INDIAN PHARMACEUTICAL INDUSTRY

GROUP 9: EQUILIBRIUM
MEMBERS: POOJA VERMA(1421337),
VINEET RAINA(1421332)
SAYON DAS(1421328),
DISHANT BANSAL(1421309),
BHAVANA KONETI(1421341),
KARTHIK ESHWARAN(1421315)

INTRODUCTION TO
PHARMACEUTICAL INDUSTRY IN
INDIA
1930: First pharmaceutical company called Bengal Chemicals and pharmaceutical works ws started
which exists even today as government owned drug manufacturers.
1970: Patent act was introduced which saw a major breakthrough in pharma industry and gave
boost to the industry.
1980: The industry values $25 million compared to $25 billion in 2014.
1992: With liberalization Indian pharma industry detached from the then included in manufacturing
industry and started expanding in India and abroad attracting foreign investments.
According to Indian Brand equity foundation the Indian pharma industry is growing at a CAGR of
17.4 % between 2012-2016 (forecasted).
In terms of volume India is 1.4% in value standing at 14th position and 10% in terms of volume
standing at 3rd position.
Today Indian companies are investing heavily on R&D , reengineering, increase exports in more
than 200 countries, penetrating in the Indian market and expanding abroad. This has led
Pharmaceutical industry to be key drivers of economy.

Structure of pharmaceutical industry in India

Pharma

Active
pharmaceutic
al
ingredients/B
ulk drugs

Branded

Formulatio
ns

Generic

Chronic

Acute

Cardiovascular
,neurological,a
ntidiabetes,gastr
o intestinal

antiinfectives,Resp
iraoty,pain,gyn
ecology

Market Share for FY2013 in revenue

27%
Indian Companies
MNCs

73%

Key International
players are AbottLaboratories, GlaxoSmithKline, Pfizer
Key Domestic Players
Sun Pharma, Lupin Ltd, Cipla, Dr Reddys,

GROWTH IN PHARMACEUTICAL IN INDIA

Outlook for Indian pharmaceutical industry by Net Revenue(USD billion)

40
35

36

30

30

25

25

20

21

15
10

14
10

11

2008

2009

16

17

2011

2012

5
0

2010

2013

2014

2015

2016

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org
Current growth outlook CAGR is at 17.4% from 2008 to 2016. Current value of Indian pharmaceutical
industry is 25 billion which is expected to grow to 36 billion.
This is resulted due to various reasons such as:
RISE IN PER CAPITA INCOME: $ 1570
RISE INVESTMENT IN HEALTHCARE INDUSTRY
TOTAL GOVERNMENT EXPENDITURE in pharma: $ 27 billion
RISE IN G.D.P OF INDIA: (average growth of 5% from 2009-2013) $1.87 trillion (nominal: 10th; 2013)
HIGHER FOREIGN INVESTMENT (FDI @ 100%): $ 10.3 billion
INCREASED LITERACY & AWARENESS ABOUT HEALTHCARE: literacy at 74%.
HUMAN DEVELOPMENT INDEX: 0.586 (135th in the world)
The Enactment of WTOs Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement
which mandated patent protection on both products and process.
The Expansion of bio-technology and research & development in India.

INDIAN PHARMACEUTICAL INDUSTRY IS 1.4% OF

INDIAN GDP (NOMINAL) FY2013.

HHI
Market Share Of Companies in % (on basis of Net Revenue)
Companies
Sun Pharma

8.4

Dr Reddy

7.8

Lupin

6.4

Cipla

5.2

Aurobindo Pharma

3.6

Cadila Health

2.4

Ipca Labs

2.1

Jubilant Life

Torrent Pharma

1.8

GlaxoSmithKline

1.6

Wockhardt

1.6

Sun Pharma Adv

1.56

Glenmark

1.54

Divis Labs

1.41

Orchid chemical

1.26

Sanofi India
Nectar Life

1.2
1

Alembic Pharma

0.9

Piramal Enter

0.9

Elder Pharma

0.82

Ajanta Pharma

0.7

Ind-Swift Labs

0.7

Sharon Bio Medi

0.7

Pfizer

0.7

Unichem Labs

0.66
56.95

14.74
978
13.696
22
11.237
93
9.1308
17
6.3213
35
4.2142
23
3.6874
45
3.5118
53
3.1606
67
2.8094
82
2.8094
82
2.7392
45
2.7041
26
2.4758
56
2.2124
67
2.1071
12
1.7559
26
1.5803
34
1.5803
34
1.4398
6
1.2291
48
1.2291
48
1.2291
48
1.2291
48
1.1589
11
100

217.5
56
187.58
66
126.29
1
83.371
81
39.959
27
17.759
68
13.597
25
12.333
11
9.9898
17
7.8931
89
7.8931
89
7.5034
63
7.3123
6.1298
63
4.8950
11
4.4399
19
3.0832
77
2.4974
54
2.4974
54
2.0731
95
1.5108
06
1.5108
06
1.5108
06
1.5108
06
1.3430
75
772.04
92

x = market share out of 100%

The scope of this analysis is pharma companies with net revenue greater than Rs 1000 cr or $160
million.
The Top 5 companies command 32% of the market share
Companies with net revenue greater than Rs 1000 cr or $ 160 million command a share of 56.95 % of market
in pharmaceutical industry.

The HHI is 772.0492

An HHI lower than 1000 indicates relatively an un-concentrated and highly competitive market.

THE PHARMACEUTICAL INDUSTRY IN INDIA

Indian pharmaceutical companies with respect to NET REVENUE (Source: www.moneycontrol.com)
Company

Net Sales

Net sales

Sun Pharma

(Rs. cr)
12500.00

in $million
2100.00

Dr Reddys Labs

12,000.00

2000.00

Lupin
Cipla

9461.38
8,202.42

1600.9
1364.3

Aurobindo Pharm

5,425.10

902.4

Cadila Health

3,675.70

614

Ipca Labs

3,234.82

538.1

Jubilant Life

3,146.30

523.3

Torrent Pharma

2,766.23

460.1

GlaxoSmithKline

2,546.15

423.5

Wockhardt

2,471.18

411

Sun Pharma Adv

2,432.14

404.5

Glenmark

2,300.90

382.7

Divis Labs

2,128.89

354

Orchid Chemical

1,906.58

317.1

Sanofi India

1,808.86

300.9

Nectar Life

1,626.25

270.5

Alembic Pharma

1,492.64

248.3

Piramal Enter

1,403.19

233.4

Elder Pharma

1,233.10

205.1

Ajanta Pharma

1,109.92

184.6

Ind-Swift Labs

1,082.70

180.1

Sharon Bio Medi

Pfizer
Unichem Labs

1,059.50
1,050.07
1,005.22

176.2
174.7
167.2

This table shows players in pharmaceutical industry of India by Net Revenue in the Indian market which
have Net Sales above 1000 crore rupees which is equivalent to $160 million.
As of Q1 FY2014 Sun Pharmaceuticals is at the top in Net Revenue at $ 2.1 billion which increased
significantly recently due to the acquisition of Ranbaxy. Dr Reddys Laboratories is second with Net Revenue
amounting to $ 2 billion followed by Lupin with $ 1.6 billion.
Among this list Cipla, Sun Pharmaceuticals and Dr Reddys Laboratories is listed in the SENSEX 30 among
all other pharmaceuticals in India.
Indian pharmaceutical industry is dominated by Indian companies, thus global pharmaceutical giants such as
Pfizer has a Net revenue as $174.7 million and GlaxoSmithkline with $423 million which is quite less
compared to top Indian counterparts in the Indian markets.
Indian Pharmaceutical companies with respect to MARKET CAPITALISATION
Sun Pharma

(Rs. cr)
1,63,559.81

(in million $)
27205.3

Lupin
Dr Reddys Labs
Cipla

49,980.00
47,012.47
35,288.39

8313.3
7819.6
5869.5

Ranbaxy Labs

25,016.79

4161.1

Cadila Health
GlaxoSmithKline

23,118.16
21,041.50

3845.3
3499.9

Aurobindo Pharm

19,789.93

3291.7

Divis Labs

19,604.85

3261

Glenmark

17,851.00

2965.2

Torrent Pharma

12,217.88

2032.1

Piramal Enter

10,978.46

1826.1

Biocon

9,303.00

1547.4

Ipca Labs

8,885.05

1477.9

Wockhardt

7,609.25

1265.7

Sanofi India

6,860.71

1141

Alembic Pharma

6,371.84

1059

Ajanta Pharma

5,816.56

967.5

Abbott India

4,315.84

717.9

Sun Pharma Adv

4,196.77

698.1

Pfizer

4,115.28

684.5

(Source: www.moneycontrol.com)
The above Table shows key players in the pharmaceutical markets ranked on the basis of market
capitalisation.
Sun pharmaceutical based on market capitalisation is at the top with $ 27 billion followed by Lupin with $8.3
billion and Dr Reddys Pharmaceutical at &$ 7.8 billion while global giants as GlaxoSmithKline with $ 3.4
billion and Pfizer with $ 684 million.

Reveneue share of Indian Pharmaceutical sub-segments in FY2013

9%
Generic medicine

19%

Over the counter medicine

Patented drugs

72%

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org

72% of market share (in revenue) is generic drug which is highest, currently at $18.3 billion. Over the
counter medicine at 19% (revenue) and patented drug at 9%.

Market segment (by revenue value) in FY2013

Anti-infectives

Cardiac

Gastro Intestinal

Vitamins/Minerals/Nutrients
18%

Respiratory

35%
12%
Pain/anaelgesics

Others
11%

7%
8%

9%

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org

17.8% anti-infective, 12.3% cardiac, 11% gastro intestinal, 8.9% vitamins/minerals/nutrients

8% respiratory, 7% pain & analgesics, 34.6% others.

R&D IN PHARMACEUTICAL

R&D expenditure in $ million

140
120
100
80
60
million $

40
20
0

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org
Average investment in R&D in pharmaceutical industry in India is 2% of revenue which stands at $ 533
million spending of pharmaceutical in 2013-14.
As the above table shows investment on R&D has significantly been increased by Top Pharma companies in
India. Dr Reddy Labs at $130 million from $82 million which is an increase of $ 48 million. Lupin is ranked
second in investment in Pharmaceutical with $124 million with an increase from $87 million.

The metropolitans and cosmopolitans contribute 30% of the Net sales whereas class 1 towns and class 2-4
towns share 31% and 19% respectively. Rural share 20% of the market with growth of 14%.

Share of generic & patented pharma in $billion

Generic

Patented

0.8

0.9

1.1

1.3

1.5

1.8

2.2

2.7

3.3

6.9

8.1

10

11.3

12.6

15.1

18.2

21.8

26.1

2008

2009

2010

2011

2012

2013

2014

2015

2016

Currently in prescribed drugs generics commands $18.2 billion whereas patented holds $2.2 billion.

PER CAPITA SALES IN PHARMACEUTICAL INDUSTRY

Per Capita Sales of Pharmaceutical (USD)

30
27

25
23

20
19
15
10

11

13

14

16

5
0

2010

2011

2012

2013

2014

2015

2016

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org
Per capita sales in current year are $19 which is expected to grow at $27 by 2016 at a CAGR at 16.3%. This
is primarily dependent at per capita income.

Trade of Indian pharmaceutical industry

Trade Data Of Indian Pharmaceutical industry (USD) billion

12

10

(USD) billion

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

Source: all Indian origin chemists & distributors, dep. of pharmaceuticals, planning commission
report www.ibef.org
Ministry of commerce targets to exports 25 billion worth of pharmaceuticals by 2016. Indian drugs are
exported to more than 200 countries in the world. India is the largest producer of generic drug market
accounting for 10% in term of volumes.
In terms of value exports have increased with a CAGR of 26.1%.
Exports are at 10.1 billion and imports are at 1.8 billion. Exports are steeply increasing due to low cost of
manufacturing and labour in India.

Sun
pharm
a
Torrent
pharm
a

Acquir
es

$3.2
billion

ranbax
y

Acquir
es

$
321.6
miilion

elder

Lupin

Acquir
es

Grim

FDI

$10
biilion

MANUFACTURING
India has the largest number of US FDA approved manufacturing plants outside US at 546 out
of 10500.
India has 2633 USFDA approved drug products out of 60000 products.
India accounts for 35.7 per cent (3,000) of 8,374 Drug Master Files (DMFs) filed with the USA,
which is the highest outside of USA.

Cost Of production:
Indias cost of production is nearly 60% lower than that of USA and 50% lower than Europe.
Labour cost is 55% cheaper than USA and Europe.
The cost of setting up a production plant in India is $50% lower than Europe and USA.
Cost efficiency is the one of the crucial reason for increase in export and opportunities for Indian
pharmaceutical industry.

W.H.O APPROVED MANUFACTURING PLANTS BY STATES

Demand of pharmaceutical product

Demand for pharmaceuticals is relatively inelastic. In case of life saving drug if a person is sick he/she is
bound to purchase the medicine in spite of the price when income factor remains constant. Price and
demand has inverse relation only in case of no lifesaving drugs can be prescribed without prescription
or whose known generic drug is available and known easily.

Qd = {-P+ Y, +HI, +INF, -M, +S, +P, +Lf)

Income
of consumer
i.e a consumers ability to pay is a variable in demand of
Y: Income
of
pharmaceutical
product.
If income of consumer is high he will likely spend more
consumer
on his health and able to spend greater. Thus income of consumer and demand
of pharmaceutical product are in positive relation.

Health investment relates to ones investment to remain healthy.

HI:
Health
Consumers
make various investment such as health insurance,
investment
medicines for healthy lifestyle such as nutrients, protein, vitamins etc.
An increase in health investment has a positive relation to demand of
pharmaceutical product.

With
increase in literacy and marketing awareness flow of information is
INF:
much
higher. Advertisement, marketing, and education helps to increase
Information
demand of pharmaceutical products . Thus, this has a positive relation to
demand.
Mortality rateis a measure of the number ofdeaths per 1,000
individuals per year. Mortality rates has been steadily declining
in past
decades due to various reasons such as better health care
M:
Mortality
system
Rate and enhanced pharmaceutical product. The lower the
mortality rate greater the number of years will survive and thus
demand better health care and pharmaceuticals in order to stay
healthy. Thus, demand of pharmaceutical and mortality rate have
an inverse relation.
P: Population
Increase
in population has been a vital factor in increase in
demand of Indian pharmaceutical industry and thus there is
excess of demand over supply of pharmaceutical products.

Indian
lifestyle has changed over the years due to
Lf: LifePopulation's
style
socio-economic factors and growing urbanization. This has led
to an increase in life-style related ailments such as obesity,
heart disease, stroke, cancer and diabetes.
Substitute to pharmaceutical products such as ayurvedic, homeopathy
Substitute aspeople opting for it for various medical reasons. However
areS:variable
during serious and critical conditions pharmaceutical products have been
favoured for their effectiveness and efficiency. Ayurvedic industry stands
at $2 billion with company as zandu, patanjali, dabur and homeopathy at
$0.5 billion industry.

Supply of pharmaceutical product

Qs = {-C, +T, +G, -TX, +I, -L)

Cost Of production: Indias cost of production is nearly 60% lower than
that of USA and 50% lower than Europe. Labour cost is 55% cheaper than
of The cost of setting up a production plant in India is
USACost
and Europe.
production:
$50%
lower than Europe and USA. Cost efficiency is the one of the crucial
reason for increase in export and opportunities for Indian pharmaceutical
industry. Thus, quantity supply is increasing. Lower cost of production
helps to increase growth of Indian pharmaceutical industry.

India'sbiopharmaceuticalindustry had a 22.2% CAGR with

revenues
of $4.3 billion in the 201314. Bio-pharma was the
T: Technology
biggest contributor generating 60 percent of the industry's
growth at $3.4 billion, followed by bio-services at $500 million
and bio-agri at $ 340 million. Technology changes in production,
equipment help in growth of demand of pharmaceutical products.

Favourable government policy such as 100% FDI in

pharmaceutical
industry, decrease in excise duty on exports,
G: Government
facilitation
for
pharmaceutical
plants and greater investment
policy
on hospitals and medical schools increases the demand for
products.

Decrease in taxes will decrease the price

TX: Taxes
pharmaceutical
product which will increase the
demand of pharmaceutical product ,thus having a
inverse relation.

Infrastructure investment by both public and private is likely to

I: Infrastructure
increase
the demand for product. Investment such as plants,
hospitals, medical schools, clinics, pharmacists have a positive
impact on demand of product.

DEMAND AND SUPPLY IN CASE OF LIFE SAVING DRUG

In case of life saving
drug the demand for
pharmaceutical
product is completely
inelastic as change in
price will not affect
quantity demand as
it is a matter of ones
life.

OTHER DRUGS
In case of other drug Price is a variable upto a certain extent thus, the
demand curve is not perpendicular.

SWOT ANALYSIS

CAUSES FOR GROWTH AND REASON TO INVEST IN INDIAN

PHARMACEUTICAL MARKET

Cost Efficient
STRENGTH
Talent Base

Labour cost is 55%

cheaper than USA and
Europe which is a
lucrative oppurtunity for
international
manufacturers to ultilize
labour in India which
helps to increase their
profitability and efficiency.

Low-Cost
Manufacturing
Base
Indias cost of production
is nearly 60% lower than
that of USA and 50% lower
than Europe.
The cost of setting up a
production plant in India is
$50% lower than Europe
and USA which makes India
a high priority destination
for investment in
manufacturing plants.
India has the largest
number of USFDA
manufacturing plant
outside USA.

Robust Generic
Pipeline
India is the largest
producer of generic
medicines in the world in
terms of volume.

R&D
In addition 2 % of revenue
is allocated to R & d for
innovation and reengineering.

WEAKENESS
Price Regulator
In India the national pharma
pricing authority dictates all
the pricing of pharmaceutical
products. They set various
pricing parameters and set
prices which leads to lower
profitability of the pharma
industry which acts as a
barrier for growth and
expansion.

Product Patent
There is lack of prosuct
patent in india which
acts as a hindrance to
innovation and
discouraging
investment from
international companies

Penetration
The pharma industry
has not penetrated
enough in the
population especially
the rural area which
remains 70% untapped
thus, have to rely on
exports for growth and
expansion.

Fragmented
Policies
In india there is
fragmented policies
thus, leading to low
barriers to entry. Which
makes the industry
highly unconcentrated
and competitive which
is deduced by HHI
above.

R u r a l p e n e t r a t io n

O PIn PIn dOia RT

I
70% U
o f rN
u r aIT
l
m a r k e t is u n t a p p e d a s it is
g r o w in g a tE
aS
ra te of 2 0 % .
T h u s , t h is p r o v id e s In d ia n
C o m p a n ie s a m p le
o p p o r t u n it ie s t o e x p lo it
a n d p e n e tra te th e
u n ta p p e d m a rke t.
M N C s a n d In d ia n
c o m p a n ie s h a v e t o o ff e r
d iff r e n t ia t e d p r o d u c t s in
o rd e r to p e n e tra te ru ra l
p o p u la t io n w h ic h m o s t ly
liv e s b e lo w B P L $ 2 /d a y.

P ro d u ct p a te n t
In t h e u .s a n d e u r o p e fr o m
2 0 1 2 -2 0 1 5 m a n y g e n e r ic
m e d ic in e p a t e n t w ill
e x p ir e . T h is le a d s a m p le
o p p o r t u n it y fo r in d ia n
c o m p a n y t o e x p lo it a n d
in t r o d u c e c h e a p e r
a lt e r n a t iv e s e s p e c ia lly in
g e n e r ic d r u g m a r k e t

L Ife s t y le
D e m o g r a p h ic s
In d ia n Po p u la tio n 's life s ty le
h a s c h a n g e d o v e r th e y e a rs
d u e to s o c io -e c o n o m ic fa c to rs
a n d g ro w in g u rb a n iz a tio n . T h is
h a s le d to a n in c re a s e in life s ty le re la te d a ilm e n ts s u c h a s
o b e s ity , h e a r t d is e a s e , s t ro ke ,
c a n c e r a n d d ia b e te s .

R a p id U r b a n is a t io n
It is e s t im a t e d t h a t 4 0 % o f
in d ia n p o p u la t io n w ill liv e
in u r b a n a r e a s u p t o 2 0 3 0
a n d u r b a n p e n e t r a t io n is
in c r e a s in g a t C A G r o f 3 0 % .
T h u s c re a te s o p p o rtu n e
a r e a f o r p h a r m a in d u s t r y.

H e a lt h in s u r a n c e
H e a lt h in s u r a n c e
p e n e t r a t io n is in c r e a s in g in
In d ia b u t o n ly 3 0 % In d ia n
p o p u la t io n is c o v e r e d b y it .
E x p e x te d to re a ch 4 5 % b y
2020.

TCH
R E AT S
o m p e t it io n
C h in a In d ia c o m p e t it iv e
m a r k e t a ls o h a s a r o b u s t
g e n e r ic d r u g p ip e in e
h a v in g m o r e e ff e c ie n t
m a n u fa c t u r in g in d u s t r y.
T h is p o s e s a t h r e a t in
in v e s t m e n t fo r
in t e r n a t io n a l p la y e r s in
In d ia .
Is r a e l is a ls o a lo w c o s t
m a n u f a c t u r e r w h ic h
t h r e a t e n In d ia n
m a n u fa c t u r e r s a n d
e x p o rts.

P a t e n t P o lic y
P a t e n t P o lic y s t r u c t u r e is
q u e s t io n e d b y
In t e r n a t io n a l p la y e r s t h u s ,
G o v e rn m e n t m ay b e
c o m p e lle d t o m o d ify w h ic h
w ill t h r e a t e n t h e d o m e s t ic
m a n u fa c t u r e r s .

E x p o r t R e ly in g
E x c e s s r e ly in g o n
In t e r n a t io n a l m a r k e t m a y
p o s e p r o b le m d u r in g c r is is
a s p e n e t r a t io n in In d ia n
m a r k e t is v e r y lo w .

Top companies overview

Sun Pharma was set up in 1983, with compact
manufacturing facility for tablets and capsules.
It set up its first API plant at Panoli in 1995.
Today, it has 26 manufacturing facilities across four
continents and employs more than 14000 people.
Over 70% of its sales come from international markets
Its revenue increased from $930.6 million in 2009 and
$2.1 billion with CAGR of 27.4%.

Source: www.ibef.org
Dr Reddys began as an API manufacturer in 1984.
It has integrated in 3 segments: Pharmaceutical
services & Active ingredients, global generics.
It accesses emerging market with partnership with
GSK.
It revenues increased from $1.5 billion in FY09 to
$2.1 billion in 2014 at Cagr of 14.4 %.
Global generics compromised 71% of its revenues.
Source: www.ibef.org

Established 1935, currently operating 34

manufacturing plants.
Cipla outperformed global pharma by offering
patented anti-AIDS drugs at affordable prices.
It has a presence over 170 countries with over 20000
employees.
It revenue increased from $1.1 billion in FY2009 to $
1.5 billion in FY2013 at CAGR of 13%.
Source: www.ibef.org

BIBLIOGRAPHY
www.ibef.org
www.medindia.com
http://www.ncbi.nlm.nih.gov/
www.pharmaceuticals.gov.in/
Economic Times (august edition 2014)