INDUSTRY required drugs ?re discovered or designed. In the

                       

 

 

 

 

 

 

 

 

 

 

 

INDUSTRY ?N?LYSIS

                 PH?RM? INDUSTRY

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Him?nshu M?heshw?ri         K?vit? Kulk?rni

80303170060                           F?culty Guide –NMIMS
Hyder?b?d

 

 

 

 

 

 

 

T?BLE OF CONTENTS

 

 

 

 

S.No

Content

P?ge
No.

1

Introduction

3-4

2

Industry
?nd Competition: M?rket Size ?nd Ch?r?cteristics

4-8

3

Industry ?nd Competition: M?rket Trends

9-11

4

Industry
?nd Competition: M?rket Structure

11-13

5

Ch?r?cteristics of Competitors

13-17

6

References

17

 

 

 

 

 

 

 

 

 

Introduction

 

 

The Ph?rm?
Industry develops, m?nuf?cture, ?nd m?rkets drugs licensed for use ?s medicines.
For this they h?ve ? well-equipped Rese?rch ?nd Development dep?rtment. Ph?rm?
comp?nies ?re ?llowed to de?l in generic ?nd/or br?nd medicines ?nd medic?l
devices. They de?l with v?riety of l?ws ?nd regul?tions of the government reg?rding
the p?tenting, testing, pricing ?nd ensuring s?fety ?nd ?dequ?cy ?nd m?rketing
of drugs. The Indi?n Ph?rm? industry is the second-l?rgest in the world by volume
?nd is ?he?d to m?nuf?cturing sector of Indi?. The first ph?rm? comp?ny of Indi?
w?s Beng?l Chemic?ls ?nd Ph?rm? Works, which still exists tod?y ?s one of 5
government-owned drug m?nuf?cturers, in C?lcutt? in the ye?r 1930. For the next
60 ye?rs, most of the drugs in Indi? were imported by multin?tion?ls either in
fully formul?ted or bulk form. The government st?rted to encour?ge the growth
of drug m?nuf?cturing by Indi?n comp?nies in the e?rly 1960s, ?nd due to the P?tents
?ct in 1970, the industry got ?n opportunity to grow. This p?tent ?ct removed
composition p?tents from food ?nd drugs, ?nd though it kept process p?tents,
these were shortened to ? period of five to seven ye?rs. The l?ck of p?tent
protection m?de the Indi?n m?rket undesir?ble to the multin?tion?l comp?nies
who h?d domin?ted the m?rket, ?nd while they stre?med out, Indi?n comp?nies st?rted
to t?ke their pl?ces. The multin?tion?ls were m?rket le?ders ?t th?t time bec?use
of their superior technology. ?s ? result of this, they h?d g?ined expertise in
reverse-engineering new processes for m?nuf?cturing drugs ?t low costs. ?lthough
some of the l?rger comp?nies h?ve t?ken sm?ll steps tow?rds drug innov?tion,
the industry ?s ? whole h?s been following this business model until the
present. Introduction to Ph?rm? Industry 28 Rese?rch ?nd Development Drug
discovery is the process by which the required drugs ?re discovered or
designed. In the p?st most drugs h?ve been discovered either by isol?ting the ?ctive
ingredient from tr?dition?l remedies or by serendipitous discovery. ? gre?t de?l
of e?rly-st?ge drug discovery h?s tr?dition?lly been c?rried out by
universities ?nd rese?rch institutions. ?ll this requires const?nt innov?tion ?nd
rese?rch by either the tr?dition?l or modern methods, or ? combin?tion of both.
Drug development refers to ?ctivities undert?ken ?fter ? compound is identified
?s ? potenti?l drug in order to est?blish its suit?bility ?s ? medicines.
Objectives of drug development ?re to determine ?ppropri?te Formul?tion ?nd
Dosing, ?s well ?s to est?blish s?fety. Rese?rch in these ?re?s gener?lly
includes ? combin?tion of in vitro studies, in vivo studies, ?nd clinic?l tri?ls.
The ?mount of c?pit?l required for l?te st?ge development h?s m?de it ?
historic?l strength of the l?rger ph?rm? comp?nies. Often, l?rge multin?tion?l
corpor?tions contribute in ? bro?d r?nge of drug discovery ?nd development, m?nuf?cturing
?nd qu?lity control, m?rketing, s?les, ?nd distribution. On the other h?nd, sm?ller
org?niz?tions l?y emph?sis on ? specific ?spect such ?s discovering drug c?ndid?tes
or developing formul?tions. Often, coll?bor?tive ?greements between rese?rch
org?niz?tions ?nd l?rge ph?rm? comp?nies ?re formed to discover ?ny prob?bility
of new drug.

 

 

M?rket Size of
Indi?n Ph?rm? Industry ?nd Its Ch?r?cteristics

 

 

Indi?n ph?rm?
sector is estim?ted to ?ccount for 3.1- 3.6 % of the
glob?l ph?rm? industry in terms of v?lue ?nd
10 % in v?lue terms. It is
estim?ted to grow to 100US$ billion by 2025. Indi? ?ccounts for 20 per cent of glob?l exports in generics. Indi?’s ph?rm? exports stood ?t US$ 16.84 billion in 2016-17 ?nd ?re
expected to re?ch US$ 20 billion by 2020. During ?pril
– September 2017, Indi? exported ph?rm? products worth Rs.411.3 billion (US$ 6.4 billion). During ?pril – October 2017, Indi? exported ph?rm? products worth Rs.478.3 billion (US$ 7.4 billion).

 

    Figure 1: Revenue of Indi?n ph?rm? sector ($
billion)

Source:
Dep?rtment of Ph?rm?s, PwC, McKinsey, TechSci Rese?rch

      Notes: F – Forec?st, C?GR – Compound ?nnu?l
Growth R?te

 

 

The
m?rket size is expected to grow to US$ 55 billion by 2020 ?nd become the 6th
l?rgest ph?rm? m?rket glob?lly by ?bsolute size. Br?nded generics with ne?rly
80% of m?rket sh?re will domin?te the ph?rm? m?rket (in terms of revenues).

 

?ccording
to d?t? from the Ministry of Commerce ?nd Industry, Indi? h?s out- performed Chin?
in ph?rm? exports with ? YoY growth of 11.44% to US$ 12.91 billion in FY
2015-16, on other h?nd imports rose m?rgin?lly by 0.80 % YoY to US$ 1,641.15 Million.

 

Figure 2:
Projected size of Indi?n Ph?rm? m?rket in $ billion

 

 

     Source: Mckinsey ?n?lysis, second?ry Rese?rch

 

Figure 3: Formul?tion
?nd Bulk Drugs Export Outlook:

 

 

Source:
CRISIL rese?rch; KPMG in Indi? ?n?lysis

 

The
US Food ?nd Drug ?dministr?tion (USFD?) ?pproved 201 in FY 2015-16 drugs of
Indi?n comp?nies, ne?rly doubled from 109 in FY 2014-15. Indi? ?ccounts for ?round
30% (by volume) ?nd ?bout 10% (v?lue) of US generics m?rket which stood ?t US$
70-80 billion in 2015-16.

 

Indi?’s biotechnology industry
m?de of bio-?griculture, bio-ph?rm?s, bio-services, bio-inform?tics ?nd
bio-industry is expected grow ?t ?n ?ver?ge growth r?te of 30% ? ye?r ?nd
expected to re?ch $100 billion by 2025.

 

 

Figure 4: Percent?ge
Distribution of Biotech Comp?nies in V?rious Segments

 

Bioph?rm?, ther?peutics,
comprising v?ccines ?nd di?gnostics, is the l?rgest sub-sector of biotech
contributing ne?rly 62% of the tot?l revenues ?t Rs 12,600 crore ($
1.88-billion).

 

 

Geogr?phic?l Clusters: Most of the ph?rm? m?nuf?cturing
units ?re concentr?ted in M?h?r?shtr? ?nd Guj?r?t. These two st?tes ?re home
for 44% of the ph?rm? m?nuf?cturing units.

 

Source:
Ministry of Skill Development & Entrepreneurship

 

 

T?ble 1: Geogr?phic?l
Distribution of the Ph?rm? Comp?nies in Indi?

 

St?te

No. of M?nuf?cturing units

Tot?l

Formul?tion

Bulk Drugs

M?h?r?shtr?

1928

1211

3139

Guj?r?t

1129

397

1526

West Beng?l

694

62

756

?ndhr? Pr?desh

528

199

727

T?mil N?du

427

98

570

Others

3423

422

3845

Tot?l

8174

2389

10563

Sources:
Dep?rtment of Ph?rm?s; KPMG in Indi? ?n?lysis, ?SSOCH?M

 

The d?t? cle?rly suggests th?t due to
better infr?structure f?cilities, enh?nced support from sm?ll-sc?le comp?nies,
conductive industri?l ?tmosphere ?nd skills in chemistry, M?h?r?shtr? rem?ins ?n
?ttr?ctive destin?tion for Ph?rm? comp?nies. The M?h?r?shtr? government
promotes the “Centres of Excellence” working on cutting-edge R&D in
emerging ?re?s of technology ?nd life sciences.

 

Figure: Percent?ge
Distribution of Ph?rm? Comp?nies in V?rious Regions

Sources:
Dep?rtment of Ph?rm?s; KPMG in Indi? ?n?lysis, ?SSOCH?M

On
other h?nd Guj?r?t ?lw?ys encour?ges new investments in the st?te ?nd employs ?pproxim?tely
52,000 people in this sector.

 

The 5 t?x-free st?tes n?mely Him?ch?l Pr?desh,
Utt?r?nch?l, J?mmu & K?shmir, Jh?rkh?nd ?nd Sikkim ?re emerging ?s hot
destin?tions for Ph?rm? comp?nies. Utt?r?kh?nd?nd Him?ch?l Pr?desh (HP) is
considered to be ?mong the f?stest growing Ph?rm? hubs in Indi?. B?ddi ?nd some
other ?re?s in HP h?ve over 300 m?nuf?cturing units. H?ridw?r, Roorkee, Dehr?dun
?nd Rudr?pur of Utt?r?kh?nd h?ve 200 ph?rm? m?nuf?cturing units.

 

Figure: M?nuf?cturing
hotspot for v?rious comp?nies ?cross Indi?

Source:
KPMG in Indi? ?n?lysis, IBEF ?ugust 2013

 

The investment in the region is reported
to be worth ?n estim?ted INR30 billion in recent ye?rs. ?lembic, Dr. Reddy L?b,
?lkem, M?nkind, Torrent, Lupin, C?dil?, Indswift L?b, Unichem, Morepen,

 

Klitch, R?nb?xy, Nector, Sury?, C?chet,
Indchemie, G?lph? ?re some of the m?jor comp?nies to h?ve est?blished their
units in these ?re?s. (Cf. KPMG in Indi? ?n?lysis, IBEF ?ugust 2013).

 

 

 

 

 

 

 

 

 

M?rket Trends of
Indi?n Ph?rm? Industry

 

 

GLOB?L TRENDS

 

Figure: Glob?l Ph?rm? M?rket, Region?l M?rket Sh?re Forec?st, 2017*

*B?sed ?t ex-m?nuf?cturer price levels, not including reb?tes ?nd discounts. Cont?ins ?udited ?nd un?udited d?te. ?ll compound ?nnu?l growth r?tes (C?GR) b?sed on five ye?rs.

Ph?rmerging countries include: ?lgeri?, ?rgentin?, Colombi?, Egypt, Indonesi?, Mexico, Nigeri?, P?kist?n, Pol?nd, Rom?ni?, S?udi ?r?bi?, South ?fric?, Th?il?nd, Turkey, Ukr?ine,

 

IMS h?s estim?ted ? compound ?nnu?l growth r?te (C?GR) for the glob?l ph?rm? m?rket of 3-6% in the forec?st period of
2013-2017. The US ph?rm? m?rket is expected to
grow ?t ? r?te of 1–4%. ?s f?r ?s Europe is concerned, the m?rkets of the Europe?n Union ?re expected to
experience ? C?GR of 0–3%, ?nd the rest of Europe is should h?ve ? C?GR of (-1%) to 2%.
Emerging m?rkets, m?y see strong
growth, but ?re expected to show slower growth th?n in the previous forec?st period. IMS
expects Chin?’s m?rket will experience ? C?GR of 13–16%, between 2013–2017 comp?red to ? C?GR of 22% during
2008–2012. IMS estim?tes th?t the ph?rm? m?rkets of Br?zil, Indi?, ?nd Russi? m?y to see ? C?GR of 10–13% between 2013–2017 comp?red to ? C?GR of 16% during
2008–2012. Tier 3 ‘ph?rm?erging’ m?rkets h?ve ? prognosis to h?ve ph?rm? industry growth of
6–9% between 2013–2017 comp?red to ? C?GR of 9% during 2008–2012.Due to reporting purposes, C?GR forec?sts ?re estim?ted in const?nt doll?rs, ?nd historic?l C?GR in ?ctu?l doll?rs. 

The influence of
emerging m?rkets in ph?rm? industry growth is subst?nti?lly proven by sever?l key projections
offered by IMS. By 2017, 50% of drugs by volume ?re forec?sted to be in ‘ph?rmerging’ m?rkets, ?nd the US ?nd Europe e?ch respectively
will ?ccount for only 13%
of ph?rm? volume by 2017.
Chin? will t?ke the le?d, ?nd the BRIC
countries (Br?zil, Russi?, Indi?, ?nd Chin?) will ?ccount for 70% of ?ll ‘ph?rmerging’ m?rket s?les by 2017 on ? v?lue b?sis ?nd str?tegic?lly will continue to be the re?sons of thriving ?mong emerging m?rkets. Ph?rm? s?les in Chin? ?re estim?ted to touch $167 billion by 2017, $49 billion in Br?zil, $24 billion in
Indi?, ?nd $27 billion in Russi?.

 

LOC?L TRENDS:

 

 

Government
expenditure on ph?rm? in the country incre?sed from US$14
billion in 2008 to US$ 53 billion in 2016. The expenditure exp?nded ?t ? C?GR of 18.1 per cent
over 2008–16to re?ch US$ 53 billion. Under Union Budget 2017-18, new 5,000 postgr?du?te se?ts in medic?l colleges were ?nnounced by the
government, to ensure ?v?il?bility of speci?list doctors. Under Union Budget 2017-18, new 5,000 postgr?du?te se?ts in medic?l colleges were ?nnounced by the
government, to ensure ?v?il?bility of speci?list doctors. Medic?l technology p?rk in Vish?kh?p?tn?m, ?ndhr? Pr?desh h?s ?lre?dy been set up with ?n investment of US$ 183.31 million. St?tes like Him?ch?l Pr?desh, Guj?r?t, Tel?ng?n? ?nd M?h?r?shtr? ?re showing interest for m?king investments in
these p?rks. Germ?n technic?l services provider TUV Rheinl?nd’s Indi?n subsidi?ry h?s p?rtnered with ?ndhr? Pr?desh MedTech Zone(?MTZ) to cre?te ?n infr?structure for
Electro-M?gnetic Interference
(EMI/EMC) ?t ?n investment of US$ 12.64 million over ? course of four to five ye?rs.

 

 

 

Rising sh?re of government expenditure (US Billion$)

 

 

 

M?rket Strucher
of Indi?n Ph?rm? Industry

 

 

The number of
purely Indi?n ph?rm? comp?nies is f?irly low. Indi?n ph?rm? industry is m?inly oper?ted ?s well ?s controlled by domin?nt foreign comp?nies h?ving subsidi?ries in Indi? due to ?v?il?bility of che?p l?bor in Indi? ?t low cost. In 2002, over 20,000 registered drug m?nuf?cturers in Indi? sold $9 billion
worth of formul?tions ?nd bulk drugs. 85% of these formul?tions were sold in
Indi? while over 60% of the bulk drugs were exported, mostly to the
United St?tes ?nd Russi?. Most of the pl?yers in the m?rket ?re sm?ll-to-medium
enterprises; 250 of the l?rgest comp?nies control 70% of the Indi?n m?rket.

 

 

 

M?jor pl?yers in ph?rm? Industries ?re

 

 

.4 SUN PH?RM?:

 

1.     
It h?s 48 m?nuf?cturing f?cilities
?cross five continents ?nd employs more th?n 30,0000 people ?s on FY16

2.     
Ne?rly 74 per cent of its s?les
c?me from intern?tion?l m?rkets in 2016

3.     
Revenues of Sun Ph?rm? incre?sed
from USD932 million in FY09 to USD 4.2 billion in FY16, witnessing growth ?t ?
C?GR of 24.16 per cent over FY09-16

4.     
In M?rch 2015, Sun Ph?rm?
completed the ?cquisition of R?nb?xy L?bor?tories Ltd to become the fifth l?rgest
glob?l speci?lty ph?rm? comp?ny, No 1 ph?rm? comp?ny in Indi?, ?nd ensure ?
strong positioning in emerging m?rkets.

5.     
The comp?ny reported net profit
of USD 335.8 million for the period July2016 – September 2016

 

     DR REDDY’S

1.     
The comp?ny’s revenues incre?sed
from USD1.5 billion in FY09 to USD2.4 billion in FY16, ?t ? C?GR of 6.84 per
cent over FY09-16

2.     
Glob?l generics comprised over
81 per cent of its revenue mix in FY15           

3.     
Dr Reddy’s is investing he?vily
on R to differenti?te itself in the m?rket. In FY15 – 16 Dr Reddy’s spent
?round 13.8 per cent of s?les on R&D

4.     
The comp?ny’s revenues incre?sed
from USD1.5 billion in FY09 to USD2.4 billion in FY16, ?t ? C?GR of 6.84 per
cent over FY09-16

5.     
Dr Reddy’s h?s ?ccess to
numerous emerging m?rkets through p?rtnerships with Gl?xoSmithKline (GSK)

 

 

LUPIN:

1.   
Its revenues incre?sed from
USD822.5 million in FY09 to USD2.1 billion in FY16,       witnessing growth ?t ? C?GR of 14.3 per
cent over FY09-16.

2.   
Its revenues incre?sed from
USD822.5 million in FY09 to USD2.1 billion in FY16, witnessing growth ?t ? C?GR
of 14.3 per cent over FY09-16.

3.   
In Febru?ry 2017, Lupin h?s
received the fin?l ?pprov?l from USFD? to m?rket pot?ssium sulf?te, sodium sulf?te
& m?gnesium sulf?te or?l solutions, which ?re used to tre?t ? form of c?ncer.

4.   
Lupin is ? renowned ph?rm? pl?yer
producing ? wide r?nge of qu?lity, ?fford?ble generic ?nd br?nded formul?tions ?nd
?PIs.

 

 

 

Ch?r?cteristics of Competitors:

PORTER’S FIVE FORCES ?N?LYSIS:

 

Competitive
Riv?lry: Growth
opportunities for ph?rm? comp?nies ?re expected to grow in next few ye?rs, with
m?ny drugs going off-p?tent in the US ?nd other countries, thus incre?sing
competition • Indi?n ph?rm? comp?nies will f?ce competition from big ph?rm?
comp?nies, b?cked by huge fin?nci?l muscle.

Thre?ts of
new Entr?nts: Strict government regul?tions strict entry of new pl?yers. ?lso
difficult to survive bec?use of high gest?tion period.

Substitute Products:

Thre?t to substitute products is low;
however, homeop?thy ?nd ?yurvedic medicines c?n ?ct ?s substitute.

B?rg?ining
Power of Suppliers:

Difficult-to-m?nuf?cture ?PIs such ?s
steroids, sex hormones ?nd peptides give b?rg?ining power to suppliers.
However, generic ?PIs do not h?ve much of th?t power.

B?rg?ining
Power of Customers:

Generic drugs offer ? cost effective ?ltern?tive
to drugs innov?tors ?nd signific?nt s?vings to customers. Bio simil?r offer
signific?nt cost s?ving for insur?nce comp?nies in Indi?.

 

 

Effects of GST on the He?lthc?re Industry

The p?ssing of the GST (Goods ?nd Services T?x) Bill h?s gr?bbed the ?ttention ?cross ?ll the industries
in the country. It would benefit most of the sectors ?nd m?ke the t?x?tion process e?sier ?s it will repl?ce ? number of
different t?xes ?nd duties.

The Indi?n He?lthc?re Industry is now ?mong of the m?jor sectors with respect to revenue ?nd to employment. ?s the expenditure
on the He?lthc?re incre?ses, so do revenues
from t?xes. Recently, the
Government of Indi? decided for the implement?tion of GST, which
would subsume v?rious t?xes of the complex t?x system in the
country into one uniform t?x system.

It is expected th?t GST would h?ve ? constructive
effect on the He?lthc?re Industry p?rticul?rly the Ph?rm? sector. It would help the industries by stre?mlining the t?x?tion structure
since 8 different types of t?xes ?re imposed on the Ph?rm? Industry tod?y. ?n ?m?lg?m?tion of ?ll the t?xes into one uniform t?x will e?se the w?y of doing business
in the country, ?s well ?s minimising the c?sc?ding
effects of m?nifold t?xes th?t is ?pplied to one product. Moreover,
GST would ?lso improve the oper?tion?l efficiency by r?tion?lising the supply
ch?in th?t could ?lone ?dd 2
percent to the country’s Ph?rm? industry. GST would help the Ph?rm? comp?nies in r?tion?lising their supply ch?in; the comp?nies would need to review their str?tegy ?nd distribution
networks. Furthermore, GST implement?tion would ?lso en?ble ? flow of se?mless t?x credit,
improvement the over?ll compli?nce cre?te ?n equ?l level pl?ying field for the Ph?rm? comp?nies in the country. The biggest ?dv?nt?ge for the comp?nies would be the
reduction in the over?ll tr?ns?ction costs with the withdr?w?l of CST
(Centr?l S?les T?x). GST is ?lso expected to
lower the m?nuf?cturing cost.

One more benefit
likely to ?ccrue due to GST is the reduction in the over?ll cost of
technology. Currently, the technic?l m?chinery ?nd equipment which ?re imported into
the country by the he?lthc?re sector ?re very costly. ?lso, the duty which
is levied is not ?llowed ?s ? t?x credit under the present t?x regul?tions. However,
with GST this scen?rio might ch?nge. Under GST, duty ch?rged on the import
of such equipment ?nd m?chinery would be ?llowed ?s ? credit.

 

 

Demonetiz?tion effect on ph?rm? Industry:

Ph?rm? sector experienced neg?tive
imp?ct with the imp?ct of demonetiz?tion, but the imp?ct is tempor?ry ?nd
expected to be s?me. pros ?nd cons
of demonetis?tion on ph?rm? Industry

He?lthc?re businesses ?nd org?niz?tions ?re contending with extr?ordin?rily new fin?nci?l, demogr?phic, ?nd regul?tory
pressures.
? ch?llenging glob?l economy
continues to str?in the bottom
lines of providers, p?yers, ?nd ph?rm?ceutic?l comp?nies – not to mention the businesses ?nd t?xp?yers who ultim?tely foot the
bill.
Tighter fin?nces ?nd thinning m?rgins h?ve m?de cost cutting ?nd oper?tion?l efficiency ? top priority ?cross the he?lthc?re supply ch?in. It h?s ?lso fuelled
innov?tion, without
compromising the end go?l: p?tient c?re
The N?tion?l S?mple Survey reve?ls th?t over 80% of Indi?n popul?tion is not
covered by he?lth insur?nce.
Priv?te Doctors ?re ? one-m?n ?rmy, t?king up the m?jority c?ses in both rur?l ?nd urb?n ?re?s.
? Forbes report
st?ted th?t the per c?pit? he?lthc?re expenditure
in Indi? is ?bout $60,
which is signific?ntly less ?mongst the
BRIC n?tions ?nd trivi?l comp?red to the developed countries, considering th?t US? spends over
$8600.
The ?l?rming f?ct here is th?t over 90% of he?lthc?re expenditure in Indi? is out of
pocket. 

 

 

References:

 

1.https://www.ibef.org/downlo?d/Ph?rm?ceutic?l-M?rch
2017.pdf     

2. https://cle?rt?x.in/s/gst-imp?ct-on-he?lthc?re-ph?rm?-sector

3.https://en.wikipedi?.org/wiki/Ph?rm?ceutic?l_industry_in_Indi?

4.https://www.linkedin.com/pulse/demonetiz?tion-slowdown-effect-he?lthc?re-ph?rm?-b?nerjee/

5.https://www.br?ndindi?ph?rm?.in/ph?rm?ceutic?l-industry-trends/indi?n-ph?rm?-comp?nies-incre?se-spending-on-rd

 

 

 

          

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