Indian Pharma: A Dark Horse

Over the years pharmacy has grown in the form of pharmaceutical sciences through research and development processes. It is related to product as well as services. The various drugs discovered and developed are its products and healthcare it provides comes under category of services.
The Indian pharmaceutical industry is in the top rank of India’s science based industries with a vast array of capabilities in the complex field of drug manufacture and technology. This sector is categorized as highly organized sector registering turnover of $ 4.5 billion and growing at a rate of 8% to 9% annually. The Indian pharmaceutical industry is capable to meet country’s demand for any drug. The manufacturing units within the country are capable of meeting about 80% of the country’s drug requirement. There are about 20,000 production units in India with products sold at competitive lower prices than international drug prices. It ranks high in the third world in terms of technology, quality and range of medicines manufactured. From simple headache pills to complex antibiotics and complicated cardiac compounds, almost every type of medicine is made indigenously.

The Indian pharmaceutical sector is highly fragmented with more than 20,000 registered units. Drastic expansion has been witnessed in last 2 decades. The leading 250 companies control 70% of the market with market leader holding nearly 7% of the market share. It’s an extremely fragmented market with severe competition and government price controls.

Playing a key role in promoting and sustaining development in the vital field of medicines, Indian pharma industry boasts of quality producers and many units approved by regulatory authorities in UK and USA. International companies associated with this sector, have stimulated, assisted and spread head this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.

India has 300 pharma companies of large and moderate size and another 10,000 small and tiny firms. But 70% of the production is by 100 larger companies. The industry manufactures around 440 of bulk drugs and almost entire range of formulations. About 1/3rd of India’s production – close to US $ 3.5 billion- is exported and exports are growing at 25% per annum. Exports to US fetch India about half billion dollars, while Germany, UK, Italy, Japan are among others. Large quantities of medicines are being exported from India to china, Brazil, Mexico and Nigeria.

PATENT REGIME
The signing of trade related intellectual property rights (TRIPS) agreement in 1995, which committed India to honor the WTO mandated product regime from 2005 marked the beginning of fresh chapter in industry’s evolution and India has finally transited into product patent regime from process patent. Process patent is the form of protection under which the process by which drug is manufactured is given protection. As there were many loopholes in this system companies very conveniently made very minor changes in the product and sold patented drugs at a lower price. Because of this MNC’s like Pfizer, Eli Lily was reluctant to launch their new molecules in Indian market. But under the product patent the molecule gets the protection and others cannot develop the similar molecule till the patent is valid.

POST 2005 SCENARIO
By issuing a patent ordinance, India met a WTO commitment to recognize foreign patents from January 2005, the culmination of 10 year process. In this new scenario, the Indian pharmaceutical manufactures won’t be able to manufacture patented drugs. To adapt to this new patent regime, the industry is exploring business models different from existing traditional ones.
New business models include:
1. Contract research ( drug discovery and clinical trials)
2. Contract manufacturing
3. Co-marketing alliances.

The focus of Indian pharma companies is also shifting from process improvisation to drug discovery and R &D. The Indian companies are setting up their own R &D setups and are also collaborating with research laboratories like CDRI, IICT etc.

CONTRACT RESEARCH
In 2002, the industry for clinical trials in India was $ 70 million. This market is growing at the rate of 20% per annum. According to experts, it will be industry worth anywhere between $ 500 million to $ 1.5 billion by 2010.
The global R&D is spending to the tune of $ 60 billion of which non-clinical segment accounts for $ 21 bn and clinical segment accounts for $ 39 bn. In terms of Indian prices this translates into ($ 7 bn at 1/3rd of US/EU costs) and ($ 7.8 bn of US / EU costs) respectively. This constitutes total potential for $ 14.8 billion for the Indian pharma companies.

CONTRACT MANUFACTURING
Many global pharmaceutical majors are looking to outsource manufacturing from Indian, companies which enjoy much lower costs both capital and recurring than their western counterparts. Many companies have made their plants CGMP compliant and India is having the largest number of USFDA approved plants outside USA.
The pharma companies are going for compliance with international regulatory agencies like USFDA, MCC etc for their manufacturing facilities.
Indian companies are proving to be better at developing API’s then their competitors from target markets and that too with non-infringing processes. Indian drugs are either entering into strategic alliances with large generic companies in the world of off-patent molecules or entering into contract manufacturing agreements with innovator companies for supplying complex under patent molecules.
Some of the companies like Dishman pharma, divis labs and matrix lab have been undertaking contract jobs for MNC’s in US and Europe. Even shasun chemicals, strides arcolabs, jubilant orgonosys and many other large Indian companies started undertaking contract manufacturing of API’s as apart of their additional revenue stream. The Boston consulting group estimated that contract manufacturing market for global companies in India would touch $ 900 million by 2010.


Growth Pattern of the Sector
The pharma industry has grown at 1.5-1.6 times the growth of the economy over the past couple of years. The industry has grown at a CAGR of 13 % from 2002-2007 and is expected to grow at a rate of CAGR of 16% over the period of 2007-2011. Accounting for the 2% of the world’s pharmaceutical market, the Indian pharmaceutical sector has market value of about US $ 8 billion. It ranks 4th in terms total global pharmaceutical production and 13th in terms of value. Over the last 2 years the sector’s market value has increased to about US $ 355 million because of launch of new products. According to an estimate 3900 new generic products have been launched in past 2 years. These have been by and large launched by big brands in the pharma sector. And in the year 2005 Indian pharmaceutical companies captured around 70% of the domestic market.
At present scenario only few people can afford costly drugs which have increased price sensitivity in the drug market. Now the companies are trying to capture the market by introducing high quality and low priced medicine and drugs. At present large number of Indian pharmaceuticals companies are looking for tie-ups with foreign firms for in license drugs. In 2005 6.2% of the disposable income was spent on healthcare as compare to 2.8% in 1995. Health insurance penetration is estimated at 10% in India and is expected to double in next five to seven years.

India is one of the top five manufactures of bulk drugs in the world and among the top 20 pharmaceutical exporters of the world. The value of the pharmaceutical output grew more than 10 fold from Rs 5000 crore in 1990 to over 65000 crore in 2006-07.india is now recognized a one of the leading global players in pharmaceutical industry. Europe accounts for highest share of Indian pharma exports followed by North America and Asia. The national pharmaceutical policy, aimed at ensuring availability of lifesaving drugs at reasonable prices is being finalized. Taking stock for the imperative requirement, the government has decided to set up six new institutes of pharmaceutical education and research (NIPERS) in different regions of the country. As anew initiative in pharmaceutical sector, the first pharmaceutical census of India is proposed to during 2007-08 to obtain robust database for the sector.

Pharma to emerge as Dark Horse in slowdown

In these tough times of recession [Indian] pharma sector has shown comparative resilience and has been relatively less impacted. There are two reasons for this: the domestic pharma market continues to experience healthy growth and the demand for generic (a biological equivalent of an originator pharmaceutical product) medicines is on the rise in international market.

Pharma is not completely immune to the slowdown and global economic crisis, but the impact is less severe. Over the past two years, the $8 billion domestic pharma industry has grown at a rate of more than 12%.
It is likely to see high single digit growth in 2009. The growing incidence of lifestyle diseases, rising disposable incomes, greater penetration of health insurance and expanding medical infrastructure will continue to foster growth in the domestic market. The fact is that however bad the economic environment, demand for medicines is relatively inelastic.

They will remain a hot centre for opportunity. There is also growing excitement as drugs worth $60 billion are expected to come off patent in the US in next few years. These positive trends signal a huge market opportunity for Indian pharma companies, who have over the years carved a niche for themselves, in most global markets