The Govt.

of India has declared 2012 through 2020 as the DECADE

OF INNOVATION. Innovation in Life Sciences will be essential to make this happen

- Karun Rishi, President, USA-India

Chamber of Commerce

Background:
Vision: Department of Pharmaceuticals has explained vision of Indian Pharmaceutical Industry asIndia: The largest global provider of quality medicines at reasonable prices. Mission: Ensure availability of drugs at reasonable prices as per provisions of the Drug Prices Control Order, 1995 Develop Human Resources for Pharmaceutical Industry and Drug Research and Development Formulate Scheme/ Project for promoting Public-Private Partnership for development of Pharmaceuticals Industry Formulate Scheme/ Project for promoting Pharmacy Brand India through International Cooperation Formulate Scheme/ Project for promoting environmentally sustainable development of Pharmaceutical Industry.

Introduction: The Indian pharmaceutical industry currently ranks among the top five countries by volume (production) and accounts for about 10% of global production. The industrys turnover has grown from a mere US$ 0.3 billion in 1980 to about US$ 21.73 billion in 2009-10. Classification of Indian Pharmaceutical Industry The products manufactured by the Indian pharmaceutical industry can be broadly classified into bulk drugs (active pharmaceutical ingredients - API) and formulations. Of the total number of pharmaceutical manufacturers, about 77% produce formulations, while the remaining 23% manufacture bulk drugs. Bulk drug is an active constituent with medicinal properties, which acts as basic raw material for formulations. Formulations are specific dosage forms of a bulk drug or a combination of bulk drugs. Drugs are sold as syrups, injections, tablets and capsules.

INDIAN PHARMACEUTICAL INDUSTRY: STRUCTURE

Indian Pharmaceutical Industry

API (Active Pharmaceutical Ingredients, also known as Bulk Drugs) accounting for about 23% market share

Formulations, accounting for about 77% of market share

Branded (Also known as Innovative)

Generic (Also known as Unbranded)

Chronic Therapy Segment: Cardiovascular Neurological Anti-diabetes Oncology

Acute Therapy Segment:

Anti- Infective Gastro- Intestinal Respiratory Analgesics/Pain Mgmt. Vitamins/ Neutraceuticals

Figure 1.1 The Indian Pharmaceutical Industry has been growing at a CAGR (Compound Annual Growth rate) of more than 15% over the last 5 years. It is expected to grow at 19% in 2013. Pharmaceutical Industry is expected to reach Rupee 5 lakh Crore by 2020. Low cost of skilled manpower and innovation are some of the main factors supporting this growth. According to the Department of Pharmaceuticals, the Indian pharmaceutical industry employs about 340,000 people and an estimated 400,000 doctors and 300,000 chemists.

Distribution of Pharmaceutical Manufacturers in India: The Industry is highly fragmented with approximate 10,563 manufacturers in the organized and unorganized segments. Out of total 10,563 pharmaceutical manufacturers in the country, 8174 or 77% (approx) manufacture formulation drugs and 23% (approx) are engaged in bulk drugs manufacture. Here is a state-wise distribution of manufacturers of pharmaceutical units in India.

State-wise No. of Manufacturers of Pharmaceuticals Units in India S. No States No. of Manufacturing Units Formulations 1928 1129 694 528 472 3423 8174 Bulk Drugs 1211 397 62 199 98 422 2389 Table 1.1 Total % Share 29.7 14.4 7.2 6.9 5.4 36.4 100 Cumulative % Share 29.7 44.2 51.3 58.2 63.6 100

1 2 3 4 5 Total

Maharashtra Gujarat West Bengal Andhra Pradesh Tamil Nadu Others

3139 1526 756 727 570 3845 10563

Concentration of Pharmaceutical Manufacturing units in India in %

Maharashtra 24%

Others 42%

Gujarat 14% Tamil Nadu 6% West Bengal 8% Andhra Pradesh 6%

Figure 1.2

Of these 10563 units, about 300-400 units are categorized as belonging to medium to large organized sector with the top 10 manufacturers accounting for approximate 36.5% of the market share. Here is a figure showing revenue of top 10 pharmaceutical companies in India:

7000

6000

5000

4000

3000

2000

1000

0 Cipla

Dr. Ranb a Aurob i Sun Cadila Jub ila Wockh reddy xy Lupin ndo Pharm Health nt Life ardt Lab s Lab s Pharm a

Ipca Lab s

3-D Column 1 6977.5 6686.3 6303.5 5364.4 4284.6 4015.6 3152.2 2641.1 2560.2 2352.6

Figure 1.3 Revenue of top 10 Indian Pharmaceutical Companies in Crores (36.5% of total market share)

Indian pharmaceutical industry: SWOT analysis

The SWOT analysis of the industry reveals the position of the Indian pharmaceutical industry in respect to its internal and external environment.

Strengths
Low cost of innovation, manufacturing and operations Low cost of skilled manpower and proven track record in design of high technology manufacturing devices.

Weaknesses
Stringent pricing regulations affecting the profitability of pharmaceutical companies Presence of more unorganized players versus the organized ones, resulting in an increasingly competitive environment, characterized by stiff price competition.

Opportunities
Opening of the health insurance sector and increase in per capita income - the growth drivers for the pharmaceutical industry. India, a potentially preferred global outsourcing hub for pharmaceutical products due to low cost of skilled labor.

Threats
Other low-cost countries such as China and Israel affecting outsourcing demand for Indian pharmaceutical products Entry of foreign players (well equipped technology-based products) into the Indian market.

Outlook Overall growth outlook for the Indian drugs and pharmaceutical industry appears positive. Pharmaceutical manufacturers are likely to benefit from rise in demand for generic products. Some of the factors that would drive growth in the domestic pharmaceutical industry are: 1) Low cost operations 2) research-based processes 3) Improvements in API 4) Availability of skilled manpower. The domestic formulations and bulk drugs markets are currently facing price pressure as benefits of cheaper drugs have been shifted to end-users and trade channels. Hence, consolidation, partnership and alliances are expected to gather momentum in the near future. Off patenting of branded drugs would increase demand for generic drugs. This provides immense opportunities to the Indian pharmaceutical companies especially given their prior experience in generic drug development. Some other factors such as high penetration in the global markets and increase of share in Abbreviated New Drug Application (ANDA) filings are likely to power growth of the formulations market. Major growth drivers for the Indian bulk drug industry include rise in demand for contract manufacturing, increase of share in Drug Master Files (DMF) filings and process innovation. Furthermore, initiatives of the Government will act as a backbone for growth. Some such initiatives include: 1) Allowing 100% FDI under the automatic route in drugs and pharmaceuticals including those involving use of recombinant technology 2) Increasing weighted tax deduction on expenditure in in-house R&D activities to 200% in the Budget 2010 and 3) Setting up a US$ 639.56 mn venture capital fund to support drug discovery and strengthen pharmaceutical infrastructure.