INDUSTRY regarding the patenting, testing, pricing andINDUSTRY regarding the patenting, testing, pricing and















We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now





















Himanshu Maheshwari         Kavita Kulkarni

80303170060                           Faculty Guide –NMIMS















Page No.





and Competition: Market Size and Characteristics



Industry and Competition:
Market Trends



and Competition: Market Structure



of Competitors



Traits of each Major Competitor



Analysis- Metrics














The Pharmaceutical
Industry develops, manufacture, and markets drugs licensed for use as medicines.
For this they have a well-equipped Research and Development department.
Pharmaceutical companies are allowed to deal in generic and/or brand medicines
and medical devices. They are deal with variety of laws and regulations of the
government regarding the patenting, testing, pricing and ensuring safety and adequacy
and marketing of drugs. The Indian Pharmaceutical industry is the
second-largest in the world by volume and is ahead to manufacturing sector of
India. The first pharmaceutical company of India was Bengal Chemicals and
Pharmaceutical Works, which still exists today as one of 5 government-owned
drug manufacturers, in Calcutta in the year 1930. For the next 60 years, most
of the drugs in India were imported by multinationals either in fully
formulated or bulk form. The government started to encourage the growth of drug
manufacturing by Indian companies in the early 1960s, and due to the Patents
Act in 1970, the industry got an opportunity to grow. This patent act removed
composition patents from food and drugs, and though it kept process patents,
these were shortened to a period of five to seven years. The lack of patent
protection made the Indian market undesirable to the multinational companies
who had dominated the market, and while they streamed out, Indian companies
started to take their places. The multinationals were market leaders at that
time because of their superior technology. As a result of this, they had gained
expertise in reverse-engineering new processes for manufacturing drugs at low
costs. Although some of the larger companies have taken small steps towards
drug innovation, the industry as a whole has been following this business model
until the present. Introduction to Pharma Industry 28 Research and Development
Drug discovery is the process by which the required drugs are discovered or
designed. In the past most drugs have been discovered either by isolating the
active ingredient from traditional remedies or by serendipitous discovery. A
great deal of early-stage drug discovery has traditionally been carried out by
universities and research institutions. All this requires constant innovation
and research by either the traditional or modern methods, or a combination of
both. Drug development refers to activities undertaken after a compound is
identified as a potential drug in order to establish its suitability as a
medicines. Objectives of drug development are to determine appropriate
Formulation and Dosing, as well as to establish safety. Research in these areas
generally includes a combination of in vitro studies, in vivo studies, and
clinical trials. The amount of capital required for late stage development has
made it a historical strength of the larger pharmaceutical companies. Often,
large multinational corporations contribute in a broad range of drug discovery
and development, manufacturing and quality control, marketing, sales, and
distribution. On the other hand, smaller organizations lay emphasis on a
specific aspect such as discovering drug candidates or developing formulations.
Often, collaborative agreements between research organizations and large
pharmaceutical companies are formed to discover any probability of new drug.



Market Size of
Indian Pharma Industry and Its Characteristics



pharma sector is estimated to account for 3.1- 3.6 % of the global pharma
industry in terms of value and 10 % in value terms.
It is estimated to grow to 100US$ billion by 2025. India accounts for 20 per cent of global exports in
generics. India’s pharmaceutical exports stood at US$ 16.84 billion in 2016-17 and are expected to reach US$ 20
billion by 2020. During April – September 2017, India exported pharmaceutical products worth Rs.411.3 billion (US$ 6.4 billion). During April – October 2017, India exported pharmaceutical products worth Rs.478.3 billion (US$ 7.4 billion).


    Figure 1: Revenue of Indian pharmaceutical
sector ($ billion)

Department of Pharmaceuticals, PwC, McKinsey, TechSci Research

      Notes: F – Forecast, CAGR – Compound
Annual Growth Rate



The market size is
expected to grow to US$ 55 billion by 2020 and become the 6th largest
pharmaceutical market globally by absolute size. Branded generics with nearly
80% of market share will dominate the pharmaceuticals market (in terms of


According to data
from the Ministry of Commerce and Industry, India has out- performed China in
pharmaceutical exports with a YoY growth of 11.44% to US$ 12.91 billion in FY
2015-16, on other hand imports rose marginally by 0.80 % YoY to US$ 1,641.15 Million.


Figure 2:
Projected size of Indian Pharma market in $ billion



     Source: Mckinsey Analysis, secondary


Figure 3:
Formulation and Bulk Drugs Export Outlook:



CRISIL research; KPMG in India analysis


The US Food and Drug
Administration (USFDA) approved 201 in FY 2015-16 drugs of Indian companies,
nearly doubled from 109 in FY 2014-15. India accounts for around 30% (by
volume) and about 10% (value) of US generics market which stood at US$ 70-80
billion in 2015-16.


India’s biotechnology industry made of
bio-agriculture, bio-pharmaceuticals, bio-services, bio-informatics and
bio-industry is expected grow at an average growth rate of 30% a year and
expected to reach $100 billion by 2025.



Figure 4:
Percentage Distribution of Biotech Companies in Various Segments


Biopharma, therapeutics, comprising vaccines and
diagnostics, is the largest sub-sector of biotech contributing nearly 62% of
the total revenues at Rs 12,600 crore ($ 1.88-billion).



Geographical Clusters: Most of the pharmaceutical manufacturing units are
concentrated in Maharashtra and Gujarat. These two states are home for 44% of
the pharmaceutical manufacturing units.


Ministry of Skill Development & Entrepreneurship



Table 1: Geographical
Distribution of the Pharmaceutical Companies In India



No. of Manufacturing units



Bulk Drugs









West Bengal




Andhra Pradesh




Tamil Nadu












Department of Pharmaceuticals; KPMG in India analysis, ASSOCHAM


The data clearly suggests that due to better infrastructure
facilities, enhanced support from small-scale companies, conductive industrial
atmosphere and skills in chemistry, Maharashtra remains an attractive
destination for Pharma companies. The Maharashtra government promotes the
“Centres of Excellence” working on cutting-edge R&D in emerging areas of
technology and life sciences.


Figure: Percentage
Distribution of Pharmaceutical Companies in Various Regions

Department of Pharmaceuticals; KPMG in India analysis, ASSOCHAM

On other hand Gujarat
always encourages new investments in the state and employs approximately 52,000
people in this sector.


The 5 tax-free states namely Himachal Pradesh, Uttaranchal,
Jammu & Kashmir, Jharkhand and Sikkim are emerging as hot destinations for
Pharma companies. Uttarakhandand Himachal Pradesh (HP) is considered to be
among the fastest growing Pharma hubs in India. Baddi and some other areas in
HP have over 300 manufacturing units. Haridwar, Roorkee, Dehradun and Rudrapur
of Uttarakhand have 200 pharma manufacturing units.


Manufacturing hotspot for various companies across India

KPMG in India analysis, IBEF August 2013


The investment in the region is reported to be worth an
estimated INR30 billion in recent years. Alembic, Dr. Reddy Lab, Alkem,
Mankind, Torrent, Lupin, Cadila, Indswift Lab, Unichem, Morepen,


Klitch, Ranbaxy, Nector, Surya, Cachet, Indchemie, Galpha
are some of the major companies to have established their units in these areas. (Cf. KPMG in India
analysis, IBEF August 2013).










Market Trends of
Indian Pharma Industry





Figure: Global Pharmaceutical Market, Regional Market Share Forecast, 2017*

*Based at ex-manufacturer price levels, not including rebates and discounts. Contains audited and unaudited
date. All compound annual growth rates (CAGR) based on five years.

Pharmerging countries include: Algeria, Argentina,
Colombia, Egypt, Indonesia, Mexico, Nigeria, Pakistan, Poland, Romania, Saudi
Arabia, South Africa, Thailand, Turkey, Ukraine,


IMS has estimated a compound
annual growth rate (CAGR) for the global pharmaceutical market of 3-6% in the
forecast period of 2013-2017. The US pharmaceutical market is expected to grow
at a rate of 1–4%. As far as Europe is concerned, the
markets of the European Union are expected to experience a CAGR of 0–3%, and
the rest of Europe is should have a CAGR of (-1%) to 2%. Emerging markets, may
see strong growth, but are expected to show slower growth than in the previous forecast period. IMS expects China’s market will experience a CAGR of 13–16%, between 2013–2017 compared to a CAGR of 22% during
2008–2012. IMS estimates that the pharmaceutical markets of Brazil, India, and
Russia may to see a CAGR of 10–13% between 2013–2017
compared to a CAGR of 16% during 2008–2012. Tier 3 ‘pharmaerging’ markets have a prognosis
to have pharmaceutical industry growth of 6–9% between 2013–2017 compared to a
CAGR of 9% during 2008–2012.Due to reporting purposes, CAGR forecasts are estimated in constant dollars, and historical CAGR in
actual dollars. 

The influence of emerging
markets in pharmaceutical industry growth is substantially proven by several
key projections offered by IMS. By 2017, 50% of drugs by volume are forecasted to be in ‘pharmerging’ markets, and the US and
Europe each respectively will account for only 13% of pharmaceutical volume by
2017. China will take the lead, and the BRIC countries (Brazil, Russia, India,
and China) will account for 70% of all ‘pharmerging’
market sales by 2017 on a value basis and strategically will continue to be the
reasons of thriving among emerging markets. Pharmaceutical sales in China are
estimated to touch $167 billion by 2017, $49 billion in Brazil, $24 billion in
India, and $27 billion in Russia.





Government expenditure on
pharma in the country increased from US$14 billion in 2008 to US$ 53 billion in
2016. The expenditure expanded at a CAGR of 18.1 per cent over 2008–16to reach
US$ 53 billion. Under Union Budget 2017-18, new 5,000
postgraduate seats in

medical colleges were
announced by the government, to ensure availability of specialist doctors.
Under Union Budget 2017-18, new 5,000 postgraduate seats in medical colleges
were announced by the government, to ensure
availability of specialist doctors. Medical technology park in Vishakhapatnam,
Andhra Pradesh has already
been set up with an investment of US$ 183.31 million.
States like Himachal Pradesh, Gujarat, Telangana and Maharashtra are showing
interest for making investments in these parks. German technical services provider TUV Rheinland’s Indian subsidiary
has partnered with Andhra Pradesh MedTech Zone(AMTZ) to create an
infrastructure for Electro-Magnetic Interference (EMI/EMC) at an investment of
US$ 12.64 million over a course of four
to five years.




Rising share of government expenditure (US Billion$)


Effects of GST on the Healthcare Industry

The passing of the
GST (Goods and
Services Tax) Bill has grabbed the attention across all the industries in the
country. It would benefit most of the sectors and
make the taxation process easier as it will replace a number of different taxes
and duties.

The Indian
Healthcare Industry is now among of the major
sectors with respect to revenue and to employment. As the expenditure on the
Healthcare increases, so do revenues from taxes. Recently, the Government of
India decided for the implementation of GST, which would subsume various taxes
of the complex tax system in the country into one
uniform tax system.

It is expected that
GST would have a constructive effect on the Healthcare Industry particularly
the Pharma sector. It would help the industries by streamlining the taxation
structure since 8 different types of taxes
are imposed on the Pharmaceutical Industry today. An amalgamation of all the
taxes into one uniform tax will ease the way of doing business in the country,
as well as minimising the cascading effects of manifold taxes that is
applied to one product. Moreover, GST would also
improve the operational efficiency by rationalising the supply chain that could
alone add 2 percent to the country’s Pharmaceutical industry. GST
would help the Pharmaceutical companies in rationalising their supply
chain; the companies would need to review their
strategy and distribution networks. Furthermore, GST implementation would also
enable a flow of seamless tax credit, improvement the overall compliance create
an equal level playing field for the Pharmaceutical companies in the country. The biggest advantage for the
companies would be the reduction in the overall transaction costs with
the withdrawal of CST (Central Sales Tax). GST is also expected to
lower the manufacturing cost.

One more benefit
likely to accrue due to GST is the reduction in the
overall cost of technology. Currently, the technical machinery and equipment
which are imported into the country by the healthcare sector are very costly.
Also, the duty which is levied is not allowed as a tax credit under the present tax regulations. However, with GST this
scenario might change. Under GST, duty charged on the import of such equipment
and machinery would be allowed as a credit.



Market Strucher
of Indian Pharma Industry



number of purely Indian pharma companies is fairly low. Indian pharma industry
is mainly operated as well as controlled by dominant foreign companies having
subsidiaries in India due to availability of cheap labor in India at low cost.
In 2002, over 20,000 registered drug manufacturers in India sold $9 billion
worth of formulations and bulk drugs. 85% of these formulations were sold in India
while over 60% of the bulk drugs were exported, mostly to the United States and
Russia. Most of the players in the market are small-to-medium enterprises; 250
of the largest companies control 70% of the Indian market.



players in pharma Industries are





It has 48 manufacturing facilities
across five continents and employs more than 30,0000 people as on FY16

Nearly 74 per cent of its sales
came from international markets in 2016

Revenues of Sun Pharma
increased from USD932 million in FY09 to USD 4.2 billion in FY16, witnessing
growth at a CAGR of 24.16 per cent over FY09-16

In March 2015, Sun Pharma
completed the acquisition of Ranbaxy Laboratories Ltd to become the fifth
largest global specialty pharma company, No 1 pharma company in India, and
ensure a strong positioning in emerging markets.

The company reported net profit
of USD 335.8 million for the period July2016 – September 2016



1.  The company’s revenues increased from USD1.5 billion in FY09 to
USD2.4 billion in FY16, at a CAGR of 6.84 per cent over FY09-16

2.  Global generics comprised over 81 per cent of its revenue mix in

3.  Dr Reddy’s is investing heavily on R&D to differentiate itself
in the market. In FY15 – 16 Dr Reddy’s spent around 13.8 per cent of sales on

4.  The company’s revenues increased from USD1.5 billion in FY09 to
USD2.4 billion in FY16, at a CAGR of 6.84 per cent over FY09-16

5.  Dr Reddy’s has access to numerous emerging markets through
partnerships with GlaxoSmithKline (GSK)