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2011 Pharma Industry Update and Future Trends

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2011 Pharma Industry Update and Future Trends Conventionally, the Indian pharmaceutical industry has been depended on a core
competency in generics, manufacturing and comparatively unripened potentialities in Research & Development. This prospect has overhauled considerably since the 1990s and Indian companies have been making investments towards ourishing drug discovery and development activities. The adoption of patent laws and the surge of contract manufacturing have preceded to the diversi cation of revenue streams, altering Indian pharma industry to go across high market growth.

India is going to rank among top 10 Global players by 2015 in pharmaceutical sector.

Fact File
Turnover of Indian pharma industry has grown exponentially from Rs.10 crore (about US$ 2 million) in 1948 to about Rs. 1,00,000 crore (US $ 21 billion) today. Presently maintaining a growth rate of over 15% annually. India is ranked 3rd largest country in terms of production volume and 13th in terms of value with 8% of Worlds Production but only 1.5% of Value. The Indian Pharmaceutical Industry employs over 4.2 million personnel, both in manufacturing and ancillary sectors. Exports of about Rs. 50,000 crore (over US $ 10 billion) last year growing at 22% annually. More than 200 manufacturing facilities are approved by US FDA, UK-MCA, Australia, South Africa Authorities and many more are holding WHO-GMP certi cates.

Strengths and weaknesses of Indias pharmaceutical industry

Strengths Cost advantages Large pool of highly trained manpower. 2nd largest number of U.S. FDA approved facilities. TRIPS (Trade Related Intellectual Property Rights) compliance. Lower operating costs. Growing biotechnology industry. Reverse engineering skills. Largest number of Drug Master Files. Bio-diversity. FDI growing at 100 percent. Strong IT skills for research data management. Strong marketing and distribution network. Well established network of laboratories. It has an excellent record of development of improved, cost-bene cial chemical synthesis for various drug molecules.
Source: CII, Financial Express

Weaknesses Industry concentrated at lower end of value chain. Low level of investment in R&D. Highly fragmented industry. Government price controls. Low margins. High tari s and taxes. Substandard drugs and counterfeiting. Most Indian companies are small by world standards. Lack of experience in drug discovery. Corruption. Weak domestic market. Low levels of per capita medical expenditure.

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2011 Pharma Industry Update and Future Trends Industrial Evaluations
Indias pharmaceutical industry consists of large, medium, small companies and is one of the worlds most cost competitive industries. It is also extremely fragmented with more than 25,000 domestic manufacturing units. 35 years of protection has switched the Indian pharmaceutical industry to everlasting scienti c and manufacturing potentialities, permitting many of its leading companies to spring up the value added string in the space.

MNC presence in India

Indian pharmaceutical companies produce 20 -22 % of the worlds generic drugs, oer 60,000 nished medicines in 60 therapeutics and nearly 400 bulk drugs used in formulations.

Many of the worlds leading pharmaceutical companies have subsidiaries or other operations in India. Multinational companies like Astrazeneca, Baxter, Aventis, P zer, Novartis, MSD, Wyeth and Merck have been active in Indias pharmaceutical market mainly through subsidiaries. The relaunch of product patents precipitated the return of a large number of other MNCs, some of who left during the process patent era. MNC pharmaceutical companies have also been drawn by tax holidays, the implication of capital R&D expenditures and other nancial motivators provided by the Indian government. There are approximately 34 foreign drug companies engaged in the Indian pharmaceutical market and among them are 15 of the worlds 20 largest pharmaceutical companies. Although MNCs have not launched new products they have invested in new production facilities, R&D centers and many are engaged in contract manufacturing, clinical trials and other forms of outsourcing. FICCI

Mergers, acquisitions, and other alliances

The last 3 years have seen a substantial rise in the number of integrations, mergers, acquisitions, and other form of link ups in the Indian pharmaceutical industry. Most of the acquisitions postulate Indian companies are looking for paths to sync with international markets, extend their global footmarks, broaden and expand their product portfolios, o er their customers a near shore-o shore option, improve their custom manufacturing, packing, R&D capabilities, acquire subsisting brands, and bring in access to the highly regulated markets.

Contract research and manufacturing, outsourcing, and other services

CRAMS (Contract Research and Manufacturing Services) can be divided into 3 basic segments: the production of intermediates, active pharmaceutical ingredients for new chemical entities and the manufacture of generic drugs. India has emerged as one of the worlds leading CRAMS providers for MNC innovator companies and now accounts for 6 to 7 % of the global market. Many expect India will command at least 15 percent of the market. The passage of the Patents (Amendment) Act 2005 has signi cant implications for both Indian and multinational companies competing in the Indian market. Leading Indian companies are now gradually moving away from the generic production to the development of new drugs, exports to regulated markets and cooperative agreements with global MNC's. Confronting lagging sales of patented drugs by MNC's in their home markets, declining R&D revenues and rising costs, many MNC's have turned to contract manufacturing, research services (CRAMS), co-marketing alliances, outsourcing of research and clinical trials to reduce costs, increase development capacity and trim the time to market for new drugs. These strategies permit MNC's to focus on their core pro t making activities, such as drug discoveries and marketing, rather than on manufacturing. India has emerged as the principal destination for global pharmaceutical companies across the pharmaceutical value chain. Although CRAMS is still in its nascent stages in India, it represents a signi cant opportunity for medium-sized Indian pharmaceutical companies.

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2011 Pharma Industry Update and Future Trends Contract outsourcing
International pharmaceutical companies are now outsourcing a wide range of activities including: the manufacture of Active Pharmaceutical Ingredients (API), chemical intermediates, formulations, clinical research, clinical testing, packaging and labeling. The Indian market for contract outsourcing has been driven by the need of leading MNC pharmaceutical companies to reduce production costs and increase revenues. These companies have shifted portions of the production, research & development, clinical trials, packaging, labeling, stability testing, other types of drug development and discovery activities to India.

e Indian Pharmaceutical Industry employs over 4.2 million personnel, both in manufacturing and allied sectors.

Future Trends
Innovation, not original research alone, is the order of the day. MNC's will make an aggressive bid for the Indian market, as India moves towards TRIPS, and international companies register their new drugs for patenting after 10 years. Smaller companies, which had so far bene ted from the protective regime, may be forced to become contracting units, or close shop. Generics will have a huge demand. Increasing R&D costs will lead to more consolidation for international companies. Within 5 years, the top 10 pharma companies will control over 60% of the world market. International companies could set up their own R&D labs in India and develop drugs for tropical diseases. Innovations in R&D process such as genomics and combinatorial chemistry. Indian pharma companies are expected to move up the value chain from merely being reverse engineers to developers of proprietary products in the US market. Implementing New Technologies to Address Key Issues. Combating the growth of counterfeit drugs. Handling "reverse logistics" where shipments are sent back to the manufacturer either due to incorrect items being issued or simply being out of date. Improving the overall e ciency of receiving goods, ensuring that the right products have been delivered.

Conclusion
The pharmaceutical business in the world trade environment will have to be competitive. The major focus should be on research, drug design and development. The industry, authorities and institutions must understand the challenges and market needs to develop workforce with competent, managerial and entrepreneurial talent. Pharmaceutical industry players will need to take risk and fortify their organization by focusing on to bring in talents and skills from outside the industry than with traditional approaches focused on developing talent from internal departments to focus more on to achieve industry goals.

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