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TMI BlogGROWTH OF PHARMACEUTICAL INDUSTRY IN INDIAX X X X Extracts X X X X X X X X Extracts X X X X ..... GROWTH OF PHARMACEUTICAL INDUSTRY IN INDIA - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 11-6-2016 - - Introduction The pharmaceutical industry is developing, producing, and marketing drugs or pharmaceuticals . The Pharmaceutical companies are generally dealing in generic or brand medications and medical devices. The phrama products are subject to a variety of laws and regulations in all countries. Because of the multivarious compliance to be complied with as required by law and procedure the pharmaceutical industry has become a large and very complex enterprise. The industry has also come to be characterized by outsourcing . That is, many companies contract with specialty manufacturers or research firms to carry out parts of the drug development process for them. Others try to retain most of the processes within their own company. Since the pharmaceutical industry is driven largely by profits and competition-each company striving to be the first to find cures for specific diseases-it is anticipated that the industry will continue to change and evolve over time. The following are the facts for the growth of Pharmaceuticals industry: Growth i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n healthcare financing products; Demand in the generics market; Rise in outsourcing activities; and Demand for emerging segments. Pharmaceutical Industry in India The Indian Pharmaceutical Industry has witnessed a robust growth over the past few years. In the year 1990 the turnover is approximately US $ 1 billion. In 2015 the turnover is approximately US$ 30 billion. In 2015 the export turnover is approximately US $ 15 billion. The country now ranks 3rd worldwide by volume of production and 14th by value, thereby accounting for around 10% of world s production by volume and 1.5% by value. India ranks 4th in terms of generic production. Its position is 17th in terms of export value of bulk actives and dosage forms. India exports pharma products to more than 200 countries around the globe including US, West Europe, Japan and Australia, which are having highly regulated markets.. It has shown tremendous progress in terms of infrastructure development, technology base creation and a wide range of products. It has established its presence and determination to flourish in the changing environment. The industry now produces bulk drugs belonging to all major therapeut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic groups requiring complicated manufacturing technologies. Formulations in various dosage forms are being produced in GMP compliant facilities. Strong scientific and technical manpower and pioneering work done in process development have made this possible. Evolution of pharmaceutical sector in India The evolution of pharmaceutical sector in India may be set into four stages. The first stage is the period before the year 1970 in which the Indian market was dominated by foreign companies with little domestic participation. The second stage is the period between 1970 and 1990. During this period several domestic companies started operations. Indian Patent Act, 1970 was enacted during this period. The export initiatives were taken during this period. 1990 2010 constituted the third stage. During this period the liberalization led Indian components to launch operations in foreign countries. The Patents Act was amended in the year 2005 which led to adoption to product patents in India. During this period India became a major generic drug manufacturing country. India s position in global India acquired 14 th rank in Global Pharma industry during 2005 (6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US billion $). India is projected as 10 th largest market in Pharma industry as indicated in the following table: Table 1: India s position in global Pharmaceutical market by value Sl. No. Country Market value 1 US 444 2 Japan 83 3 France Germany 46 4 Germany 38 5 China 38 6 UK 32 7 Spain 25 8 Italy 25 9 Canada 25 10 India 20 11 Brazil 20 12 Mexico 19 13 South Korea 15 14 Turkey 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Source: INS world review analysis Projections, Mckinsey India Pharmaceutical demand model By absolute growth, India will be among the top five markets (3 rd position) globally during 2005 2015 in terms of technology, quality and the vast range of medicines that are manufactured. It ranges from, simple headache pills to sophisticated antibiotics and complex cardiac compounds. 20,000 units are registered in this industry. Being a highly organized sector, the Indian Pharmaceutical market is expected to expand at a CAGR of 23.9% to reach US $55 by 2020. Growth of Exports The export of pharma products by India is commendable one. The following table shows the details of exports made by India in this Industry: Table 2 : Value of Export of Pharma products in India Financial year Export value 2006 $2bn 2007 $3bn 2008 $4bn 2009 $5bn 2010 $5bn 2011 $7bn 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... $9bn 2013 $10bn 2014 $11.7 bn Source: A brief report on pharmaceutical industry in India-July 2015 India exported $11.7 bn worth of pharmaceuticals in 2014. The pharma products are exported to various nations by India. The details of the value of the exports made to the top ten countries and their share in percentage are listed in the below table: Table 3 : Value of Exports to top 10 countries of the world and its share Rank Country Value (US $) Share 1 United States $3.8 billion 32.9% 2 South Africa $461.1 million 3.9% 3 Russia $447.9 million 3.8% 4 United Kingdom $444.9 million 3.8% 5 Nigeria $385.4 million 3.3% 6 Kenya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... $233.9 million 2% 7 Tanzania $225.2 million 1.9% 8 Brazil $212.7 million 1.8% 9 Australia $182.1 million 1.6% 10 Germany $178.8 million 1.5% Source: www.en.wikipedia.org Major pharmaceutical companies in India Even though there are many players in the Pharma Industry in India, the following table reveals some of leading Indian players in this industry as on July 2015: Table 4 : List of major pharmaceutical companies in India in sales Company Name Sales in Rs. crores Sun Pharmaceutical 2,17,636 Lupin Limited 84,193 Dr. Reddy s Lab 63,779 Cipla 52,081 Aurobindo Pharma 42,454 Cadila H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth care 38,677 Glenmark Pharmaceuticals 29,047 Glaxo Smithkline Pharmaceuticals Limited 28,587 Divis Laboratories 24,847 Torrent Pharmaceuticals 22,320 www.en.wikipedia.org Market segment by value Products and their market share in the pharmaceutical Industry in India is furnished in the following table: Table 5 : Pharma products and their market share in India Product Market Share Anti-infectives 16% Cardiovascular 13% Gastro Intestinal 11% Vitamins, Minerals 8% Respiratory 9% Pain/analgesic 7% Anti-diabetic 7% Others 29% Source: A brief report on pharmaceutical industry in India-July 2015 FDI Pharmaceutical In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustry accounts 6% of the total FDI of the country. The increase in FDI flows has helped in the expansion, growth and development of the industry. Increase in FDI results in the quality of the products from the drugs and pharmaceuticals. Vide Circular No. D/o IPP F.No. 5(1)/2015-FC-1, dated 12.05.2015 the Government issued the consolidated FDI policy with effect from 12.05.2015. The FDI policy in regard to pharma industry is given in the following table: Table 6 : Consolidated FDI policy for Pharma Industry Sector/Activity % of Equity/FDI Cap Entry route 6.2.19.1 - Greenfield 100% Automatic route 6.2.19.2. - Brownfield 100% Government Other conditions for FDI in respect of this industry indicated in the above said circular are as follows: Non compete clause would notbe allowed exceptin special circumstanceswith the approval of the ForeignInvestment Promotion Board; The prospective investor and the prospective investee are required to provide a certificate along with the FIPB applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion; Government may incorporate appropriate conditions for FDI in Brownfield cases at the time of granting approval. The circular further provides that FDI up to 100%, under the automatic route is permitted for manufacturing of medical devices. The above mentioned conditions will not be applicable to Greenfield as well as Brownfield projects of this industry. Certificate to be Furnished by the Prospective Investor as well as the Prospective Recipient Entity It is certified that the following is the complete list of all inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee Brownfield pharmaceutical entity 1. 2. . 3. . (copies of all agreements to be enclosed) It is also certified that none of the inter-se agreements, including the shareholders agreement, entered into between foreign investor(s) and investee Brownfield pharmaceutical entity contain any non-compete clause in any form whatsoever. It is further certified that there are no other contracts/agreements between the foreign investor(s) and investee Brownfield pharma entity other than those listed above. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign investor(s) and investee Brownfield pharma entity undertake to submit to the FIPB any inter-se agreements that may be entered into between them subsequent to the submission and consideration of the application. The Department of Industrial Policy and Promotion data suggests that the drugs and pharmaceuticals sector has attracted an impressive level of FDI worth US$ 1,882.76 million during April 2000 to March 2011. Industrial licenses are not required in India for most of the drugs and pharmaceutical products. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Table 7 : FDI INFLOW IN PHARMACEUTICAL INDUSTRY Year FDI inflow ($ in million) 2000 48.4 2001 90.7 2002 52.3 2003 60.7 2004 341.4 2005 116.3 2006 216.1 2007 72 2008 181 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 - 10 1006 2010 - 11 961 2011 - 12 14605 2012 - 13 6011 2013 - 14 7191 2014-15 9211 Up to September 2015 1441 Source: www.dipp.nic.in The largest source of FDI in Indian Pharmaceutical Industry is Mauritius. SWOT ANALYSIS Each industry in any country has its own strength for its development and weaknesses. The pharma industry is not an exception to this. The pharma industry in India is also having certain factors on strength and weakness. Strength In India the cost of manufacturing pharma products are less and effective comparing to other countries. India has a strong manufacturing base. Due to the technology development the high skilled work force is available in India. The marketing and distribution system is also on the higher side in India by communication development. The diverse ecosystem also strengthens the sector. Weakness Even though the FDI limit is liberalized the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is still less investment in research and development which has to be taken care of by the Industry and the government. The lack of co-ordination between the industry and academician is on the weak point. When comparing to other expenditures by households the expenditure incurred on health care is negligible. The manufacture of low and fake medicines which are having low quality is a threatening to this industry. Opportunities Despite the weaknesses of the industry the growth of this industry is expected greatly because there is increased export potential. It is also expected that the export of generic drugs to the developed markets will be on the increase. There is immense scope to position India as a centre for international clinical trials. It is also expected that India will be a key player in global pharmaceutical R D. Threats The product patent regime is one of the major threats to domestic Industry. To face this threat the industry is to take up R D initiative aggressively. The Drug Price Control order made by the Government of India put undue pressure on product prices which affects the profitability of the pharmaceutical companies. The new MRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based excise duty regime is the threat for the small business companies. Research Development Indian companies have started to adapt their product development processes to the new environment. The companies 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 thus 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. Patents Intellectual property rights in the pharma sphere have been a contentious issue globally. Previously, the IPR debates were typically between the branded pharma companies and generic pharma companies. India was no exception to this IPR tussle and in view of the large poor population in need of basic healthcare, the Indian au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities were initially not keen on granting substantial IPR protection. However, over a period of time, the Indian authorities have become more sensitized to the need and importance of IPR protection for the long-term good of industry. The (Indian) Patents Act was enacted in 1970. This act contains provisions relating to pharmaceutical patents. This patent regime has led to the investment from many pharmaceutical multinationals in India. Now they are looking at India not only for its traditional strengths in contract manufacturing but also as a highly attractive location for research and development (R D), particularly in the conduct of clinical trials and other services. Indian and foreign companies are continuing with patented drug launches in India and between 2005 and 2010, the Indian Patent Office has granted 3,488 product patents, as per a KPMG report. Indian Government s initiative The Indian government has given its rapport to the pharmaceutical industry. During the year the Indian Government established the Department of Biotechnology under the Ministry of Science and Technology. Since then, there have been a number of dispensations offered by both the centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al government and various states to encourage the growth of the industry. India launched a program to provide tax incentives and grants for biotech start-ups and helping the firms which are seeking to expand. India establishes the Biotechnology Parks Society of India to support ten biotech parks. Previously limited to rodents, animal testing was expanded to include large animals as part of the initiative. State Governments have started to vie with one another for biotech business. They offer exemption from VAT and other fees, financial assistance with patents and subsidies on everything ranging from investment to land to utilities. National Pharmaceutical Pricing Authority ( NPPA for short) was established on 29.08.1997 as an independent body of experts as per the decision taken by the Cabinet Committee in September 1994 while reviewing Drug Policy. The Authority has been entrusted with the task of fixation/revision of prices of pharmaceutical products (bulk drugs and formulations), enforcement of provisions of the Drugs (Prices Control) Order and monitoring the prices of controlled and decontrolled drugs in the country. The Addendum 2015 of the Indian Pharmacopoeia (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) 2014, published by the Indian Pharmacopoeia Commission (IPC) on behalf of the Ministry of Health Family Welfare, is expected to play a significant role in enhancing the quality of medicines that would in turn promote public health and accelerate the growth and development of pharmaceutical sector. The following are the further initiatives taken by the Government: The Department of Pharmaceuticals has prepared a Pharma Vision 2020 document.The objective of this document is for making India as one of the leading destinations for end-to-end drug discovery and innovation. The Government of India provides support by way of world class infrastructure, internationally competitive scientific manpower for pharma R D and venture fund for research in the public and private domain; The Government is also embarking on a major multi-billion dollar initiative with 50 per cent public funding through a public-private partnership (PPP) model to harness India s innovation capability. This vision will put India into one of the top five pharmaceutical innovation hubs by 2020.This vision also targets to achieve a global niche with one out of every five to ten drugs discovered worldwid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by 2020 originating from India. The Government is also taking various policy initiatives for the pharmaceutical sector. These initiatives include tax-breaks to the pharmaceutical sector and weighted tax deduction at 150% for the R D expenditure incurred. The Government also take steps to streamline procedures covering development of new drug molecules, clinical research etc. Indian Government has launched two schemes- New Millennium Indian Technology Leadership Initiative; and The Drugs and Pharmaceuticals Research Programme which is specially targeted at drugs and pharmaceutical research. The Central Drug Standard Control Organization (CDSCO is made as the primary pharma regulatory body in India. The Drug Controller General of India (DCGI) presides over the CDSCO at both the central and state levels. The Government also plans to set up a Pharmacopeial Commission to support Ayurveda,Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH) through guidelines laid down in the review of the Eleventh Plan; The Department of Pharmaceuticals has set up an inter-ministerial co-ordination committee, to review, coordinate and facilitate the resolution of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issues and constraints faced by the Indian pharmaceutical companies periodically; The Department of Pharmaceuticals has planned to launch a venture capital fund of ₹ 1,000 crore (US$ 154 million) to support start-ups in the research and development in the pharmaceutical and biotech industry; Indian and global companies have expressed 175 investment intentions worth ₹ 1,000 crore (US$ 150 million) in the pharmaceutical sector of Gujarat. Telangana has proposed to set up India's largest integrated pharmaceutical city spread over 11,000 acres near Hyderabad, complete with effluent treatment plants and a township for employees, in a bid to attract investment of ₹ 30,000 crore (US$ 4.5 billion) in phases. Hyderabad, which is known as the bulk drug capital of India, accounts for nearly a fifth of India's exports of drugs, which stood at ₹ 95,000 crore (US$ 14.3 billion) in 2014-15; The Minister of Fertilizer and Chemicals announced that six pharmaceutical parks will be approved and established this year which will have sufficient infrastructure and facilities for testing and treatment of drugs and also for imparting training to industry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professionals. The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies. Future perspective The pharmaceutical industry will have a future in India as well as globally. The future perspective of this industry is based on the high burden of disease, good increase in the higher disposable incomes of the individuals, improvements in healthcare infrastructure and improved healthcare financing. The Indian pharma industry has been growing at a compounded annual growth rate (CAGR) of more than 15% over the last five years. The industry has significant growth opportunities. The pharma companies in India will have to rethink their business strategy to sustain the robust growth till the year 2020. The companies are to adopt new business models and think of innovative ideas to the best satisfaction of the consumers. The Pharma companies in India may continue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grow organically and inorganically through alliances and partnerships. They have to focus on improving operational efficiency and productivity continuously. The developments in the health insurance, medical technology and mobile telephony can help the growth of the pharma industry by removing financial and physical barriers to healthcare access in India. Customs duty increase During January of this year the Government increased customs duty on medical devices from 5% to 7.5% and also 4% Special Additional duty. During the first week of February 2016 the Government has withdrawn customs duty waiver from 76 drugs. This will increase the cost of the pharma products by which the ultimate consumers will be affected. The Government is to look into this matter and reduce the burden imposed on the industry and also on the consumers. Conclusion There is no doubt about the growth of pharmaceutical industry. India may rank among the top five global pharma markets by 2030. Yet the domestic companies find it difficult in the current scenario. Some of the players quit the industry. Foreign companies are adding more competition to the domestic market by launching products i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both branded and generic categories. It is the bounden duty of the Government to take care of domestic companies in this industry so that they have to align themselves to the existing scenario. With numerous strengths and a growing consumer class, the pharma industry in India may face certain legacy and new issues, but it is expected to grow multifold and continue to be an attractive investment destination. References: www.investindia.gov.in www.dipp.nic.in www.cci.in www.pwc.in www.en.wikipedia.org www.ibef.org - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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