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The Pharmaceutical Industry

The pharmaceutical industry develops and markets drugs for use as medications. The Indian pharmaceutical industry is estimated to be worth $4.5 billion and is growing at 8-9% annually. The industry is divided into segments including capsules, drugs, formulations, multinational corporations, injectables, and bulk drugs. The industry faces barriers like price competition, government price control, and market fragmentation. Consolidation through mergers and acquisitions as well as increased investment in R&D are steps that can strengthen the industry.

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226 views21 pages

The Pharmaceutical Industry

The pharmaceutical industry develops and markets drugs for use as medications. The Indian pharmaceutical industry is estimated to be worth $4.5 billion and is growing at 8-9% annually. The industry is divided into segments including capsules, drugs, formulations, multinational corporations, injectables, and bulk drugs. The industry faces barriers like price competition, government price control, and market fragmentation. Consolidation through mergers and acquisitions as well as increased investment in R&D are steps that can strengthen the industry.

Uploaded by

Lopa Bhagawati
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© Attribution Non-Commercial (BY-NC)
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INDUSTRY

INDUSTRY
ANALYSIS
ANALYSIS
THE PHARMACEUTICAL INDUSTRY
OUTLINE
 Introduction
 Types of industry

 Industry attractiveness

 Key success factors

 Barriers

 Steps to strengthen industry

 Advantage india

 Pest analysis

 Future of industry

 Herfindahl index
 The pharmaceutical industry develops, produces, and
markets drugs licensed for use as medications

 The Indian Pharmaceutical Industry today is in the


front rank of India’s science-based industries with wide
ranging capabilities in the complex field of drug
manufacture and technology. A highly organized sector,
the Indian Pharma Industry is estimated to be worth $
4.5 billion, growing at about 8 to 9 percent annually
 The Pharma Industry is divided into 7 types:
 Phrm Gelat Capsu

1)Capsuqel India
2) Medi Caps
3) Natural Capsules

 Phrm IB Drug
1) Amrutanjan Drugs
2) Biotech Synergy
3) Hikal

 Phrm Indian Formulation


1)Alpha
2) Cadila
3) Dr Wellmans

 Phrm MNC
1) Glaxo Smith
2) Pfizer
3) Aventis
 Phrm IV FLIDS
1)Dujohn
2) Venus

 Phrm- Indian Bulk Drugs & formln Large


1) Cipla
2) Dr Reddys Lab
3) Fdc
4) Ranbaxy

o Phrm- Indian Bulk Drugs & formin M/s


1) Cebo
2) Cepham
3) Claris
Market is oligopolistic with 250 players
controlling 70% of the market with main players being Ranbaxy,Dr.
Reddy’s,Lupin Labs accounting to a large share.

 INDUSTRY ATTRACTIVENESS:

 Increasing emphasis on health standards around the world.


 The cost-benefit relationship of pharmaceutical use will further increase the
demand for the industry.
Pharmaceutical corporations have lower interest expenses, raw materials
costs, tax rates and general and administrative cost as a percentage of sales
when compared with most industries..

 The aging population


KEY SUCCESS FACTORS

 Strong Marketing Acumen 


 Manufacturing Know How 

 Strong Product Development and Regulatory Skill 

 Adequate Capitalization

 Barriers:
 It is an extremely fragmented market with
 severe price competition
 government price control
STEPS TO STRENGTHEN THE INDUSTRY

Consolidation :Mergers and Acquisitions

Investment in R & D.

Advantage of the recent advances in biotechnology and information technology.


ADVANTAGE INDIA

Competent workforce: India has a pool of personnel with high managerial and technical competence as also
skilled workforce. It has an educated work force and English is commonly used. Professional services are
easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-
beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs
and exports sophisticated bulk drugs. 

Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal framework
and strong financial markets. There is already an established international industry and business community. 

Information & Technology: It has a good network of world-class educational institutions and established
strengths in Information Technology.

Globalisation: The country is committed to a free market economy and globalization. Above all, it has a 70
million middle class market, which is continuously growing. 

Consolidation: For the first time in many years, the international pharmaceutical industry is finding great
opportunities in India. The process of consolidation, which has become a generalized phenomenon in the
world pharmaceutical industry, has started taking place in India. 
Socio- Technol
Cultural ogical

Econo
mic PEST

Politica
l
Political

Effective the January, 2005 the Government has shifted from charging the Excise
Duty on the cost of manufacturing to the MRP thereby making the finished products
more costly. Thus, life saving drugs unaffordable to the poor

According to Product patent regime ,a patented drug would be


manufactured using the same chemical route and would be manufactured by the
inventor or his licentiates using the chemicals with same specifications. Hence, no dilution of
quality.

The different brands would have to compete on the basis of packaging, color, flavors.
The marketing effort would be now focused on logistics, communications, economy of
operation, extra-ingredient innovations and of course pricing

Drugs Price Control Order (DPCO)


Drugs and formulations have been subjected to price control for more than three decades now
Economic
India spends a very small proportion of its GDP on healthcare ( A mere 1% ). This
has stunted the demand and therefore the growth of the industry.

Per capita income of an average Indian is low , therefore, spending on the healthcare takes a
low priority. An Indian would visit a doctor only when there is an emergency. This has led to a
mushrooming of unqualified doctors and spread of non-standardized medication.

Taxation: Excise Duty ( State & Central),Custom Duty, Service Tax, Profession Tax, License
Fees, Royalty, Pollution Clearance Tax, Hazardous substance (Storage & Handling). On an
average it
amounts to no less than 40-45% of the costs.

The number of Registered Medical practitioners is low. As a result the reach of


Pharmaceuticals is affected adversely.

Lack of Adequate storage and transportation facilities. A study had indicated that nearly 60% of
the Retail Chemists do not have adequate refrigeration facilities and store drugs under sub-
optimal conditions. India has poor roads and rail network. Therefore, the transportation time is
higher.
Technological Factors

Advanced automated machines

Computerization

Ayurveda is a well recognized science and it is providing the industry with a cutting edge.

Advances in Bio-technology, Stem-cell research have given India a step forward


Socio-cultural Factors

Factors contributing to growth of Pharmaceutical Business

Poverty and associated malnutrition

Poor Sanitation and polluted water sources prematurely end the life

In India people prefer using household treatments handed down for generations for
common ailments.

The use of magic/tantrics/ozhas/hakims is prevalent in India.

Increasing pollution is adding to the healthcare problem.

Smoking, gutka, drinking and poor oral hygiene is adding to the healthcare problem

Cattle-rearing encourage diseases communicated by animals.


THE FUTURE OF THE INDUSTRY

 The future of Indian pharmaceutical sector is very bright


because of the following factors:

Clinical trials in India cost US$ 25 million each, whereas


in US they cost between US$ 300-350 million each.
In India investigational new drug stage costs around US$
10-15 million, which is almost 1/10th of its cost in US
(US$ 100-150million).
Market leaders in terms of
Total Healthca Net income/
revenue Company
Revenue Rank
Country Revenues(USD  re R&D (loss)
2008
millions) 2006(US 2006(USD milli
1 Novartis Switzerland 53,324 7,125 11,053
2 Pfizer USA 48,371 7,599 19,337
3 Bayer Germany 44,200 1,791 6,450
United
4 GlaxoSmithKline Kingdom 42,813 6,373 10,135

5 Johnson and Johnson USA 37,020 5,349 7,202


6 Sanofi-Aventis France 35,645 5,565 5,033
7 Hoffmann–La Roche Switzerland 33,547 5,258 7,318
United
8 AstraZeneca Kingdom 26,475 3,902 6,063
9 Merck & Co. USA 22,636 4,783 4,434
10 Abbott Laboratories USA 22,476 2,255 1,717
Market
Rank leaders
Company in terms of sales
Based/Headquartered in
1 Pfi zer US
2 GlaxoSmithKline United Kingdom
3 Novartis Switzerland
4 Sanofi -Aventis France
5 AstraZeneca United Kingdom
6 Hoffmann–La Roche Switzerland
7 Johnson & Johnson US
8 Merck & Co. US
9 Abbott US
10 Eli Lilly and Company US
Herfindahl index 
The Herfindahl index (also known as Herfindahl–Hirschman Index, or HHI) is a measure of
the size of firms in relation to the industry and an indicator of the amount of competition among
them

Industry - Pharmaceuticals - Multinational

Industry - Pharmaceuticals - Multinational Sales Contribution of each firm


Abbott India 201011 13.68 107.1 940.66 0.133184573 0.017738131
Astrazeneca Phar 200912 5 82.8 396.51 0.056140386 0.003151743
Aventis Pharma 200912 23.03 334.57 974.83 0.138022577 0.019050232
Fulford (India) 200912 3.9 9.75 194.55 0.027545616 0.000758761
Glaxosmit Pharma 200912 84.7 289.18 1,872.65 0.265141593 0.070300065
Merck 200912 16.86 148.29 472.34 0.066876875 0.004472516
Novartis India 201003 15.98 23.35 623.92 0.088338527 0.007803695
Pfizer 201011 29.84 187.81 876.39 0.124084822 0.015397043
Solvay Pharma. 200912 5.05 64.23 242.17 0.034287955 0.001175664
Wyeth 201011 22.72 80.77 468.81 0.066377075 0.004405916
7062.83 0.144253766

HHI=0.1442 indicates moderate concentration i.e. Medium


Industry - Pharmaceuticals - Indian - Formulations

Twilight Litaka 201003 10.64 84.49 491.96 0.073342576 0.005379134


U P Drugs & Pha. 200003 0.64 2 5.53 0.000824426 6.79678E-07
Unjha Formul. 201003 5.2 3.43 4.79 0.000714105 5.09946E-07
Veronica Labs. 200503 12 2.64 15.38 0.002292887 5.25733E-06
Vikrant Pharma. 199503 2.24 0 4.64 0.000691742 4.78507E-07
Vista Pharma. 201003 15 10.55 0.8 0.000119266 1.42244E-08
Vysali Pharma. 200706 5.43 20.88 10.14 0.001511696 2.28522E-06
Western Inds. 200403 5.16 3.98 36.31 0.005413182 2.93025E-05
White Way Prod. 200303 3 1.16 0 0 0
Yogi Pharmacy 199903 15.32 8.06 1.65 0.000245986 6.05091E-08
Zenith Health 201003 5.37 3.51 4.04 0.000602293 3.62757E-07
Zenotech Lab. 201003 34.43 81.17 6.57 0.000979471 9.59364E-07
Zental Drugs 200903 2.84 0 0 0 0
Zim Labs. 199709 1.32 0 8.74 0.00130298 1.69776E-06
6970.7 0.063640357

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