a drug. Several companies are granted licenses to manufacture the generic version for specific originator drugs. For example, over a dozen pharma companies have been awarded the licenses to manufacture Liposomal Amphotericin B.

3.2.6 Lack of Awareness

In India, most people identify a product or commodity by a brand name. Even in the rural belt, people are aware of brand names than the commodity. The ‘brands’ have created a trust at a larger scale. When it comes to drugs, particularly the ‘Over the Counter’ (OTC), the majority of patients ask for the’ Brand’. An average person asks for a Crocin, Combiflam, Amoxil, etc.

In general, patients go by doctors’ prescriptions in case of scheduled drugs (drugs that are fatal). It has been observed that nearly 70% of India’s population lives in rural areas, and does not have access to well develop medical facilities. This group does not have knowledge about generics medication. They are unaware of the fact that generic drugs have potential to treat similar ailments at prices lower than the reference products.


4.1 Indian Market Performance relative to the World

In 2014, India accounted for a 3.7% share in the global generic drug market by value. As these drugs do not progress through clinical trial hurdles, these drugs are fast to enter into the market. It is worth noting that more than 80% of the six million AIDS patients globally are treated with Indian generic drugs. Moreover, the country has the second largest number of Abbreviated New Drug Applications (ANDAs) and is the world leader in Drug Master Files (DMFs) applications with the US.

The country is attracting several big pharma companies like Novartis, Roche, Merck and Pfizer among others due to cheap labour, favourable government policies, rising personal disposable incomes, and high-out of pocket health expenditure. India is the leading supplier of affordable HIV and tuberculosis medications and is the second leading provider of medicines distributed by UNICEF in the developing world.

Similarities Differences

It must contain the same active ingredients (the chemical substance that makes the drug work)

It must have the same route of administration (the way the medication is introduced into the body)

It must have the same dosage strength (the amount of active ingredients, for example 20 mg or 40 mg)

They could have different sizes, shapes, colours or markings. – They have different names

It must be the same dosage form (that is, it needs to be available in the same form as the original—for example, as a liquid, pill, etc.)

They might have different inactive ingredients. – Drugs are made up of both active and inactive ingredients. Some people may be sensitive to inactive ingredients. For example, some people have reactions to certain dyes used in some drugs

It must deliver similar amounts of the drug to the bloodstream (that is, it needs to deliver a comparable amount of the drug into the bloodstream within a similar time period as the brand name drug)

The generic costs less than the brand name drug. – The cash price and insurance co-pay is usually lower. Generics can cost between 20 and 80 percent less, but keep in mind that cost is only one factor when considering the right medication for your condition

4. India Generic Overview

Table4-1: Similarities and Differences Between Branded And Generics Drugs

SOURCE- International Journal of Pharmacy & Pharmaceutical Sciences


4.2 Market Size

Generic drugs account for 75% of the domestic pharmaceutical market by value. According to RNCOS, the generic drugs market has grown at a CAGR of 11% from 2009 to 2014. Fuelled by cheap labour, patent cliff of blockbuster drugs and prevalence of lifestyle diseases, the domestic generic market has shown positive growth during these years. However, the influence of physicians in India in terms of prescribing branded medicines and the lack of drug pricing control laws have limited the consumption of unbranded generics in the domestic market. Thus, Generics majors like Sun Pharma, Lupin, Dr, Reddy’s etc., have been targeting international markets for their revenue. In the last two years, Indian drug makers have gained more than 100 generic drug approvals from the US FDA, making the US region its biggest market.

4.3 Top Generic Drugs Globally

Drugs for cholesterol control, pain management, anticoagulant, respiratory, liver disorders, depression and lipid regulators are highly prevalent in the global market. Indian firms have been successful in penetrating in the global market. Recently, Sun Pharma got the US FDA nod to manufacture generic hydocodone bitartate with acetaminophen (APAP) tablets. It is a narcotic analgesic indicated in the treatment of relief of moderate to moderately severe pain of acute, chronic, or post-operative types.

Similarly, Mumbai based Wockhardt is manufacturing generic Lisinopril for treating high blood pressure (hypertension), congestive heart failure, and to improve survival after a heart attack. Hyderabad based firm Ranbaxy is authorized to manufacture Simvastatin, which is a cholesterol lowering medication. The drug category became the 7th largest category by volume.

Figure4-1: Generics Drug Market (Billion US$) 2009-2014

2009e

6.8

7.48.2

9.0

10.0

11.6

2010e 2011e 2012e 2013e 2014e

SOURCE- RNCOS

CAGR 11%


Name of Drug Volume (Mllion)

Hydrocodone-acetaminophen 123.4

Lisinopril 103.1

Levothyroxine Sodium 95.2

Atorvastatin Calcium 77.0

Amlodipine Besy 76.4

Simvastatin 73.5

Omeprazole (Rx) 73.2

Metformin Hcl 61.2

Amoxicillin 54.0

Hydrochlorothiazide 49.5

Table4-2: Top Generic Drugs Globally by Prescription (Million) 2014

SOURCE- IMS Health

4.4 Key Therapeutic Areas for Generics

• Anti-infectives segment is dominated by old Indian drug makers such as Cipla and Ranbaxy (now a part of Sun Pharma). The growth of the segment is fuelled by rising incidences of lifestyle diseases

• The aggravating stroke problems in the country due to increasing obese population, and patent expiry of GlaxoSmithKline’s cardiovascular pill ‘Lovaza’ have opened the doors for Indian firms to target the cardiovascular segment

• Indian manufacturers have limited penetration in the gastro-intestinal segment with few firms active in the market such as Lupin, Aurobindo Pharma etc.

• Patent expiries of blockbuster respiratory drugs such as Actavis’s- Daliresp (2015), and Tudorza Pressair (2016) will propel the demand for more generics. Some of the renowned names in the segment include Cipla, Ranbaxy, Sun Pharma, and Aurobindo Pharma

• The demand for Multivitamins/Mineral supplements is rising with growing health awareness among the youth. Thus, sufficient supply of such drugs would be needed in the future. Domestic manufacturers like Piramal, Zydus Cadila are already established players in the market

• Analgesics/pain market is highly competitive with the presence of Ranbaxy (Now a part of Sun Pharma), Wockhardt, GSK, Zydus Cadila, Piramal etc.


• India is going to become the diabetes capital of the world that would create a significant burden to the healthcare system in India. Following the trend, several Indian players are targeting this segment. The largest player; Sun Pharma derives 11% revenue from its diabetes business, Similarly, Dr. Reddys, Lupin, Cipla, Zydus Cadila, Piramal Healthcare have been generating sufficient revenues

• Other important segments, including dermatology, gynaecology, oncology, anti-depressants, Thyroid, etc. contributed 32% of the total domestic generic sales. Continued patent cliff, inclining chronic diseases and rising healthcare expenditure are likely to open new opportunities for Indian players

Figure4-2: Revenue Share of Major Generics Segments (%) 2014

15% Anti-Infectives32% Others

13% Cardiovascular

10% Gastro-intestinal7% Anti-diabetes

7% Pain/Analgesic

7% Vitamins, Minerals

9% Respiratory


Ongoing Patent cliff would be a big financial boost for the generic industry. India exports 40-45% of the generic drugs to several market including US, Europe and Africa. Thus, it is benefitting several Indian firms. The share of Indian companies is growing rapidly in the international generics market with increasing number of Abbreviated New Drug Application (ANDA) filings.

5. Patents Expiry of Blockbuster Drugs

Parent Company Drugs Year

Actavis Daliresp 2015

Otsuka Pharmaceutical Co. Abilify 2015

Forest Laboratories Namenda 2015Astrazeneca Nexium 2015Astrazeneca Synagis 2015

AstraZeneca Cretor 2016

Daiichi Sankyo Benicar 2016

Daiichi Sankyo Benicar HCT 2016

Cubist Pharmaceuticals Cubicin 2016

Hospira Biotax 2016

Santarus Zegerid 2016

Actavis Tudorza Pressair 2016

Eli Lilly Alimta 2017

Otsuka Velcade 2017

AstraZeneca Seroquel IR 2017

Eli Lilly Prozac Weekly 2017

Novo Nordisk A/S Novolog 2017

Abbott Niaspan 2017

Abbott Tricor 2018

Abbvie Zemplar 2018

Astrazeneca Prilosec 2019

Takeda Pharma Dexilant 2020

Table5-1: List of Blockbustor Drugs Losing Patent (2015-2020)

SOURCE- Various Industry Sources


Generic manufacturers have been successfully involved in mergers and acquisition activities to enhance their existing capabilities. The acquisition provides necessary impetus to their business and the strengthen their reach to newer markets with a wider portfolio of products. Indian firms are also keen to enter into licensing deals with larger pharmaceutical companies that are looking at emerging markets such as India to license out their products.

Acquisitions at the global scenario create handful of opportunites for Indian generic makers to acquire products and grow their business. For instance, acquisition of Allergan’s generics business by Teva Pharmaceutical Industries creates certain product overlaps that is likely to boost domestic generics players to widen their product portfolio. The merger deal between Sun Pharma and Ranbaxy has been the biggest deal in pharmaceutical industry in Asia. Another influencer of the market is Lupin which is seeking to expand its generic business in the developed markets.

S.No. Company Company (Acquired) Year Purpose

1Sun Pharmaceutical Industries Ltd

Ranbaxy Laboratories Ltd 2014

Aiming to become 5th largest Global Pharma Company with operations n over 55 markets and 40 manufacturing facilities worldwide

2Strides Arcolab Limited (Strides)

Bafna Pharmaceuticals 2014To acquire majority stake of Bafna’s branded generic business

3 Lupin European Generics firm 2014

To increase capabilities in complex generics like inhalation products and injectables, dermatology products, and biosimilar drugs

4 Abbott CFR Pharmaceuticals 2014Exceeding generic capabilities in emerging markets including India

5 Lupin

GAVIS Pharmaceuticals LLC &Novel Laboratories Inc. (GAVIS)

2015

To expand US Generics Business. Broadens Lupin’s pipeline in dermatology, controlled substance products and other high-value and niche generics

6 Cadila Claris Lifesciences 2015 To acquire generic sterile injectables business of claris

Table6-1: Consolidations in Indian Generic Industry (2014-2015)

SOURCE- Dept of Pharmaceuticals

6. Consolidations in Generics Industry


7. Government Initiatives

7.1 Jan Aushadhi Scheme for the Promotion of Generic Drugs

Jan Aushadhi scheme enables free distribution of low cost unbranded generic drugs through Jan Aushadhi stores in various districts of the country. The following initiatives define Jan Aushadhi Campaign.

• Encouraging public–private partnership to establish retail outlets in Government hospitals premises and in selected districts. Applicatnts would be invited form NGOs, charitable institutes, consumer bodies, hospitals to run retail oulets

• To engage medium and small, enterprises for manufacturing the drugs to shore up the supply of generic drugs

• To train and encourage doctors to prescribe generic drugs• Increasing the public awareness about the usage, availability and price of generic drugs

through national helpline or multimedia• To open Jan Aushadhi stores in all medical colleges and district hospitals • To increase the availability of anti-biotics, anti-cardiac, anti-infective and gastro intestinal drugs.• Widening marketing and distribution channel through quality cGMP facilities and improved

logistics chain

7.2 Free Essential Drug Scheme

The free drug programme is one part of the National Health Assurance Mission announced by the president. The scheme now has been implicated to the states government. A large number of states have been agreed to the proposal made my the center to provide free drugs. The Centre will financially incentivize states to start the free drug scheme.

To initiate a free drug scheme and fulfilling the condition of putting in place a quality assurance system, states will be will be given 5% of its NHM allocation as an incentive. However, centre has also decided to provide 50 essential free. The mission will essentially have three components — free drugs, free diagnostics and free health services. Major drugs to be distributed include antibiotics, anti-hypertensives and anti-diabetes drugs. In addition, include drugs to cure fever, cough, cold, rabies, etc., would be also provided for free.

The health ministry had sought Rs 500 crore budgetary support for the scheme. Under the programme, 348 drugs in the National List of Essential Medicines (NLEM) were proposed to be provided free from 1.6 lakh sub-centres, 23,000 primary health centres, 5,000 community health centres and 640 district hospitals.


7.3 ‘Sehat’- A Telemedicine Initiative to Drive Generic Drugs Sales

The Government has announced a Telemedicine/Teleconsultation services support named ‘Sehat’. The initiative will help people in rural areas to consult doctors through a video link and also order generic drugs. The Common Service Centres (CSCs) will deliver tele-consultation in collaboration with Apollo Hospitals. Under the service, people can visit CSCs and fix an appointment for seeking expert consultancy with a doctor. The faclity will be available in 60,000 CSCs across the nation. The CSCs will also provide diagnostic services and promote sale of generic drugs through collaboration with Ministry of Health, by setting up Jan Aasudhi Stores.

States Cost Incurred ( INR Crore) Free Drugs

Rajasthan Medical Service Corporation (RMSC) 295 607

Tamil Nadu Medical Service Corporation (TMSC) 300 651

LKerala Medical Service Corporation (KMSC) 242 771(essential)

Karnataka State Drugs and Warehousing Society Logistics (KSDLWS)

200 378 (and some surgical items)

Table7-1: : Free Drugs Provided by States



8.1 Market Share of Major Players

The domestic generic drug market is highly competitive by the presence of several players such as Sun Pharma, Lupin, Dr. Reddys, Cipla, Aurobindo pharma among others. The top 10 players account for 25% of the domestic market. Rest 75% of the domestic generic drug market is influenced by international players such as Teva Pharma, Sandoz, Actavis, Pfizer, small & medium enterprises such as Natco pharma and among others.

Acquisition of Ranbaxy by Sun Pharma have made it to emerge as the domestic generic leader. The company derived US$ 612.54 Million of the revenue from India. It specializes in various therapeutic areas with dominant player in neuropshitary, cardiology, gastroenterology and diabetology segments. The combined entity of Sun Pharma- Ranbaxy aims to become the sixth largest generic player in the world.

With 4% share in the domestic generic market, Cipla became the second largest player by value. The company generates about 40% of the revenue from domestic sales. Mumbai-based player which is popular for its APIs manufacturing was able to derive US$ 467 Million from its generics sale during 2014.

8. Competition

Name of Drug Volume (Mllion US$) % Share

Sun Pharma 613.0 5.3%Cipla 467.0 4.0%Lupin 417.0 3.6%Zydus Cadila 409.1 3.5%Dr. Reddys 288.0 2.5%Biocon 249.0 2.2%Workhardt 168.0 1.5%Jubiliant 166.0 1.4%Aurobindo Pharma 125.0 1.1%Others 866.2 74.9%

Table8-1: Share of Major Players in Generics Drug Market (%) 2014



The domestic generic drug market is poised for an impressive growth in the near future. According to RNCOS, the market is anticipated to grow at a CAGR of 16.3% from 2014 to 2020. The Generics would account for 85% share in the domestic pharma market by 2020. With key initiatives announced by Modi Government to include price control policies and the revision of Jan Aushadhi campaign, the market is likely to show a notable incline in the penetration of unbranded drugs.

India is likely to be the diabetes capital of the world. This, coupled with the rising prevalance of chronic diseases would give rise to a huge patient pool. These aggravating problems would demand value added drugs at affordable prices. Keeping these factors in mind, players are leveraging their capabilities in new therapeutic segments.

The rising consolidations in the market are opening doors for the domestic players to extend their capabilities, making the industry highly competitive. Players are expanding their global footprint, announcing new distribution channels and opening new manufacturing facilities. Moreover, several drugs are going to lose their patent protection in the US and Europe, which will generate huge opportunity for the domestic players by opening up a number of developed markets.

9. Future Outlook

Figure9-1: Generics Drug Market (Billion US$) 2015-2020

2015

13.114.9

17.2

20.1

23.5

27.9

2016 2017 2018 2019 2020

SOURCE- RNCOS

CAGR 16%


10. Opportunities

Leveraging different Distribution ChannelsThrough government efforts to promote generic drugs by opening JAS stores across the nation, generic manufacturers have the opportunity to widen their distribution channel system. For instance, drug distribution channelized via government tenders is on rise with increasing evidence of Government involvement in drug procurement in states such as Tamil Nadu, Andhra Pradesh and Karnataka. This is due the fact that the majority of the generic players such as Sun Pharma, Dr. Reddy’s Laboratory, Cipla and Lupin are located in Western & Southern parts of the country. These companies have limited their supply chain to their own regions.

The hospital procurement channel is another distribution channel that can be leveraged in other states. This channel is characterized by its organized nature and inherent legalities. Companies may have to remodel their current commercial channels to leverage the opportunity that these new channels offer.

Capitalizing on Unbranded Generics MarketPresently, the generics market in India is dominated by branded generics (an off-patent drug sold under a brand name) and this has been a potential roadblock for sale of unbranded generic products by domestic manufacturers. The revival of Jan Aushadhi Scheme and Free Essential drug scheme by the state & central government would provide ample opportunity to the domestic players to capitalize on unbranded generic drug sector.

Revision of Patent Laws to Promote Generic Drug ManufacturersIndian patent law aims to curtail a process known as ‘evergreening,’ in which pharmaceutical companies make sometimes minor improvements to an old medicine, allowing them to renew their patent. Under India’s tough standards, modifications that do not improve the efficacy of the drug are not eligible for extended patents. Perhaps, India is a leading supplier of affordable HIV/AIDS and Tuberculosis medications and is the second leading provider of medicines distributed by UNICEF in the developing world. For instance, rejection of patent extension of Novartis innovator product by Indian Supreme Court during 2012 would open the doors for domestic manufacturers to develop cheaper drugs that are affordable for poor patient population.

Similarly, issuing of compulsory licensing to the generic drug companies under the section 92 of Indian Patent Law would encourage domestic manufacturers. For instance, IPO granted first CL to the domestic company Natco against the anti-cancer drug by German pharma company, Bayer in 2012. The similar move has been taken for Roche’s Herceptin (trastuzumab), a biotech drug for the treatment of breast cancer and Bristol-Myers Squibb’s (BMS’s) Sprycel (dasatinib) for the treatment of leukemia and Ixempra (ixabepilone) for the treatment of breast cancer. This would make easier for manufacturing of generic drugs in India.

Remodeling of Product PipelineIndian companies should focus on niche segments and products that involve a higher level of technology and complexity such as:

New Drug Delivery Systems (NDDS): Indian companies can grab the opportunity presented by delivery-based drug systems. Technology-intensive products such as extended-release tablets, patches and inhalers may help companies create a more differentiated portfolio.


Emerging therapeutic areas: With increasing healthcare awareness, growing geriatric population in the country, new needs are emerging, leading to new opportunities. Areas such as diabetes, respiratory, inflammatory disorders, oral contraceptives, etc. can be the potential focus segments.

Value added generics: While niche and complex molecules are a part of the diversification strategy that companies can adopt to build a sustainable portfolio, value- added generics are a means to enhance present offerings. Indian companies must innovate and look at generating value from ‘super-generics’, which can deliver additional benefits – increased efficacy, improved ADME characteristics, etc., to patients.

Expanding Regional PresenceGeneric drug companies in India are confined to the Southern and Western regions. Thus, the performance of any drug manufacturer is affected by unequal distribution of its manufacturing plants and distribution channels in the domestic market. The revision of government policies such as technical training, funds allocation, opening of organized retail chains in states such as Rajasthan and Punjab as well as the encouragement of public private partnership in the industry would be an initiative welcomed by generic players to widen their regional location.

New Export Markets (International)Several compliance issues and stringent quality control regulations in the US/EU markets are acting as restraints for generic exports. India derives major chunk of its export revenues from these developed markets. Markets such as GCC, Japan and CIS still remain untapped. For example, India’s presence in the world’s second largest pharma market, Japan, is merely 1%. However, ability of Lupin to successfully establish its footprint in Japan is a proven example for exploring other markets. In addition Indian generic manufacturers can look to establish their foothold in regulated markets such as South East Asia and Africa.


11. Recommendations

Focus on Quality Control: Since India has been a leading manufacturing hub for generic drugs, and popular destination for low cost HIV drugs, the country is still struggling with quality issues such as adultration, manufacturing malfunctions and product recall from international markets. Thus, improvements need to be made on the safety and efficacy of these drugs.

Creation of Robust Supply Chain Network: Establishing a firm and sound logistics framework is imperative to meet the demand of affordable medications. States governments need to devise novel strategies, and work closely with third party supply chain operators to develop warehouses and new retail outlets.

Support to Other States: Central Government’s initiative to establish Jan Aushadhi retail chains has been limited to a few states. Special attention is required to open manufacturing plants in Uttar Pradesh, Haryana, Punjab, Bihar, etc. These states have a potential for strong consumption of medicines due to severe cold and continuous fog in the months from November through February. Thus, there is a tremendous need for antibiotics, anti-colds, anti-asthmatics, and cough suppressant products during these months.

Access to Modern Technology: In an increasingly complex and competitive economic landscape, the need to align people, processes and technology is stronger than ever. Access or availability of modern technology can help enterprises reduce cost and time taken to innovate and offer sophisticated products and services. This helps generic drug players of the country differentiate from global peers.

Need for Infrastructure Development: The small & medium enterprises engaged in generic drug manufacturing face a lot of problems in terms of infrastructure as they do not have enough supply of water or electricity, also they do not have warehouses where they can keep their excess stock or raw materials. Therefore, infrastructure development is very much needed so that enterprises can manufacture goods to their maximum capacity.

Need for Increasing Awareness Programmes: The generic drug sector in India faces a major issue of lack of awareness regarding low cost generic drugs among the population. The ministry should conduct awareness programmes in rural as well as urban areas, so that people should get to know about the benefits of the these drugs.

Encouraging New Entrepreneurs: Government has been very supportive towards the industrial units in several states, giving special incentives to SMEs. Various incentives like capital, bank loans, plant & machinery, among others, along with special incentives and relaxations such as procurement of raw materials at subsidized rates, entrepreneur training to the rural entrepreneurs will give a further push to the industry.

R&D for Product Development: The generic drug sector is in a dire need for accelerating R&D and modern technology adoptions in various fields. The government should help the enterprises with research in developing new products and there should an existence of proper R&D centres or institutes which should be exclusively dedicated to research and development of generic products.


ASSOCHAMTHE KNOWLEDGE ARCHITECT OF CORPORATE INDIA

EvOLuTION OF vALuE CREATORASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. Having in its fold more than 400 Chambers and Trade Associations, and serving more than 4,50,000 members from all over India. It has witnessed upswings as well as upheavals of Indian Economy, and contributed significantly by playing a catalytic role in shaping up the Trade, Commerce and Industrial environment of the country.

Today, ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the technology driven cyber age of ‘Knowledge Based Economy’.

ASSOCHAM is seen as a forceful, proactive, forward looking institution equipping itself to meet the aspirations of corporate India in the new world of business. ASSOCHAM is working towards creating a conducive environment of India business to compete globally.

ASSOCHAM derives its strength from its Promoter Chambers and other Industry/Regional Chambers/Associations spread all over the country.

vISION

Empower Indian enterprise by inculcating knowledge that will be the catalyst of growth in the barrierless technology driven global market and help them upscale, align and emerge as formidable player in respective business segments.

MISSION

As a representative organ of Corporate India, ASSOCHAM articulates the genuine, legitimate needs and interests of its members. Its mission is to impact the policy and legislative environment so as to foster balanced economic, industrial and social development. We believe education, IT, BT, Health, Corporate Social responsibility and environment to be the critical success factors.

MeMbers – Our strength

ASSOCHAM represents the interests of more than 4,50,000 direct and indirect members across the country. Through its heterogeneous membership, ASSOCHAM combines the entrepreneurial spirit and business acumen of owners with management skills and expertise of professionals to set itself apart as a Chamber with a difference.

Currently, ASSOCHAM has more than 100 National Councils covering the entire gamut of economic activities in India. It has been especially acknowledged as a significant voice of Indian industry in the field of Corporate Social Responsibility, Environment & Safety, HR & Labour Affairs, Corporate Governance, Information Technology, Biotechnology, Telecom, Banking & Finance, Company Law, Corporate Finance, Economic and International Affairs, Mergers & Acquisitions, Tourism, Civil Aviation, Infrastructure, Energy & Power, Education, Legal Reforms, Real Estate and Rural Development, Competency Building & Skill Development to mention a few.

INSIGHT INTO ‘NEW BuSINESS MODELS’

ASSOCHAM has been a significant contributory factor in the emergence of new-age Indian Corporates, characterized by a new mindset and global ambition for dominating the international business. The Chamber has addressed itself to the key areas like India as Investment Destination, Achieving International Competitiveness, Promoting International Trade, Corporate Strategies for Enhancing Stakeholders Value, Government Policies in sustaining India’s Development, Infrastructure Development for enhancing India’s Competitiveness, Building Indian MNCs, Role of Financial Sector the Catalyst for India’s Transformation.

ASSOCHAM derives its strengths from the following Promoter Chambers: Bombay Chamber of Commerce & Industry, Mumbai; Cochin Chambers of Commerce & Industry, Cochin: Indian Merchant’s Chamber, Mumbai; The Madras Chamber of Commerce and Industry, Chennai; PHD Chamber of Commerce and Industry, New Delhi.

Together, we can make a significant difference to the burden that our nation carries and bring in a bright, new tomorrow for our nation.

The Associated Chambers of Commerce and Industry of IndiaASSOCHAM Corporate Office:

5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021Tel: 011-46550555 (Hunting Line) • Fax: 011-23017008, 23017009

email: [email protected] • Website: www.assocham.org

26 Come Invest in Africa: The continent of the future

About RNCOS

Strategic Consulting

Business Support Services

Identification of Business Opportunities

Business Research Services

• Market Entry Strategies• Growth Consulting Services (New Mar-

kets, Customers, Geography / Demogra-phy)

• Pre-testing and post launch evaluation• Concept and Product Testing

• Business Setup Support / Strategies and Planning for Start-ups

• Phone Consultations/ Expert Recruitment for Industry Insights

• Lead Generation• Setting up of Dealer Distributor Network

• Set up a representative office in any par-ticular geography.

• Capturing and increasing market shares• Identifying potential clients• Competitive Intelligence Services• Location Consulting Service

• Report Writing Services• Region / Country Analysis• Sector / Industry Briefings• Technology Reports• White Papers

Business Consulting Services firm offering a broad spectrum of Management Consulting and Business facilitation services including but not limited to Financial & Business Assessment, Market Entry / Expansion Strategies, Market and Industry Research, Identification & Selection of Business Partners, Feasibility and Facility Location Studies etc.

Since our inception in 2002, we have been offering research solutions to distinguished clientele’ across multi geographies and industry verti-cals. We help our clients in achieving sustainable performance and better growth prospects by weeding out their obsolete business process with well laid strategies by working in close co-ordination with them.

A - 142, Second floor, Sector 63, Noida - 201301, INDIATel: +91-120-4224700/01/02/03Fax: +91-120-4224707Website: www.rncos.comEmail: [email protected]

5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021Tel: 011-46550555 (Hunting Line) Fax: 011-23017008, 23017009 Email: [email protected] Website: www.assocham.org

Generic medicines in india promulgating growth & access

Healthcare

Transcript of Generic medicines in india promulgating growth & access