biopharma report
Post on 12-Nov-2014
84 Views
Preview:
DESCRIPTION
TRANSCRIPT
1 | P a g e
Indian Pharmaceutical Industry in 2020
A REPORT ON
“DEVELOPING FUTURE SCENARIOS
FOR THE INDIAN BIO/PHARMA
INDUSTRY
IN 2020”
(DELPHI STUDY APPROACH)
By:
ARUN GUPTA
09BS0000425
SMI BRAIN NET.
2 | P a g e
Indian Pharmaceutical Industry in 2020
A REPORT
ON
“DEVELOPING FUTURE SCENARIOS FOR THE INDIAN
BIO/PHARMA INDUSTRY IN 2020”
(DELPHI STUDY APPROACH)
BY
Arun Gupta
09BS0000425
SMI BRAIN NET
A REPORT SUBMITTED IN PARTIAL FULLFILMENT OF
THE REQUIREMENT OF
MBA PROGRAM OF
THE ICFAI UNIVERSITY, DEHRADUN
SUBMITTED TO:-
FACULTY GUIDE: COMPANY GUIDE
Prof. A. Lakshminarasimha Prof. Dr. Roger Moser
Associate Dean IBS-Bangalore Director SMI India
DATE OF SUBMISSION: 14/5/10
3 | P a g e
Indian Pharmaceutical Industry in 2020
DECLARATION
I declare that the study entitled “Developing Future Scenario for the Indian
Pharmaceutical Industry in 2020” conducted at SMI BRAINNET, Bangalore is a record of
independent work carried out by me during the academic year 2010. I have completed my
study under the guidance of my faculty Guide Prof. Lakshminarasimha .A. of IBS-
Bangalore and company guide Prof. Dr. Roger Moser of SMI BrainNet.
I also declare that this study is the result of my effort and has not been submitted to any other
University or Institution for the award of any degree or personal favor whatsoever. All the
details and analysis provided in the report hold true to the best of my knowledge.
Date: 14 May 2010 Arun Gupta
Place: Bangalore IBS Bangalore
4 | P a g e
Indian Pharmaceutical Industry in 2020
ACKNOWLEDGEMENT
I would like to express our heartfelt gratitude and thankfulness towards our
Industry Analytics professors, Dr. Prof. Roger Moser for giving us an
opportunity to work on this project, which has helped us gain an in depth
understanding of the Indian Pharmaceutical Industry. Also the expert comments
given timely helped a lot.
The timely advice given by Prof. A. Lakshminarasimha has gone a long way in
ensuring that we do not lose focus while working on the project. The constant
guidance and meaningful suggestions provided by them also helped in making
this project a relevant and a rich source of learning for the students of Industry
Analytics. With his kind reference we have visited a government manufacturing
plant KAPL (Karnataka Antibiotics and Pharmaceuticals Limited) and get a
knowledgeable exposure about all the departments of a company. We come to
know how the functioning is done in an organization.
We hope that this project would enable the readers understand present and the
future scenarios of Indian Pharmaceutical Industry.
Regards,
Arun Gupta.
5 | P a g e
Indian Pharmaceutical Industry in 2020
Table of Contents
DECLARATION ................................................................................................................... 3 ACKNOWLEDGEMENT ..................................................................................................... 4
ABSTRACT: ......................................................................................................................... 7 INTRODUCTION ................................................................................................................. 8
Company Profile: ............................................................................................................. 8
SMI:............................................................................................................................... 8
SMI India ....................................................................................................................... 8 Our academic partner – IIM-B ....................................................................................... 9
Our corporate partner(s) ................................................................................................. 9 Research ........................................................................................................................ 9
BrainNet ..................................................................................................................... 10 DEVELOPING A FUTURE SCENARIO ............................................................................ 11
Fundamental Steps of Scenario Planning ..................................................................... 12
Objective of the project.................................................................................................. 14
Limitations of the project .............................................................................................. 14
METHODOLOGY: ............................................................................................................. 14
Overview of Delphi Technique: ..................................................................................... 15
RealTime-Delphi – Procedure for Respondents ........................................................... 15
Experts focused approach: ............................................................................................ 18
INTRODUCTION: INDIAN PHARMACEUTICAL INDUSTRY....................................... 19
INDUSTRY SEGMENTATION .......................................................................................... 22 DOMESTIC GROWTH DRIVERS: .................................................................................... 25
CRITICAL SUCCESS FACTORS....................................................................................... 27
New product development ............................................................................................. 27
Therapeutic coverage ..................................................................................................... 28
Exports ........................................................................................................................... 29
Low cost production through scale ............................................................................... 29
FACTORS WHICH MAKE INDIA MOST FAVORITE OUTSOURCING HUB: .............. 30
PEST Analysis of Pharmaceutical Industry: ......................................................................... 33
Political Factors.............................................................................................................. 33
Economic Factors ........................................................................................................... 34
Social Factors ................................................................................................................. 35
Technological Factors .................................................................................................... 36
6 | P a g e
Indian Pharmaceutical Industry in 2020
SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY ................................ 38
Strengths ........................................................................................................................ 38
Weakness ........................................................................................................................ 39
Opportunities ................................................................................................................. 39
Threats ........................................................................................................................... 40
Projections: .......................................................................................................................... 41
Outcome Projections:..................................................................................................... 41
Enabler Projections: ...................................................................................................... 42
Impact on Industry: ....................................................................................................... 44
EXPLANATION OF THE OUTCOME PROJECTIONS AND 6 ENABLER‟S
PROJECTIONS with EXPERT COMMENTS ..................................................................... 49
Outcome projections ...................................................................................................... 49
Enabler projections: ...................................................................................................... 49
Short Stories Which Will Support the Above Projections: .................................................... 60
Lifestyle Diseases: DIABETES in India ........................................................................ 60
BRANDED PILL BITTER DOSE ................................................................................ 61
Chronic diseases cost India more than $ 1 billions. ...................................................... 62
Government support ...................................................................................................... 62
REGRESSION ANALYSIS ................................................................................................ 63
Impact on Industry:- ...................................................................................................... 63
APPENDIX ......................................................................................................................... 69
Experts Rating regarding Impact on Industry ............................................................. 69
Calculations for Conclusion: ......................................................................................... 70
References: .......................................................................................................................... 71
7 | P a g e
Indian Pharmaceutical Industry in 2020
ABSTRACT:
The proposed project is about future scenario development of Indian Pharmaceutical industry
by 2020. For projecting the most probable/likable scenarios, existing Political, Economical,
Social as well as Technological factors are considered and a PEST framework is formulated.
While developing this framework we need to consider the enabling factors (enablers) which
can influence in future. These enablers are suggested and recommended by experts from
Pharmaceutical industry as well as academic background.
Each Pharmaceutical company is controlled by 5 major elements which will directly
affect their functioning. They are Customers, Suppliers, Competitors, Government and
Society in large. The entire project started with identifying the various Political, Economical,
Socio-Cultural and Technological factors that can influence Pharmaceutical sector especially
in India. Then these identified factors were grouped under the key five elements. Now the
most challenging part of project was to find out which are all factors of the key elements
affect which all PEST factors. On the basis of this relationship existing we identified main
projections also their corresponding enabler projections. These identified projections are
sent to experts for Delphi analysis. Experts have to comment on each of main projection and
also on enabler projections. Experts have to flash their thoughts on 3 parts for each projection
1) Probability of projection happening
2) Impact on industry
3) Desirability Of occurrence. Also expert can post their comments on each part.
Experts were selected from Pharma industry, consulting firm, academics, supplier segment
and also financial analysts for Pharmaceutical industry. We have got 45 responses from the
experts. After getting the response from the experts to analyze the data we have done Factor
analysis, Regression analysis and come out at the final conclusion of the probability of
happening of the most likable scenario.
8 | P a g e
Indian Pharmaceutical Industry in 2020
INTRODUCTION
Company Profile:
SMI:
The importance of Purchasing, Logistics and Supply Chain Management has increased
enormously. Due to recent business developments, the strategic significance of Purchasing
and Logistics has been recognized. Their functions are treated accordingly - not just
when cost reductions and quality improvements are concerned. The latest research proves
that competitive advantages emerge from the procurement of innovative products and services
– Purchasing does indeed act as an innovation driver. Logistics is often referred to as a
"strategic weapon" to be used against the competition.
The Supply Chain Management Institute (SMI) is one of the leading research institutes
worldwide for Purchasing, Logistics and Supply Chain Management at the European Business
School (EBS) in Wiesbaden. Together with renowned partners from the academic and
business world, we successfully drive up-to-date and innovative topics in Purchasing,
Logistics and Supply Chain Management research projects and studies.
At the same time, increasing customer expectations require an integrated approach in which
all activities along the value added chain are planned, implemented and
controlled throughout the entire product life cycle. Supply Chain Management takes over this
function in the company and tracks the long-term performance improvement of every single
company of the Supply Chain as well as the Supply Chain as a whole.
SMI India
China is known as the "workbench of the world", India is rapidly developing into a global
service provider – not only in IT, but also in contract research in the pharmaceutical,
biotechnological and chemical industries, in engineering services for the automotive and
aerospace industries, etc. At the same time, a growing customer base in India requires high-
quality products and services. Multinationals as well as local companies have great
9 | P a g e
Indian Pharmaceutical Industry in 2020
opportunities in India but also face many challenges. One of these challenges is the optimal
management of the supply chain essentially including sourcing and logistics. Especially in the
area of sourcing and supply management, a gap exists in India between the required support
from universities for local and multinational companies operating in India and the number of
research centers focusing on theses challenges.
Our academic partner – IIM-B
It is well known for its excellent education of students and the success of its alumni all over
the world. IIM Bangalore is the host of the research and education center of SMI and part of
its Global Research and Education Network.
Our corporate partner(s)
The EADS-SMI Endowed Chair for Sourcing and Supply Management was established in
2007 jointly by EADS (European Aeronautic, Defence and Space Company) in order to
establish the first research and education center in India, solely focusing on sourcing-related
challenges in India
Research
The research focus of SMI India is the optimal management of the interface between suppliers
in India and operations abroad or other parts of India. SMI India is therefore part of the
following research groups:
Sourcing Organizations: Effective Management and Efficient Structures in Emerging
Markets.
Regional Sourcing Strengths and Weaknesses: A Cluster-based Analysis for India and
China.
Supplier Management in Emerging Markets: Integration Challenges and Transparency
Requirements
In addition, SMI India is conducting research projects in India-specific Supply Risk
Management and Talent Management together with different partners from industry.
10 | P a g e
Indian Pharmaceutical Industry in 2020
BrainNet
BrainNet is a leading international brand for Supply Chain Management Consulting.
BrainNet, a consultancy based in Bonn, Germany, a market leading purchasing consultancy,
also sends experienced industry insiders to its clients. Not only do they attend the negotiations
with the suppliers but, beforehand, they also cast an expert eye over the production plants to
gauge the negotiating leverage.
BrainNet is one of the leading international brands for the supply chain management
consulting:
11 | P a g e
Indian Pharmaceutical Industry in 2020
DEVELOPING A FUTURE SCENARIO
Scenarios provide substitute images of probable futures, they serve to enable an organization
to think ahead rather than to forecast future situations, without any evaluation of the
probability that they will arise. Scenarios consist of a consistent set of external factors over
which the company has no influence.
Planning for future scenario enhances the effectiveness of corporate management. It increases
the visibility of the future and widens the room for manoeuvre. It also enhances
management‟s ability to calculate the potential impact of possible environmental changes. Is
developing future scenario worth the effort? Well, this is a decision for each company to
make. With increasing financial insecurity, a lot of companies are installing scenario planning
as an essential part of their business model.
Evolution of Scenario Planning
Planning scenarios dates back to more than 60 years and has its roots in military strategy.
Scenarios were developed during World War II to handle the possible effects on the
environment if an atomic bomb were to be detonated. Herman Kahn and the Hudson Institute
further developed this method, the rationale being to “think the unthinkable” and then
assigning probabilities to it.
In corporate management, planning scenarios gained importance during the end of 1960,
when Shell was able to anticipate different potential outcomes of the oil crisis. Due to their
early preparation of strategic options, Shell managed benefits from the crisis and gained
competitive advantage. Shell used second generation scenarios (decision-support scenarios)
which analyzed business dependence on certain relevant factors and their influence on the
decision makers. While the first generation scenarios were explanatory scenarios, they only
highlighted the possible future developments. By 1980s lot of companies in USA used
scenario planning technique.
Still scenario planning did not become the integral part of many companies due to
sophisticated process, time needed and a frequent unwillingness to deal with somewhat soft
factors. But today, scenario planning has formed an integral component of the business model
of almost all the companies and is of a sensitivity analysis or long term forecast.
12 | P a g e
Indian Pharmaceutical Industry in 2020
Planning for the Future
General traditional planning is based on a single bundle of assumptions – the official future of
the organization, while alternative futures are not taken into consideration. There is a vague
assumption that expectation for the future do not differ much from the past. Planning is
basically done on the fact that tomorrow does not deviate much from today, which is a
dangerous deception in today‟s uncertain world.
One-dimensional thinking about the future is just not enough in today‟s ever-changing world.
This is where scenario planning helps an organization to prepare not just for a single future
but for a future space instead. Key performance indicators increase the robustness and
flexibility of the corporate management, thereby giving a clear picture of the business model.
Fundamental Steps of Scenario Planning
Figure: Advanced Scenario Thinkshop (AST)
Advanced Scenario Thinkshop (AST) is a tightly organized and systematic process of
developing a scenario. It is a balanced mix of quantitative and qualitative elements, while at
its heart, this process is about evaluation of relevant business models and the possible
strategic courses of action in the context of well defined scenarios for the companies.
There are basically three steps in planning a scenario:
1. Think
2. Calculate
3. Prepare
Think: The future can not be predicted, but equally it did not come out of blue. Organizations
try to identify and select the uncertainties which are important for the success of the company
and for which it needs to be prepared. Thinking can be facilitated through different steps:
Reflect on current global and industry specific trends
13 | P a g e
Indian Pharmaceutical Industry in 2020
Differentiate between certain and uncertain events
Analyze substitute developments of uncertain trends
Infer scenarios through coherent combinations as well as aggregation and description
of the relevant variations of uncertainties.
Calculate: The measurement of the success of a business model is based on calculation of the
effects the scenarios have on the key performance indicators. Accurately defined statements
helps in shaping up of the interface between the scenario and the planning model. External
statements reflect the necessary attributes of the defined scenarios, while internal statements
reflect the necessary attributes of the business model.
Prepare: Is the current strategy and the direction of the business model enough to secure the
growth and competitive advantage of the company in the important scenarios? Or further
measures are necessary for the survival and stability of the company? These questions can not
be answered in simple yes or no, there are certain strategies that can be used while answering
these questions, the best strategy or a combination of strategies that suits the business model a
particular company can be used by that company to prepare itself for the future. The strategies
are:
Robustness: Provide a satisfactory performance in as many defined scenarios as
possible.
Flexibility: Leave the strategic options open as long as possible.
Multitrack: Allow the parallel pursuit of competing options for as long as possible.
Risk: Provide the highest yield, even if the other scenarios result in losses.
Robustness and flexibility are the best solutions for preparing for future as they can yield the
greatest benefits. At times of instability in the market flexibility can be even more essential
than robustness where as multitrack model is too resource intensive, costly and the level of
risk associated are also high.
14 | P a g e
Indian Pharmaceutical Industry in 2020
Objective of the project
The objective of the project is to develop scenarios that will act as indicators of the
complexities that the pharmaceutical industry will face in the future, i.e. in the year 2020 and
to act as forerunner on managing these complications. This is followed by contacting the right
experts for their comments on the predicted scenarios. The experts were asked to assess the
projections in terms of the probability of occurrence, their impact on the Indian
pharmaceutical industry, and their desirability using the ratings scale provided. Scenarios for
the year 2020 were developed with the help of the views received from experts.
Limitations of the project
Since the pharmaceutical industry is very vast and it covers wide range of products,
only limited companies are taken into consideration for the research.
Company Experts may not give the exact details and conceal some important fact and
details.
It is difficult to contact the right experts for this research due to their busy schedule.
The Delphi approach accesses the future based on the opinions of the experts, the
accuracy of these predictions remains a major limitation.
METHODOLOGY:
The study approaches the Indian Pharmaceutical industry with a unique approach that does
not boast of numbers and complexities. It‟s simple because the focus is on preparing for the
worst scenarios and otherwise not involving narrowed down views that are very susceptible to
the dynamism, credible because the predictions pass through different phases of screening and
authentication by the expert panel comprising of a heterogeneous set of academicians,
industry personnel and industry consultants, dynamic because the participants can review
their views at their convenience to suit the discussion and give it a dimension, authentic
because the views expressed are part of the knowledge inherited by the panel over the subject
through their many years of service in the sector and related fields. Once the expert panel has
15 | P a g e
Indian Pharmaceutical Industry in 2020
an exact dimension on the study, the study focuses on the sustainability of the projections and
elucidating the rest on how to prepare for the unpredictable and complicated future we live in.
Overview of Delphi Technique:
The Delphi technique is one of the most commonly known methods of future research. It is a
systematic, multi-stage survey procedure and was developed by the RAND Corporation at the
end of the 1950s to avoid the general problems associated with group discussions (bandwagon
effect, halo effect). It was first used in the “Delphi project” in which seven researchers
assessed the possible targets of Soviet attacks on the US in the form of a structured, written
survey. After years of being used solely for military purposes, the Delphi technique was
presented to the public in 1964. As part of the “Report on a Long-Range Forecasting Study”
T. J. Gordon and O. Helmer presented the results of long-term forecasting of scientific and
technical developments for the next 50 years.
Today the Delphi technique is a standard approach used in science and everyday life. A
classic Delphi survey comprises several rounds. Once the future assumptions, or projections
as they are known, have been developed, the first round of the survey involves a group of
previously selected experts. They are individually and anonymously confronted with
questions which require quantitative appraisals. In addition to the appraisals, each expert can
also provide comments to justify his or her opinion. Before the next round, all the participants
can view the cumulated group appraisal and the comments made. The participants then have
the opportunity to modify their appraisals. Through this Delphi process, the panel of experts
comes close to reaching a consensus on the appraisals.
RealTime-Delphi – Procedure for Respondents
The RealTime-Delphi developed was an innovative and quick-response platform for
participants to appraise their expectations of the future. The participants were asked to
appraise 18 projections online in terms of their probability of occurrence, impact, and
16 | P a g e
Indian Pharmaceutical Industry in 2020
desirability. They could also add comments and reasoning to their responses. Immediately
after answering a question, the real-time calculations provided the participants with insight
into the statistical group opinion and comments collected. The participants were then able to
reconsider and change the responses they provided after the first round. The Delphi was
designed to be self-explanatory. Nevertheless, the participants were able to access a tutorial at
any point which explained the background to and the procedures used in the RealTime-
Delphi. Every participant completed an average of around four rounds of the survey. The first
round ran through all 20 assumptions, i.e. 20 first round screens and 20 revision screens with
group statistics. Each time the participant logged in subsequently and was taken to a
consensus portal, this was considered to be a new round.
The statistical group opinion was provided for each survey dimension in the form of a box-
plot. A box-plot (also known as a “box-and-whisker plot”) can be described as a diagram
showing a row of univariate numerical data (e.g. from 0 to 100%) as well as several
characteristics of the series of data (e.g. median, distribution, outliers). The median was
17 | P a g e
Indian Pharmaceutical Industry in 2020
indicated by a black line in the box-plot. A gray shaded area showed the second and third
quartile – also called “interquartile range”, which is known as a measure of dispersion. The
central innovative aspect of the box-plot was the graphical and differentiated illustration of an
outlier position. Divergence from the group was indicated using different colors:
a) Green: Within the group opinion
b) Yellow: Moderate divergence
c) Orange: Significant divergence
d) Red: Strong divergence
An “outlier labeling rule” also helped with classifying observations as “out” or “far out” of
the group opinion. In addition to the statistical group opinion, the arguments already collected
from the experts for each projection could also be viewed. Once all 18 projections had been
answered, the session was ended automatically. When next logging in, each participant was
immediately taken to a consensus portal. The consensus portal was a form of control panel
from where a respondent could jump into and review every single projection. The color of the
buttons indicated the status of the given probability judgment for a projection, i.e. the
divergence from the group opinion.
18 | P a g e
Indian Pharmaceutical Industry in 2020
Experts focused approach:
For the Delphi study we approached almost 500 experts and out of these 44 have responded
through their comments. So we can say that the response rate is around 9%. We have
contacted experts from different fields so that we can have overview of the different
prospectus of different fields. Actually we have contacted some academicians from IITs, IIMs
and best Pharma colleges in India. Research scholars and PhDs from renowned institutes like
NIPER (National Institute of Pharmaceutical Education and Research, CSIR labs, CRI
Kausauli etc. Doctors from India‟s best hospitals like AIIMS. GOI officials, Industry experts
from magazines, pharma companies (suppliers), consultants and financial analysts. All these
experts view industry in a different look and have different things to share. In our survey the
break of experts is as follows:
Out of 44 experts 9 are from academics, 25 from industry and 10 from research centres. So we
got the data that is a mixture with maximum number of experts are from industry will actually
tell the difference between the present scenario and what is it going to be.
19 | P a g e
Indian Pharmaceutical Industry in 2020
INTRODUCTION: INDIAN PHARMACEUTICAL INDUSTRY
“The Indian pharmaceutical industry is a success story providing employment for millions
and ensuring that essential drugs at affordable prices are available to the vast population of
this sub-continent.”
The pharmaceutical industry has been considered an “evergreen” industry. It has weathered
recessions, downturns and upturns and has provided investors with certain risk/reward that
was well understood and documented. The rate of change in this industry, compared with
most of the others, has always been sedate – with a group of few pharmaceutical companies
driving its future.
Pharmaceutical Industry in India is one of the largest and most advanced among the
developing countries. It is ranked 3rd
in volume terms and 14th
in value terms globally. It
provides employment to millions and ensures that essential drugs at affordable prices are
available to the vast population of India. Indian Pharmaceutical Industry has attained wide
ranging capabilities in the complex field of drug manufacture and technology. From simple
pain killers to sophisticated antibiotics and complex cardiac compounds, almost every type of
drug is now made indigenously.
Indian Pharmaceutical Industry is playing a key role in promoting and sustaining development
in the vital field of medicines. Around 70% of the country's demand for bulk drugs, drug
intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and vaccines is
met by Indian pharmaceutical industry. A number of Indian pharmaceutical companies
adhere to highest quality standards and are approved by regulatory authorities in USA and
UK.
The Indian pharmaceutical industry traditionally relied on “reverse engineering” i.e. product
copying, through which vast profits were made. In recent years, however, the larger domestic
companies have realized the need to undertake original research and / or penetrate into the
regulated generics markets in the USA/EU in order to survive in the global market. At the
same time, the Indian pharmaceutical industry is renowned for supplying affordable generic
20 | P a g e
Indian Pharmaceutical Industry in 2020
versions of patented drugs for illnesses like HIV/AIDS to some of the world‟s poorest
countries.
Some of the strategies that have been followed by Indian pharmaceutical companies for their
growth in the global markets have been as follows:
Geographic diversification with few companies focusing on increasing presence in
the regulated markets and others exploring the developing/under-developed markets
of the world.
As a part of diversification strategy, some of the companies have acquired brands,
facilities and businesses overseas. Some companies have even started their local
marketing in foreign markets.
Partnerships for supply of bulk drugs and formulations with the generic companies
as well as innovators.
For regulated markets such as the US, there are companies focussing on value
added generics, niche segments or patent challenges in the US.
Focus on offering research and manufacturing services on a contractual
basis(CMOs and CROs)
Apart from these strategies Indian companies have to devise newer strategies continuously to
survive in the highly competitive global market in an industry that is characterized by - high
capital requirement, high technical requirement, high process skills, high value addition
prospects, high export volumes, high market sophistication. Indian companies are
following the route of mergers and acquisitions to make inroads in the foreign markets. They
need to consolidate further in different parts of the world to become trans-national players.
Indian companies will have to rise above the statement of Michael Porter (1990), that most
multi-national firms are just national firms with international operations. They shall certainly
be at an advantage, as their strong national identities will give them a competitive advantage
in the global markets.
This decade has seen perhaps the most significant changes in the fortunes of the pharma
industry:
21 | P a g e
Indian Pharmaceutical Industry in 2020
1. Development of new products, the real driver of growth and profitability, has seen a
serious drop in approvals, against a backdrop of ever increasing R&D costs.
2. There has been an emergence of biologics as a significant driver of new R&D. Many
of the established pharmaceutical companies have had to make changes/acquisitions to
align their portfolios to include a larger biologic presence.
3. On the other end of the product life-cycle, the ever strengthening generic competition
has meant rapid declines in sales of products going off patent.
4. The global financial crisis of the past two years has added the final challenge in that
the key markets, US & Europe, have had low/no growth.
Big Pharma in particular have had to take a look at their business models and refocus energies
towards new growth opportunities (biologics, cytotoxics and emerging markets) as well as
evaluate more cost efficient operating models. The result has been that the innovative
pharmaceutical industry has moved into a faster trajectory of outsourcing and off shoring of
R&D and manufacturing across APIs and dosage forms. The global outsourcing industry
is USD51b and growing at 14%; faster than the global pharmaceutical industry growth.
India is perfectly positioned to be a preferred destination for global pharmaceutical companies
to outsource R&D as well as manufacturing. Some of the key drivers being:
• Track record of supplying pharmaceutical API and formulations globally (with all the
requisite quality and regulatory approvals in place) – particularly small molecule
• Strong cost/quality proposition. Lower costs and strong supply of skilled manpower
(scientists, QA/QC professionals etc) and capital efficiency
• Diverse and wide group of companies who have acquired this capability India as a
outsourcing market is USD1.1b and growing at ~51%. The opportunity for growth for
Indian as well as global companies looking at setting up in India is very strong and
sustainable for the foreseeable future.
The Indian outsourcing industry has overcome many hurdles along the way and is now poised
to assume the mantle of leadership as a strategic partner of choice for global pharmaceutical
companies across the areas of R&D and manufacturing.
22 | P a g e
Indian Pharmaceutical Industry in 2020
INDUSTRY SEGMENTATION
Indian pharmaceutical industry can be widely classified into Bulk drugs, Formulations and
Contract research. Bulk drugs are the Indian name for Active Pharmaceuticals Ingredients
(API). Formulations cover both branded products and generics. Indian pharmaceutical sector
is self sufficient in meeting domestic demand and exports successfully to various markets
globally. The existence of process patents in India till January 2005 fuelled the growth of
domestic pharmaceutical companies and developed them in areas like organic synthesis and
process engineering, as a result of which, Indian pharmaceuticals sector is able to meet almost
95 percent of the country‟s pharmaceutical needs. India is globally recognized as a low cost,
high quality bulk drugs and formulations manufacturer and supplier. Contract Research,
a nascent industry in India has witnessed commendable growth in the last few years. As per
Yes Bank /OPPI report (2007-08), formulation segment (including domestic formulation and
formulation exports) constituted 72% of the total pharmaceutical industry (in terms of sales)
while bulk drugs and contract research constituted 25% and 3% of pharmaceutical industry
respectively.
Fig: Segment wise Sales
(SOURCE: YES BANK / OPPI)
23 | P a g e
Indian Pharmaceutical Industry in 2020
Presently, the growth of a domestic pharmaceutical company is critically dependant on its
therapeutic presence. In terms of end-use, the pharmaceutical industry is sub-divided into
several therapeutic segments. These segments are broadly defined on the basis of therapeutic
application. Some of these segments are low-volume, high margin segments, while the others
are high-volume with relatively low margins. The new lifestyle categories like Cardiac,
Respiratory and Vitamins are expanding at double-digit growing rates. The long term ailment,
chronic therapies is now accounting 24% of the market. The only growth driver for acute
therapies is the new product introduction under this segment. Today, anti-infective which
used to be the single largest therapeutic segment in Indian pharmaceutical industry is
increasing. Anti-infective segment is now 1st in terms of value contribution followed by
Gastrointestinal and Cardiac.
The key therapeutic segments include:
Anti-infective
Cardio vascular
Central nervous system drugs
Anti-infective is currently the largest therapeutic segment in India. It accounts for one-fifth of
total market turnover. Next in line, and accounting for one-tenth each, are cardio-vascular
preparations, cold remedies, pain killers and respiratory solutions.
Fig. Therapeutic wise distribution (ORGIMS)
(SOURCE: CRISINFAC, YES BANK/ OPPI)
24 | P a g e
Indian Pharmaceutical Industry in 2020
The global pharmaceutical industry is in the midst of challenging times:
In 2008, the global pharmaceutical market has grown at the slowest rate in this decade and is
expected to slow down further. The market reached USD773 billion at a growth rate of 4.8%
in 2008, which is the slowest growth rate of the decade. US and Europe which contributed
almost 73% of the global market in 2008, achieved growth rates of 1.4% and 5.8%
respectively. Going forward, the US market is expected to stagnate or decline further over the
next five years while the European market is expected to grow at a sluggish pace with a
CAGR of 2 - 5% for 2008 - 2013. There are primarily four reasons for this slowdown:
• Decreased R&D productivity: during the eight year period between 2000 and 2008, while
the total R&D spend of pharmaceutical companies has increased from USD53 billion to
USD129 billion, the number of drugs approved has declined. This decreased R&D
productivity is due to the increased failure rate in trials and higher cost of developing new
drugs due to stricter regulatory requirements.
• Current global financial crisis: the crisis has severely affected the liquidity of small biotech
companies; with 44% of the US biotech companies having less than a year‟s operating cash
and 26% having less than six months of operating cash. Further, the consumer spend on
healthcare has declined, reflected by a drop in the number of prescriptions in the US by 2%
for the first time in a decade in 2008-09.
• Increasing penetration of generics: penetration of generics in US, in terms of their share in
total prescriptions, has increased from 47% in 1999 to 63% in 2007 .Going forward, this is
expected to increase further driven by impending patent expiries and measures by
governments to reduce healthcare costs.
• Fewer and smaller blockbusters: decreased number of blockbuster approvals to replace the
existing ones going off patent and reduced sales potential of recently launched drugs will
further decelerate the market growth. The sales of blockbuster drugs have grown only 9% in
2007 compared to 24% in 2004. Further, projected sales of top 10 NMEs launched in 2008
show no potential of achieving a blockbuster status in the next 5 years.
25 | P a g e
Indian Pharmaceutical Industry in 2020
DOMESTIC GROWTH DRIVERS:
Pharmaceutical sector is one of the most globalized sectors among the Indian industries. The
downside is pharmaceutical sector traditionally has been immune to business cycles. The
upside of Indian pharmaceutical sector, however, is influenced by a mix of global and local
factors. Global factors are important as most Indian companies ship a major portion of their
production to overseas markets. Also, multinationals operating in the Indian market follows
the central research and global marketing model. Their actions are largely dictated by global
trends although local issues are given due importance. The domestic market is critical for both
Indian companies and multinationals. For Indian companies, the domestic market lends
stability to bottom line and offer means to cope with fluctuations in global demand. The
growth drivers for Indian pharmaceutical market are:
Growing Population and Improving Incomes: Household incomes are rising in
India; the proportion of middleclass in Indian population is also increasing. Statistics
show a clear migration of population towards middle and upper classes. Rise in
income levels is always accompanied by greater demand for medical facilities and
pharmaceutical products. Middle class is already 70 million strong and is expected to
grow even fast, accounting for a higher share of total population. Increase in living
standards will lead to longer life expectance and higher consumption of drugs and
health care services.
Changing lifestyles: Rising incomes and improving literacy rates are leading to
change in lifestyles. While incomes provide the means to access medical facilities and
products, improving literacy boost awareness about diseases and lead to higher
consumption of drugs. Changing lifestyles, however, is leading to a change in disease
profile especially in urban areas. Hectic lifestyles and high cholesterol diets are
resulting growing incidence of diseases such as cardio vascular diseases and cancer.
Research and Development: The R&D efforts of Indian companies have been largely
focussed on chemical synthesis of molecules and their cost effective production
thereof. India has a large pool of technical and scientific personnel with good English
language skills. Indian scientists have developed a high degree of chemical synthesis
26 | P a g e
Indian Pharmaceutical Industry in 2020
skills while engineers have developed competencies in producing molecules cost
effectively. These skills have helped Indian companies tap generic markets abroad
successfully in the past and will continue to do so.
Healthcare Expenditure: Indian healthcare system is largely run by the govt with
private sector playing a small, but important part. The healthcare system in India
comprises government hospitals in cities and towns and a network of health centres in
rural areas. This is supplemented by a string of private hospitals and clinics in largely
urban areas. The public expenditure on health has been growing at a decent rate while
private expenditure has been recording marginal growth.
Insurance Sector giving a Lift: Indian insurance sector has been thrown open to
private sector. Large sections of Indian population are not covered by health insurance
schemes. Currently, less than 10% of the Indian population is covered by some form
of health insurance.
27 | P a g e
Indian Pharmaceutical Industry in 2020
CRITICAL SUCCESS FACTORS
The rules of pharmaceutical business are changing. Indian pharmaceutical companies can no
longer get away with plundering intellectual properties of multinational companies.
Pharmaceutical business has become a new ballgame altogether after the introduction of
product patents in January 2005.
New product development
Pre 2005: New product development efforts of Indian pharmaceutical companies in process
patents era were limited to reverse engineering molecules discovered by other companies.
Thanks to absence of product patents, Indian companies did not have to go through long
winded drug development process. Nor did Indian companies have to expend any effort on
research focus. Indian companies simply zeroed in on blockbuster drugs and tried to come up
with an alternative process as fast as they could. The focus of the Indian companies was to
launch a copy of a blockbuster drug ahead of their rivals in India and abroad.
Key areas to focus on R&D for Indian companies:
1. Potential product identification
Complex API
Complex finished product
Commercial potential of products
Out-licensing opportunity to MNCs
2. Novel Drug Delivery System (NDDS)
3. New Drug Development
Post 2005: A large number of drugs are going “off patent” in the next few years. According
to IMH Health, more than $60 billion worth of drugs are going “off patent” by 2011. Thus,
Indian companies will not be short of new products for at least another two years. In the long
run, however Indian companies may find it hard to make money from drugs coming off
patent. Already competition in generic market is intense and likely to increase further in the
future. Hence, new molecules rather than generics will drive revenues and profits in the
28 | P a g e
Indian Pharmaceutical Industry in 2020
product patents area. Indian companies need to discover new drugs either through their own
efforts or research alliances. Perhaps licensing deals with multinationals could also provide
Indian companies access to new drugs. Focus on basic research will come with its own
issues. Indian companies will have to acquire the skills of identifying research areas that offer
excellent revenue and profit potential. This will entail a closer tracking of disease profiles and
related therapies as well as keeping a close tab on the research programmes of rivals. Besides,
Indian companies will have to pay more attention to economics of drug development process.
A product patent is granted for a period of 20 years
Therapeutic coverage
Pre-2005: In the absence of product patents, Indian pharmaceutical companies did not feel
the need to focus on specific therapeutic areas. Most Indian pharmaceutical companies
eschewed narrow focus and tried to cover as many therapeutic areas as possible. Now the
product portfolio of many Indian companies has considerable breadth and depth. Given the
price controls in the market, diversification worked to the advantage of companies in the
domestic markets. In the export markets, a wider product portfolio gave companies the
option of picking and choosing from an array of opportunities.
Post 2005: Opinion is divided over the therapeutic strategy that Indian companies should
pursue in product patent era. Some companies believe that focus on select therapeutic
segment will fetch them greater dividends in terms of new chemical entities and market
share. Other companies believe such a strategy is risky given the size of Indian companies
and that a big setback in research could sink the company. Instead such companies are
pursuing a de-risking strategy of building a wide product portfolio. In the domestic market,
such a strategy will result in economies of scale at production and marketing stage, putting
the company in a better place to weather competition from multinationals. In the export
markets even after the introduction of product patents, products under patent protection will
comprise only 15 percent of the market. So a vast chunk of the market will be still open for
competition although margins will be wafer thin.
29 | P a g e
Indian Pharmaceutical Industry in 2020
Exports
Pre-2005: Most Indian companies focused on exports. Exports improve the valuation of
companies owing to higher margin in overseas markets. Indian companies built fortunes by
making cheaper versions of blockbuster drugs and selling them in domestic and export
markets. Indian companies built especially strong position in manufacture of bulk drugs. Out
of the total exports, formulations constituted 55 percent and bulk drugs constituted 45
percent. Success in export market allowed some Indian companies to build a strong position
in the domestic market organically and through acquisitions of brands and companies.
Post 2005: Exports has continued to be a priority for Indian companies. Major blockbuster
drugs will come off patent in the near future, creating a big generic opportunity for Indian
companies. Also, a growing demand for anti-AIDS drugs in Africa will keep Indian
companies busy. Exports have and will continue to provide Indian companies with the
strength to withstand the onslaught of multinationals in the domestic market.
Low cost production through scale
Pre-2005: Indian pharmaceutical companies have mastered the science of producing drugs
cheaply. Thanks to benign patents regime, Indian companies have developed a high level of
chemical synthesis skills. The absence of development costs together with efficient
production has enabled Indian companies to establish a solid position in bulk drug
manufacturing. But scale did not receive as much importance as it should have, because the
cost of Indian pharmaceutical companies was already low owing to aforesaid reasons. Many
Indian companies did not find the return on investment of world class plants compelling
enough.
Post 2005: By 2011, drugs worth $60 billion will come off patent, presenting a huge generic
opportunity to Indian companies. But the competition in the generic market will be brutal,
resulting in thin margins. The cost of production will hold the key to success in the generic
market. The production cost in turn depends on scale. Indian pharmaceutical companies need
to build global scale to stand a chance in the generics market.
30 | P a g e
Indian Pharmaceutical Industry in 2020
FACTORS WHICH MAKE INDIA MOST FAVORITE OUTSOURCING
HUB:
India is a fast growing custom manufacturing outsourcing destination with a growth rate of
43% that is thrice the global market rate. This is driven by its ability to create a differentiating
cost value proposition powered by its lower manufacturing costs, skilled manpower and
strong technical capabilities
Assurance, quality and service are the ticket to play in the custom manufacturing space while
cost and innovation serve as differentiating criteria for selection. The India story is driven by
its offering of a „cost value proposition‟ comprising cost efficiency along with skilled
manpower and technical capabilities.
1. India is rated highest in terms of its cost efficiency attractiveness among six countries
– India, China, Eastern Europe, Puerto Rico, Singapore and Ireland. Approximately
67% of the respondents have rated India as “excellent” and rest 33% have rated it
“above average”.
2. India‟s cost efficiency is driven by its low manufacturing costs which are only 35-40%
of the cost of manufacturing in the US supported by its low installation and manpower
cost.
3. Around 90% of the respondents have rated India either “excellent” or “above average”
for its technical capability attractiveness. This is demonstrated by the following:
4. It has manufacturing prowess in both APIs, where India is the 3rd largest player in the
world with 500 different APIs and in formulations where it manufactures 60,000 packs
across 60 therapy areas.
5. India currently accounts for 8% of the global pharmaceutical production making it the
world‟s 4th largest pharmaceutical producer.
6. Vertically integrated model of Indian players to offer end to- end services across
development and manufacturing in both formulations and API‟s.
7. It has around 119 USFDA and 84 UK MHRA approved plants and accounts for one
third of DMFs and highest number of ANDAs in the US.
31 | P a g e
Indian Pharmaceutical Industry in 2020
8. Approximately 90% of the respondents have rated India either “excellent” or “above
average” for its skilled manpower attractiveness.
9. India offers a large pool of English speaking skilled manpower. Every year, around
1.6 million graduates and 0.4 million post graduates qualify in science courses.
10. While the growth in the North American and European markets is expected to slow
down to -1 to 2% and 2 - 5%
11. respectively over 2008-2013, the growth of emerging markets would be 11-14%.This
increasing influence of the emerging markets will position India in the proximity of
the markets driving growth of the pharmaceutical industry.
12. Share of emerging markets in clinical trials has been increasing and India is emerging
as a hot spot as compared to most emerging markets, with a robust growth of 31% p.a.
over the last four years. This trend will increase India‟s proximity to the clinical trial
supplies market.
13. 67% of respondents have rated India “above average” both on project management
attractiveness and response time attractiveness indicating that India has developed
strong project management capabilities with reduced turnaround time
14. While India needs to improve its IP perception Indian companies are adopting various
business models to ensure partnering with global companies and have been successful
in doing so.
15. In order to further strengthen India‟s position in the pharmaceutical manufacturing
outsourcing market, government has taken or planning to take several initiatives such
as
16. Streamlining and reducing time frame for approvals involving NOC manufacturer and
NOC export licenses from 8 – 12 weeks to 2 weeks.
17. Providing infrastructure support such as building “Pharmazones”, a separate dedicated
temperature and atmosphere controlled area to maintain the safety, efficacy, and
quality of imported and export drugs/ pharmaceutical products at international airports
at Delhi, Hyderabad and Mumbai.
32 | P a g e
Indian Pharmaceutical Industry in 2020
18. Building capabilities through collaboration with western countries such as MoU with
US FDA, WHO, Health Canada, South Africa and EMEA.
19. All the above factors have been instrumental in the Big Pharma conducting their
sourcing operations from India and attracting global CMOs like Lonza, Patheon, DSM
and Albany Molecular Research Institute to set up base or collaborate in India.
20. India is thus well poised to become the strategic partner of choice in the arena of
contract manufacturing
33 | P a g e
Indian Pharmaceutical Industry in 2020
PEST Analysis of Pharmaceutical Industry:
Political Factors
1) Stable government: government at the state and the central level is very unstable
and both have different policies for the development of the Industry.
a. State level.
b. Central level.
Both the Levels of government must support for the manufacturing and R&D in the industry.
2) Taxation policy
a. Pollution clearance tax
b. Service Tax
c. R&D Tax and Patenting Tax
d. Excise duty
e. Custom duty
f. License Fees
g. Hazardous substance (Storage & Handling) license
GOI is supporting the Pharmaceutical industry in the form of 200% weighted deduction on in-
house research and development (R&D) expenses on an average it amounts to no less than 40-
45% of the costs. FDI is 100% allowed in this sector but it depends on the central government
to decide.
3) Strong legal policies :
a. Environmental pollution – due to microbial stains, chemicals, biomolecules
etc…
b. Safety measures –once the new product had been manufactured by a
company, the government institutes check the safety and effectiveness of
the vaccine/medicine. It must not harm the consumer.
c. To protect the biodiversity- policies to save the Rare biodiversity of the
country. ( micro organisms and plant and animal species)
34 | P a g e
Indian Pharmaceutical Industry in 2020
4) Subsidies by government are not sufficient as there are less SEZ‟s for supporting
the companies in this sector.
5) IPR- Indian Patent act 2005 has made a lot of difference in this industry in each
and every prospectus as discussed before.
6) Relations with the officials – the company must have good relations with the
higher authorities in government for the support.
7) Wage legislations of the officials.
Economic Factors
1) Nation‟s GDP, GNP – only 1% of the National income is spending on the industry
and research.
2) Population growth: Indian population is increasing at a good rate and also the level
of diseases in the urban and rural areas.
3) Literate population: still 70% of the population lives in the rural areas so the
literacy level is low and the penetration of pharma is very low in this these areas.
4) Pricing strategy –
a. Pricing strategy depends on the economic conditions of the country.
b. Also if the price is too low then the rich people may think it is not of good
quality and if prices are very high then it is a problem for the poor people
to buy those products.
5) Unemployment rate – to produce a highly technical product and to sell it in a
country the population must be employed so that they can buy that product.
6) Buying capacity of people-
7) Infrastructure and Transportation cost - these facilities are not so good in India so a
company have to invest more in infrastructure and transport.
8) Financing options- interest rates
9) Pay scales of the scientist – the pay scale of the scientists are very low as
compared to western countries so Brain drain takes place.
10) Export base – if the country has a good export base then it attracts other players
and in India domestic consumption is low as compared to Exports.
35 | P a g e
Indian Pharmaceutical Industry in 2020
11) Mergers & Acquisitions – company must look at the economic conditions to
merger with the companies in India.
12) Venture funding – is very less in India which is much needed for the biotech
companies.
13) Business cycle stage – this industry is at the growth phase of its cycle.
14) Quality standards – there are only a few laboratories where GLP and GMP
practices are followed, so the number of such labs has to be increased.
15) No proper marketing
Social Factors
1. Lifestyle
(a) Change in the lifestyles of a growing middle class population marked with a
change in the socio-economic composition,
(b) increase in disposable income,
(c) increasing urbanization, with access to medical care as well as awareness about
diseases
2. Low insurance penetration
(a) Currently the market penetration is only 2% of the total population in India
(b) According to World Bank Report 99% of Indians will face shortage of finance in
case of any critical illness
3. Genetically modified food and human health
(a) In future will the genetically produced medicine cause any harm to human health
is a big issue in India
4. Bioethical issues
5. Lack of knowledge and awareness in rural areas: people living in rural areas due to
poverty and illiteracy, enroll their self for clinical trials and it may lead to death of
many poor people.
6. In rural India people prefer using household treatments handed down for generations
for common ailments.
36 | P a g e
Indian Pharmaceutical Industry in 2020
7. Superstition – Because of superstition, the rural people hold themselves back from
using medicines and go for black magic
8. Poverty – With increase in urbanization, urban poverty and urban slums have also
increased and this class of people is not able to buy even the basic medicines.
9. Local perception (Groups perceive risks differently depending on their culture,
scientific background, perception of government, and other factors.)
10. Reference groups – Most people use reference from people who they know while
using medicinal products, so they don‟t get much idea about new drugs
Technological Factors
1. Technology: India is still lacking in the availability and development of latest
technology needed for the drug discovery and the research processes. Most of the
latest technology for the research purposes is imported from western countries.
Because latest technology not only saves time and cost but will also help to retain the
educated pool of India, which go abroad due to lack of latest technology.
2. Risk involved: there is a high risk involved while importing new technology from the
western countries:
(a) If India, imports a technology to manufacture a product or for the research
purposes and the technology is not user friendly, then the company will loose huge
amount of money.
(b) Success rate of the product: as we know the success rate of the drug discovery
pipeline is dried up, and due to stringent regulation by USFDA, Indian
Pharmaceutical companies are bound to use latest technology.
3. Lack of specialized disciplines and capabilities in various areas, especially in R&D
and aspects related to product quality.
4. The production process brought in from a totally different economic context may be
disastrous for the economy that imports it, if it is unchanged and unadapted.
5. Redesign – the technology imported from a different country has to be redesigned
according to the need of that particular company and country requirement adding cost
to the company
37 | P a g e
Indian Pharmaceutical Industry in 2020
6. Availability of Quality raw Materials – before importing a new technology, it has to be
made sure that quality raw materials are available for that technology
7. Education
(i) Mismatch between academic curriculum and industry
(ii) Biopharma in India also lack the academic collaboration that is crucial to drug
development in the West
(iii) Lower number of post graduates and PhDs
(iv) Commercial Expertise
38 | P a g e
Indian Pharmaceutical Industry in 2020
SWOT ANALYSIS OF INDIAN PHARMACEUTICAL INDUSTRY
The SWOT analysis of the industry reveals the position of the Indian pharmaceutical
industry in respect to its internal and external environment.
Strengths
1. India with a population of over a billion is a largely untapped market. In fact the
penetration of modern medicine is less than 30% in India. To put things in perspective,
per capita expenditure on health care in India is US$ 93 while the same for countries
like Brazil is US$ 453 and Malaysia US$189.
2. The growth of middle class in the country has resulted in fast changing lifestyles in
urban and to some extent rural centres. This opens a huge market for lifestyle drugs,
which has a very low contribution in the Indian markets.
3. Indian manufacturers are one of the lowest cost producers of drugs in the world. With
a scalable labour force, Indian manufactures can produce drugs at 40% to 50% of the
cost to the rest of the world. In some cases, this cost is as low as 90%.
4. The fact that despite the low level of unit labor costs India boasts a highly skilled
workforce has enabled the country's pharmaceutical industry at a relatively early stage to
offer quality products at competitive prices. Each year, roughly 115,000 chemists
graduate from Indian universities with a master‟s degree and roughly 12,000 with a
PhD.4 The corresponding figures for Germany – just fewer than 3,000 and 1,500,
respectively – are considerably lower. After many chemists from India migrated to
foreign countries over the last few years, they now consider their chances of
employment in India to have improved. As a result, a smaller number is expected to go
abroad in the coming years; some may even return.
5. Indian pharmaceutical industry possesses excellent chemistry and process
reengineering skills. This adds to the competitive advantage of the Indian companies.
The strength in chemistry skill helps Indian companies to develop processes, which are
cost effective.
39 | P a g e
Indian Pharmaceutical Industry in 2020
Weakness
1. The Indian pharmaceutical companies are marred by the price regulation. Over a
period of time, this regulation has reduced the pricing ability of companies. The NPPA
(National Pharmaceutical Pricing Authority), which is the authority to decide the
various pricing parameters, sets prices of different drugs, which leads to lower
profitability for the companies. The companies, which are lowest cost producers, are at
advantage while those who cannot produce have either to stop production or bear
losses.
2. Indian pharmaceutical sector has been marred by lack of product patent, which
prevents global pharmaceutical companies to introduce new drugs in the country and
discourages innovation and drug discovery. But this has provided an upper hand to the
Indian pharma companies.
3. Indian pharma market is one of the least penetrated in the world. However, growth has
been slow to come by. As a result, Indian majors are relying on exports for growth. To
put things in to perspective, India accounts for almost 16% of the world population
while the total size of industry is just 1% of the global pharma industry.
4. Due to very low barriers to entry, Indian pharma industry is highly fragmented with
about 300 large manufacturing units and about 18,000 small units spread across the
country. This makes Indian pharma market increasingly competitive. The industry
witnesses price competition, which reduces the growth of the industry in value term.
To put things in perspective, in the year 2003, the industry actually grew by 10.4% but
due to price competition, the growth in value terms was 8.2% (prices actually declined
by 2.2%)
Opportunities
1. The migration into a product patent based regime is likely to transform industry
fortunes in the long term. The new patent product regime will bring with it new
innovative drugs. This will increase the profitability of MNC pharma companies and
40 | P a g e
Indian Pharmaceutical Industry in 2020
will force domestic pharma companies to focus more on R&D. This migration could
result in consolidation as well. Very small players may not be able to cope up with the
challenging environment and may succumb to giants.
2. Large number of drugs going off-patent in Europe and in the US between 2005 to
2009 offers a big opportunity for the Indian companies to capture this market. Since
generic drugs are commodities by nature, Indian producers have the competitive
advantage, as they are the lowest cost producers of drugs in the world.
3. Opening up of health insurance sector and the expected growth in per capita income
are key growth drivers from a long-term perspective. This leads to the expansion of
healthcare industry of which pharma industry is an integral part.
4. Being the lowest cost producer combined with FDA approved plants; Indian
companies can become a global outsourcing hub for pharmaceutical products.
Threats
1. There are certain concerns over the patent regime regarding its current structure. It
might be possible that the new government may change certain provisions of the
patent act formulated by the preceding government.
2. Threats from other low cost countries like China and Israel exist. However, on the
quality front, India is better placed relative to China. So, differentiation in the contract
manufacturing side may wane.
3. The short-term threat for the pharma industry is the uncertainty regarding the
implementation of VAT. Though this is likely to have a negative impact in the short-
term, the implications over the long-term are positive for the industry.
41 | P a g e
Indian Pharmaceutical Industry in 2020
From the above PEST analysis, we have found out 20 projections, which are further divided
in to 8 outcome projections and 12 enabler‟s projections. The main 8 projections have very
low co-relation between them and enabler‟s projections are highly co-related to these 8 main
projections and these are listed below as:
Projections:
Outcome Projections:
Projection PO1: 2020: Pharma/biotech companies conducting research projects in India
focusing on diseases of high relevance for the Indian population receive substantial tax
benefits.
Projection PO2: 2020: A stringent regulatory environment for new drug approvals is strictly
enforced in India.
Projection EO1: 2020: The research focus of the pharma/biotech industry in India is to 90%
on priority diseases for the domestic market (e.g. Malaria, Diabetes, and Dengue).
Projection EO2: 2020: The manufacturing focus of the pharma/biotech industry in India is to
90 % on export markets.
Projection SO1: 2020: Consumers in India expect to be provided with the best and latest
drugs at the globally lowest prices.
Projection SO2: 2020: Large-scale clinical trials for export-focused drugs are widely
accepted in the Indian society.
Projection TO1: 2020: Pharma/biotech research organizations funded by the GOI
(Government of India) own all necessary world-class, state-of-the-art research equipment for
innovative drug discovery projects.
Projection TO2: 2020: The innovation and drug discovery capabilities of pharma/biotech
researchers in India are the best in Asia.
42 | P a g e
Indian Pharmaceutical Industry in 2020
(P- Political, E- Economical, S- Social and T- Technological).
Enabler Projections:
CUSTOMERS:
Projection CuE1: 2020: The rural population of India is ready to invest a substantial part of
their income into the prevention and treatment of febrile diseases like Malaria, Diphtheria etc.
Projection CuE2: 2020: Indians widely prefer to fight their lifestyle diseases (e.g. obesity,
depressions etc.) with reactive approaches such as drugs than to proactively invest into any
preventive activities (e.g. sports, healthy food etc.).
SUPPLIERS:
Projection SuE1: 2020: India‟s rich biodiversity (flora and fauna) has been identified as key
investment criteria for R&D centers of global pharma/biotech companies in India.
Projection SuE2: 2020: The number of PhDs at CSIR, JRF, and NET for research positions
in the pharma/biotech industry is 24‟000 candidate‟s p.a.
COMPETITORS
Projection CoE1: 2020: Pharma/biotech companies have established a common packaging
technology reducing the faked drug market sector in India by 50% compared to 2010.
Projection CoE2: 2020: Global pharma/biotech companies have tripled their API (Active
Pharmaceutical Ingredients) production volumes in India compared to 2010.
GOVERNMENT
Projection GoE1: 2020: The GOI allows free market mechanisms to determine the pricing of
essential drugs.
Projection GoE2: 2020: The regulatory system for the pharma/biotech in India is essentially
the same as US FDA regulatory system.
43 | P a g e
Indian Pharmaceutical Industry in 2020
Projection GoE3: 2020: The weighted tax deduction for the R&D expenditure of the
pharma/biotech industry in India is 300%.
Projection GoE4: 2020: The GST (Goods and Service Tax – expected to be implemented in
2011) on pharma/biotech products and medical equipments is more than 20%.
SOCIETY AT LARGE
Projection SoE1: 2020: The financial attractiveness of clinical trials for the less privileged
part of the Indian society has lead to a global market share of clinical trials in India of more
than 20%.
Projection SoE2: 2020: The Indian society is largely convinced that physical health is a key
factor for monetary wealth.
44 | P a g e
Indian Pharmaceutical Industry in 2020
Factor Analysis:
Impact on Industry:
I have done Factor analysis of all the 8 outcome projections by data collected from Experts,
regarding their opinion on Impact on Industry values given by them for these main 8
outcome projections. The experts had rated the impact from 1 to 5. 1 is low impact and 5 is
the high impact on industry. This is done to reduce the attributes in to components to capture
the patterns seen in the data. It will help the experts and the industry to see the factors which
are inter
The main benefits of factor analysis are that the analyst can focus their attention on the unique
core elements instead of the redundant attributes, and as a data “pre-processor” for regression
models.
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure
of Sampling Adequacy.
.551
Bartlett's Test of Sphericity Approx. Chi-Square 62.259
df 28
Sig. .000
Value of KMO statistic (.551) which is more than .500 so it is good for the Factor Analysis
and it is an appropriate technique for analyzing the above correlation matrix.
Communalities
Initial Extraction
Po1 1.000 .655
Po2 1.000 .800
Eo1 1.000 .497
Eo2 1.000 .600
So1 1.000 .714
So2 1.000 .531
To1 1.000 .725
To2 1.000 .689
45 | P a g e
Indian Pharmaceutical Industry in 2020
Communalities
Initial Extraction
Po1 1.000 .655
Po2 1.000 .800
Eo1 1.000 .497
Eo2 1.000 .600
So1 1.000 .714
So2 1.000 .531
To1 1.000 .725
To2 1.000 .689
Above results indicate the amount of variance in each variable that it accounted for. Initial
communalities are estimates of the variance in each variable accounted for by all components
or factors. This is always equal to 1.0 for correlation analyses. Extraction communalities are
estimates of the variance in each variable accounted for by the components. As above tables
shows that communalities in this table are all high, which indicates that the extracted
components represent the variables well.
Total Variance Explained
Compo
nent
Initial Eigenvalues
Total % of Variance Cumulative %
1 2.416 30.205
2 1.666 20.823
3 1.129 14.107
4 .797 9.965 75.100
5 .746 9.326 84.426
6 .563 7.039 91.465
7 .394 4.926 96.391
8 .289 3.609 100.000
Extraction Method: Principal Component Analysis.
46 | P a g e
Indian Pharmaceutical Industry in 2020
The variance explained by the initial solution, extracted components, and rotated components
is given in the above table. 2nd
3rd
and 4th
Column of the table shows the Initial Eigen values
i.e. total variance attributed to that factor. Number of factors for that should be used in the
analysis is determined based on the Eigen values. (Only the factors with Eigen value greater
than one is retained i.e. first three factors in with Eigen value of 2.416, 1.666 and 1.129).
We can intemperate from the last column that nearly 75.1% of the variability is explained by
three extracted variables , so you can considerably reduce the complexity of the data set by
using these components, with only a 24.9% loss of information.
Scree plot:
47 | P a g e
Indian Pharmaceutical Industry in 2020
A Scree Plot is a plot of the Eigen values against the number of factors in order of extraction.
The shape of plot is used to determine the number of factors. The plot has distinct break the
steep slope of factors, with large Eigen values and a gradual trailing off associated with the
rest of the factors. In the total variance explained table we can see that Eigen values more than
one i.e. 2.416, 1.666 and 1.129 are extracted. From this graph we can tell that these three
factors will effect the Biopharmaceutical industry the most and in a significant way. And the
distinct break in the Scree plot occurs at other five variables. Finally, from the cumulative
percentage of variance accounted we can see that these two factors accounted for 75.1 % of
variance and the gain achieved in going to these factors is marginal.
Rotated Component matrix:
Rotated Component Matrixa
Component
1 2 3
Po1 .668 .456 .040
Po2 .709 -.258 .480
Eo1 .562 .424 .031
Eo2 .086 .770 .021
So1 .046 .769 .348
So2 -.016 .350 .640
To1 .756 -.044 -.390
To2 -.026 .045 .828
But by Rotated Component Matrix we know that how these variables are related i.e.
positively or negatively correlated. So we can see that Factor analysis has got three
components and all the Political, Economic, Social and technological factors are covered
under these 3 components. The factors P01, P02, E01 and T01 are positively correlated and
are covered under component 1. The factors E02 and S01 are positively correlated and
covered under component 2 .The factors S02 and T02 are positively correlated and are
covered under component 3. The positive correlation signifies that all the projections
48 | P a g e
Indian Pharmaceutical Industry in 2020
developed will have positive impact on the industry i.e. if one of the component had positive
had positive effect other will also had positive effect.
49 | P a g e
Indian Pharmaceutical Industry in 2020
EXPLANATION OF THE OUTCOME PROJECTIONS AND 6
ENABLER’S PROJECTIONS with EXPERT COMMENTS
Outcome projections
1. Po2
2. Eo2
3. So2
4. To2
Enabler projections:
1. CuE2
2. SuE2
3. CoE1
4. GoE2
5. GoE3
6. SoE2
P- Political, E –economical, S- social, T- technological.
Cu- Customers, Su- suppliers, Co- Competitors, Go- Government, So – Society at large
50 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“India has a large market for the
spurious drugs which is around 40%,
a strict regulatory environment will
reduce this market if not terminate
completely.”(P)
“To compete globally and increase its
market share globally, regulatory
environment should be strict and
stringent.”(P)
“Since the large illiterate population
is vulnerable to being exploited by
the pharma companies there will be
increased pressure on the lawmakers
to make a stringent regulatory
body.”(P)
“It will speed up the research and
commercialisation of the drug and
help save cost. This will have a direct
impact on quality of drugs and will
even lead to decline of counterfeits in
the country”.(I)
“It will encourage foreign companies
to launch newer drugs in India and
compete in the price sensitive
market.”(D)
Probability Impact Desirability
58.02 3.88 3.84
Projection PO2: 2020 – A stringent regulatory environment for new drug approvals is strictly
enforced in India.
Reasons:
Increased failure rate of Indian drugs in western countries
Bureaucracy.
It reduces the time taken to approve a drug.
Spurious drugs.
Patent Act 2005: after the acceptance of patent act 2005 India has started to shift its focus
from Reverse-engineering to Innovation and Drug discovery.
Increased outsourced manufacturing projects.
Increased profits due to high acceptance.
“French Custom authorities seized at Paris airport
another consignment of Indian generic drugs 0f
1.74 million tablets of anti-platelet drug,
Clopidogrel, which were shipped by Mumbai
based Macloeds pharma to Venezuela.”
This was 18th
time Generic drugs meant for
developing countries has been confiscated during
transit within the EU, although the manufacture
of the drug in India and sale in the destination
countries.
In February and March, the Netherlands has
confiscated blood pressure control and HIV-Aids
drugs of Dr. Reddy‟s laboratories and Aurobindo
Pharma to Brazil, Columbia and Nigeria on
grounds of alleged patient infringement.
51 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“Drug patents worth $100bn will expire
in 4 years, this will be a huge advantage
to India to manufacture and export these
drugs due to its competitive advantage
in the generic drugs market.” (P)
“The production cost of generics in
India is approximately 50% lower than
that of U.S. and EU markets.” (P).
“Local companies can put back profits
for expansion, R&D, Up gradation And
Training And Development.” (I).
“Outsourcing of manufacturing to India
should increase. This will help to
generate cash flows to fund research
work.” (D)
Probability Impact Desirability
60.98 3.65 3.19
Projection EO2: 2020 – The manufacturing focus of the pharma/biotech industry in India is to 90 %
on export markets.
Reasons:
Drug patents worth $60bn to expire in 4 years.
Cheap labor.
GOI providing medicines at subsidized rates for the domestic population.
Increased profits.
Increase in the no of players in the industry.
Increased manufacturing outsourced projects in India due to low cost and high returns.
“According to Ministry of health in India, 36
major Drugs are going to be unpatented.
These drugs have a market share of around
400000 Crore. So it is a big opportunity for
the generic producers of India which makes
the 66% of the total Indian Pharma industry,
to produce these drugs and it will be
available at very cheaper prices.”
52 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“India has a huge population that is
relatively naive for treatment. Along
with cost benefits will spur growth in
this segment.”(P)
“This segment is a significant
revenue contributor. It will also
demand to put the infrastructure in
place with longstanding bill on
clinical establishment.” (I)
“It will increase the awareness and
safety issues speciality in the rural
population
in relation with the clinical trials.”(D)
“High growth in the number of
Principal investigators for clinical
trials.” (P).
Probability Impact Desirability
50.3% 3.51 3.09
Projection SO2: 2020 – Large-scale clinical trials for export-focused drugs are widely accepted in
the Indian society.
Reasons:
Large patient pool.
Easy to retain the patients.
High growth in the number of Principal investigators for clinical trials.
Low cost.
Highest number of US F.D.A approved plants outside India.
53 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“India is still behind in the curve
when it comes to pure drug discovery
and innovation and Pharmaco
genomics and Proteonomics. But
surely, we are thriving to climb up
the curve with returned scientists and
Government incentives to step up
drug discovery in the country. We are
though best when it comes to
manufacturing skills.”(P)
“With increasing cost of drug
discovery, almost all MNCs are
looking at India for its high quality
and low cost manufacturing base.”(I)
“Strategic partnership with global
companies is on the rise after the in
India after the Patent Act 2005.”(D)
Probability Impact Desirability
55.44% 3.88 4.07
Projection TO2: 2020 – The innovation and drug discovery capabilities of pharma/biotech
researchers in India are the best in Asia.
Reasons:
Availability of highly skilled and trained workforce.
Strong Manufacturing Base.
Availability of high standard R&D centers.
Rich biodiversity
With increasing cost of drug discovery, almost all MNCs are looking at India for its high
quality and low cost manufacturing base.
54 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
Indians are more prone to sedentary
lifestyle. Partly due to lack of facilities at
work or open spaces for jogging etc. The
Asian population is genetically more prone to lifestyle diseases due to their
food habits over generations. I see a
higher number of people using the medicines to treat these diseases.” (P).
“Indians will never change their lifestyle, be it in 2020 or 2060. Indians are always
reactive & largely not proactive.” (P)
“It will impact the industry as cost of the
disease would go up and it will increase the burden on GDP numbers. Cost of
treating diabetes is US$ 420 per person
per year. If these costs remain the same then by 2025 India's total bill for
diabetes would be US$ 30 billion.
Prophylaxis alone can prevent 10% from
getting diabetes and save nearly US$ 8 billion a year.” (I)
“Government need to promote healthy lifestyle habits by making more
playgrounds, parks within city limits as
wells as promote healthy food habits on TV etc- popular TV commercials in 80's
featured ads for milk, eggs.(D
Probability Impact Desirability
56.28% 3.47 3.05
Projection CuE2:2020–Indians widely prefer to fight their lifestyle diseases (e.g. obesity,
depressions etc.) with reactive approaches such as drugs than to proactively invest into any
preventive activities (e.g. sports, healthy food etc.)
Reasons:
Western lifestyle.
Eating habits. ( fast food)
Lack of physical exercise in daily routine.
Increase in the income level in the rural areas.
Indian Pharma companies are more concentrated on producing low cost drugs for Lifestyle
diseases to gain maximum profit.
55 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
Out of the total research scholars,
80% of the Biotech/ pharma
Postgraduate want to pursue research
as their career according to the
survey by the DBT (Department of
Biotechnology).”(P)
“Increased outsourced projects and
increased availability of USFDA
approved labs lure western countries
to do research.” (P)
“We don't have the infrastructure &
Government impetus to arrive at this
number. Even in 2020, the situation
will remain the same.” (P)
“A huge talent pool will engage in R
& D & new drugs can be discovered
at low cost as it will boost drug
discovery in the country.” (I)
“Adequate utilization of talent pool
in India which will help to stop brain
drain to the western countries.” (D)
Probability Impact Desirability
54.3% 3.63 3.65
Projection SuE2: 2020 – The number of PhDs at CSIR, JRF, and NET for research positions in the
pharma/biotech industry is 24‟000 candidate‟s p.a.
Reasons:
Increasing investment in R&D by big MNC‟s.
Outsourced projects due to low cost in India.
80% of the Biotech/ pharma Postgraduate want to pursue research as their career.
Requirement of Highly skilled researchers in the industry.
GOI giving enough incentives for the R&D sector of this industry.
The Government has taken commendable
initiative in fostering the Pharmacy Education
in the country as it announced establishment of
6 more National Institutes of Pharmaceutical
Education and Research (NIPER) in the
country i.e. at Ahmedabad, Hyderabad,
Hazipur, Kolkata, Guwahati and Rae Bareli by
allocation 50 crores for their establishment in
the interim budget in order to address the issue
of setting up educational institutes par
excellence to meet the challenges of Pharma
industry, Academia and Research.
56 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“With increased investments in
advanced technology, and advanced
of IT this is bound to happen.” (P)
“Lack of infrastructure and political
influence will not help to counter the
menace of counterfeit drugs. As most
of the Government hospitals are most
important hub for these drugs.”(P)
“This will change the healthcare
scenario in India and increase the
credibility of the Indian
pharmaceutical sector multi fold and
also it will increase alliances and
profitability of the Indian
companies.”(I)
“It is most desirable as it will
eradicate spurious drug market and
save lives of many poor and illiterate
people which are mostly dependent on
Government hospitals.” (D)
Awareness among the end users
should be created to identify that the
brand is authentic. Besides these
measures, training for the related
agencies needs to be initiated to
identify the spurious products."(D).
Probability Impact Desirability
52.77% 3.77 3.81
Projection CoE1: 2020 - Pharma/biotech companies have established a common packaging
technology reducing the faked drug market sector in India by 50% compared to 2010 i.e. from 40%
to 20 %.
Reasons:
40% of the spurious drug market is in India.
Increased no of deaths due to spurious drugs.
Strict and stringent regulatory policies.
Stiff competition from the spurious drug market.
More profits for the generic manufacturers.
Lack of belief of customers in the domestic market and western market.
The main problem with this issue is that there is no law or
no punishment for the people who sell spurious drugs. In
the year 2003, the Mashelkar committee had suggested
some harsh punishments to spurious drug offenders. In
this scenario, the packaging industry could turn out to
be the biggest rescuer for the pharma industry. Government in this aspect should act strongly against any
activity by any agency or individual engaged in spuriosity
of drugs," says Umesh Joshi, General Manager,
Packaging Development, Wockhardt. It can also
conduct regular audits or surprise inspections at pharma
plants, dealers or retailers etc. Most crucial is to bring the
packaging material manufacturer associated with only the
pharma industry under regulation ie, only authorised and
licensed packaging vendors can supply to a pharma
company." Santosh Das, Head, Packaging
Development, Aurobindo Pharma,"First, a proper
mandatory guideline needs to be put in place so that
across the industry, whether it is for export or domestic
market, product and packaging should include anti-
counterfeiting features and track and trace technology.
57 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“Increasing demand of high quality
drugs, also increasing outsourced
projects by western countries will
force Indian government to follow
USFDA.” (P)
“The entire regulatory mechanism in
the lines of US FDA will take more
than 10 years considering the lack of
efficiency of the GOI run DCGI as
there is high corruption in the
bureaucracy & drugs control
department can never enforce the
USFDA type regulatory discipline.”
(P)
“If at all this happens (which is a
distant dream), it will be a very good
thing as foreign companies cannot
use Indian population to test their
new drugs, before launching them
globally.” (I)
“The time for introduction of drugs
would increase and so would the
investment needed.”(I)
Probability Impact Desirability
47.37% 3.6 3.65
Projection GoE2: 2020 - the regulatory system for the pharma/biotech in India is essentially the same
as US FDA regulatory system.
Reasons:
Increase in the demand of quality drugs.
To reduce spurious drugs.
To reduce time of new drug discovery process.
Less transparency in the Indian regulatory system.
Low acceptability of drugs in the developed market.
Failure of many drugs manufactured in India, in the U.S market.
58 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“Government will introduce a model,
which mobilizes funds from investors
who are willing to share the fortunes
of the high-risk high-reward game of
drug research and funnel it to
companies with promising
experimental new drugs.”(D)
“After the Patent act 2005, most of
the MNC‟s are concentrating on
R&D to have competitive edge and
also increase in the advancement of
drug discovery and innovation.”(P)
“Industry will move up its value
chain from generic makers to
innovation.” (I)
“GOI will be compelled to take this
step for growth and motivate industry
players.”(D)
“The weighted tax deduction will not
reach 300% as there is lack of
communication between Industry and
GOI and low infrastructure to support
R&D in India.”(P)
Probability Impact Desirability
53.84% 3.88 3.63
Projection GoE2: 2020: The weighted tax deduction for the R&D expenditure of the pharma/biotech
industry in India is 300%.
Reasons:
Increased failure rate of Indian drugs in western countries
Bureaucracy.
It reduces the time taken to approve a drug.
Spurious drugs.
Patent Act 2005: after the acceptance of patent act 2005 India has started to shift its focus from
Reverse-engineering to Innovation and Drug discovery.
Increased outsourced manufacturing projects.
Increased profits due to high acceptance.
According to trade Estimates, top
25 companies in India spend
around 6% of their sales on R&D
in the last fiscal as compared to
Global average of 13%. Currently,
India spends around 0.8% of its
GDP on R&D compared with
1.23% with China.
On the other hand, developed
countries spend around 3% of the
GDP on R&D.
59 | P a g e
Indian Pharmaceutical Industry in 2020
Ex
perts
' C
om
men
ts
“There is some benefit to the lesser
privileged society due to the lowered
cost of drug and “hopefully better”
version of drugs. However in order
not to be exploited as guinea pigs, the
government needs to come with
stricter regulations for conducting the
clinical trials.”(P)
"More investment by the foreign
players in India will boost for the
clinical research industry as India has
the highest number of USFDA
outside USA which is around
120."(I)
Regulations in India being very poor,
this step will give a good rope to
companies to engage in more clinical
trials.”(I)
“It will encourage foreign companies
to launch newer drugs in India and
compete in the price sensitive
market.”(D)
Probability Impact Desirability
55.74% 3.74 3.16
Projection SoE1: 2020 – The financial attractiveness of clinical trials for the less privileged part of
the Indian society has lead to a global market share of clinical trials in India of more than 20%.
Reasons:
Large patient and genetic pool.
Low cost.
Availability of high standard Clinical trials centers in India.
Availability of manpower in the form of PI. (Principal investigators).
GOI support. (CTRI a separate government body for conducting Clinical trails in India).
Average cost in U.S
Average cost in India
60 | P a g e
Indian Pharmaceutical Industry in 2020
Short Stories Which Will Support the Above Projections:
Lifestyle Diseases: DIABETES in India
October 2009 2025 (P) 2030 (P)
50.8 million 73.5 million 87 million
• Indians are more prone for diabetes than almost any other population in the world.
Since very long, Indians believed that diabetes and heart disease are exclusive to the
affluent societies. But as the living conditions improved in India in both the rural and
the urban areas, Indians are increasingly following western dietary habits unsuited for
their environs, adopting sedentary life style, and exposed to psycho-social stress. This
has resulted in an unprecedented rise of diabetes to epidemic proportions during last
few decades in the country.
• The number diabetes in India is expected to go up from 50.8 million1 in October 2009
to 73.5million by 2025 and reach 87 million by 2030, i.e. 8.4% of the country's
adult population will be diabetic by 2030.
• The costs of treating diabetic patients are currently about $420 per person per year. If
these costs remained the same as they are now, India‟s total bill for diabetes would be
about $30 billion by 2025. But as its economic wealth grows and standards of care
improve, treatment costs are likely to rise. The US spends an average $10,844 per year
on each patient with diabetes. If India‟s per capita expenditure rose to just one-tenth of
this level, the total cost of treating all patients with diabetes would be around $79.7
billion by 2025.
1 http://indiatoday.intoday.in/site/Story/67143/Health/India+is+world+diabetes+capital.html
61 | P a g e
Indian Pharmaceutical Industry in 2020
• Demand for medicines that treat diabetes formerly associated exclusively with the
developed world is thus expanding in the developing world especially India and India
at the same time becoming increasingly affluent.
“In 1995, every 7th diabetic person in the world was an Indian & by 2025 every 5th2
diabetic person will be an Indian.”
BRANDED PILL BITTER DOSE
PRICE WARS
DRUG BRAND, MANUFACTURER QUNATITY
PRICE
(RS.)
Risperidone Risperdal, johnson & Johnson 2mg, 10 tab 270
Respidon, Torrent Pharma 2mg, 10 tab 17
Risedronate Actonel, Sanofi Aventis 35 mg, 4 tab 2000
Risofos, Cipla 35 mg, 4 tab 110
Letrozole Femara, Novartis 2.5mg, 10tab 1815
Oncolet, Biochem 2.5mg, 10tab 99
Clopidogrel Plavix, Sanofi Aventis 75 mg, 10 tab 1020
Noklot, Zydus 75 mg, 10 tab 78
Pregabalin Lyrica, Pfizer 75 mg, 10 tab 768
Pregabit, Intas Pharma 75 mg, 10 tab 69
Zoledronic Acid Zometa, Novartis 4mg, 1Vail 13900
Zolodria, Cipla 4mg, 1Vail 2800
Levofloxacin Tavanic, Sanofi Aventis 500mg, 5 tab 475
2 Survey conducted by WHO. (World Health Organization)
62 | P a g e
Indian Pharmaceutical Industry in 2020
Leeflox, Centaur Pharma 500mg, 5 tab 37
3
This chart shows that there is a huge difference between the Branded pill and Generic drugs
and government have to take steps so that the poor customers can get the drugs at premium
prices. So NPPA has to regulate the prices of the drugs.
Chronic diseases cost India more than $ 1 billions.
Government support
National Rural Health mission (NRHM) was bestowed with monetary favours in the budget
by a minimal increase form the last year from Rs 12050 to Rs 12070 crore in order to give
thrust to the healthcare oriented development programmes of the Government for the
upliftment of economically weaker sections of the society.
In the area of biotechnology, the Central plan of the budget has earmarked Rs 340 crore for
R&D and Rs 200 crore for autonomous R&D institutions.
The Government has taken commendable initiative in fostering the Pharmacy Education in
the country as it announced establishment of 6 more National Institutes of Pharmaceutical
Education and Research (NIPER) in the country i.e. at Ahmedabad, Hyderabad, Hazipur,
Kolkata, Guwahati and Rae Bareli by allocation 50 crores for their establishment in the
interim budget in order to address the issue of setting up educational institutes par excellence
to meet the challenges of Pharma industry, Academia and Research.
With the Indian traditional medicines making headway into the Global market, the
government has provided support of Rs 354 crore in the kitty of AYUSH and Rs 134 crore for
the support of Ayurveda.
3 http://pharmaceuticals.gov.in/
A joined report by WHO (world health organization) and WEF (world economic
forum) says, India will incur an accumulated loss of $236.6 Billion by 2015, due to
unhealthy lifestyles and faulty diets.
The income loss to Indians because of these diseases, which was $8.7 billion in 2005,
is projected to rise to $54 billion in 2015.
63 | P a g e
Indian Pharmaceutical Industry in 2020
REGRESSION ANALYSIS
Impact on Industry:- This report consist Regression analysis conducted on major 4 outcome projections. The
analysis will help to identify which are the key enabler‟s projection and the outcome
projections that will influence our selected outcome projections PO2, EO2, SO2 and TO2.
In these Coefficients table attached below, we have noticed the value of beta. The higher the
value of beta, high is the influence on the main outcome projections.
After doing Regression analysis we can get two types of values i.e. either positive or negative.
The positive value of Beta shows that the factors are positively co-related i.e. if the
probability of one of these increases then the probability of the other will also increase and
both will have positive impact on the industry. The negative value signifies that these factors
are negatively correlated i.e. if probability of one of the projection will increase the
probability of the other will decrease simultaneously. The negative beta value shows that
these will act as a disabler for the outcome projections.
It is carried out as each time the main projection is the dependent variable and the rest of the
main projections and the all the outcome projections are taken as independent variables.
Projection PO1: 2020 – Pharma/biotech companies conducting research projects in India
focusing on diseases of high relevance for the Indian population receive substantial tax
benefits.
Coefficientsa
Model
Unstandardized Coefficients
Standardized Coefficients
B Std. Error Beta T Sig.
1 (Constant) -2.554 1.424
-1.793 0.087
Eo1 0.235 0.185 0.236 1.271 0.217
64 | P a g e
Indian Pharmaceutical Industry in 2020
To1 0.387 0.184 0.42 2.104 0.047
GoE1 -0.212 0.236 -0.213 -0.895 0.381
GoE2 0.25 0.238 0.271 1.051 0.305
a. Dependent Variable: Po1
The regression analysis of the Projection Po1 shows that if the above outcome projection i.e.
Eo1 and To1 and enabler projections GoE1 and GoE2 will highly drive the main outcome
Projection i.e. Po1
Dependent variable Po1 (Substantial Tax benefits)
Important Independent variables Eo1 (Research focus on domestic market)
To1(World of art Research equipments)
GoE1(Free market for pricing of drugs)
GoE2 (UF FDA)
The regression analysis of the data signifies that if GOI will give tax benefits to the MNC‟s,
then the focus of the companies will be increased towards the domestic diseases and they will
focus their research on Domestic diseases will benefit both the consumers and the companies.
Also to do research, world of class research equipments are necessary to produce high quality
drugs at worldwide cheap prices. If the GOI will provide tax benefits to the companies it will
not provide free market for pricing of drugs because it will make the price of the drug very
high that adds to the pocket of the customer and the poor population of India, is able to get
cure. To produce high quality drugs India and to earn maximum profits must follow US FDA
because it will increase their credibility in the western market like EU and U.S.
Projection EO2: 2020 – The manufacturing focus of the pharma/biotech industry in India is
to 90 % on export markets.
Model
Unstandardized Coefficients
Standardized Coefficients
B Std. Error Beta T Sig.
1 (Constant) -0.013 1.551
-0.009 0.993
To1 0.2 0.19 0.22 1.05 0.305
65 | P a g e
Indian Pharmaceutical Industry in 2020
So1 0.561 0.252 0.559 2.224 0.037
Eo1 -0.521 0.255 -0.485 -2.04 0.054
GoE4 0.466 0.286 0.37 1.627 0.118
a. Dependent Variable: Eo2
The regression analysis of the Projection Eo2 shows that if the above outcome projection i.e.
To1, So1 and Eo1 and enabler projections GoE4 will highly drive the main outcome
Projection i.e. Eo2.
Dependent variable Eo2 (Manufacturing Focus on Exports)
Important Independent variables So1 ( High Quality drugs at Worldwide low cost)
To1(World of art Research equipments)
Eo1(Research focus on the domestic market)
GoE4 (GST will be 20%)
The projection signifies that focus of the major companies will be on Export market because
to earn maximum profits as there is no regulation i.e. NPPA for the pricing of the drugs for
the export market. The above regression analysis tells the important factors which actually
drive the growth of Exports in 2020. Firstly there is increasing demand of high quality drugs
at low cost as India is the major producer of generics, so the export focus has to be increased.
Secondly main driving force will be the latest research equipments, which will act as a
catalyst for the formation of high quality drugs and increase the output. Also the GST will
affect the manufacturing focus i.e. the manufacturer have to thing for maximizing profits it is
good to produce for the domestic market or export market.
Projection SO1: 2020 – Consumers in India expect to be provided with the best and latest
drugs at the globally lowest prices. Coefficients
a
Model
Unstandardized Coefficients
Standardized Coefficients
B Std. Error Beta t Sig.
1 (Constant) -0.247 1.184
-0.208 0.837
Eo2 0.327 0.147 0.328 2.224 0.037
So2 0.329 0.16 0.316 2.061 0.051
66 | P a g e
Indian Pharmaceutical Industry in 2020
SuE1 0.408 0.194 0.381 2.101 0.047
GoE1 -0.282 0.177 -0.312 -1.59 0.126
a. Dependent Variable: So1
The regression analysis of the Projection So1 shows that if the above outcome projection i.e.
Eo2 and So2 and enabler projections SuE1and GoE1 will highly drive the main outcome
Projection i.e. So1.
Dependent variable So1 (High Quality drugs at worldwide low cost)
Important Independent variables Eo2 ( Manufacturing focus for Export market)
So2 (Clinical Trails are widely accepted in society)
SuE1(Rich Flora and Fauna)
GoE1 (Free market for the Pricing of Drugs)
The regression analysis of So1 shows that there are many driving factors i.e. India is moving
up the value chain from Reverse engineering to production of innovative drugs, consumers
want drugs of high quality and at low cost for which right utilization of Flora and Fauna
should be done for the research purposes. GOI should take steps to increase awareness about
the clinical trials and also maintains strict rules and regulations and also takes care of the
safety of the people. As the consumers still don‟t believe to spend money for branded drugs
and believe in low cost generics so GOI can allow free market mechanism for the pricing of
drugs because it will make the price of the drugs 10 times higher than the drugs under control
of NPPA( National Pharmaceutical Pricing Authority). So this projection will act as a disabler
for the production of low cost drugs because free market will allow the manufacturers to
quote high price for the drugs.
Projection TO2: 2020 – The innovation and drug discovery capabilities of pharma/biotech
researchers in India are the best in Asia.
67 | P a g e
Indian Pharmaceutical Industry in 2020
Coefficientsa
Model
Unstandardized Coefficients
Standardized Coefficients
B Std. Error Beta t Sig.
1 (Constant) 3.787 1.398
2.709 0.013
Po1 0.433 0.206 0.399 2.104 0.047
CuE1 -0.422 0.253 -0.328 -1.667 0.11
SuE1 0.29 0.283 0.226 1.025 0.317
CoE2 0.361 0.328 0.281 1.101 0.283
a. Dependent Variable: To1
The regression analysis of the Projection To1 shows that if the above outcome projection i.e.
P01 and enabler projections CuE1, SuE1 and CoE2 will highly drive the main outcome
Projection i.e. To1.
Dependent variable To1 (World of art Research Equipments)
Important Independent variables Po1 (Substantial Tax benefits)
CuE1 (Increase in investment by consumers on
febrile diseases like malaria, dengue etc)
SuE1( Rich diversity of Flora and Fauna )
CoE2 (High production of API production)
This projection To1 signifies that India to become a leader in the Pharmaceutical industry
have to acquire all necessary world of art research equipments for drug discovery. GOI should
support the MNC‟s by giving necessary and substantial tax benefits so that manufacturers can
get these equipments at subsidized rates and invest in R&D. It will increase the production of
Active Pharmaceuticals Ingredient. The research equipments are necessary because of
68 | P a g e
Indian Pharmaceutical Industry in 2020
increasing investment by the consumers as Indian consumers still believe in investing their
income in medicines rather than investing in good food and sports.
CONCLUSION
Environmental Variables Political Influences
Economic Influences
Social Influences Technological
Influences
PO1, 59.26%
PO2, 57.05%
EO1, 51.91%
EO2, 60.76%
SO1, 60.14%
SO2, 49%
TO1, 44.05%
TO2, 55.41%
Political Influences
PO1, 59.26% 82.51 80.41 83.78 77.21 PO2, 57.05% 82.51 82.88 78.1 81.08
Economic Influences
EO1, 51.91% 80.41 81.13 EO2, 60.76% 81.13
Social Influences
SO1, 60.14% 83.78 82.88 79.7 SO2, 49% 78.1 79.7
Technological Influences
TO1, 44.05% 77.21 75.06 TO2, 55.41% 81.08 75.06
Prominent scenarios
Perfectly correlated Scenarios
Non Prominent Situations
The above format provided a close idea about the probability of happening of the most
important Scenarios in future i.e. 2020.
According to my research, the two most important scenarios for the better future of the Indian
Pharmaceutical industry are – (Po2, So1) and (Eo1, Eo2). These scenarios are (Stringent
regulations and High quality drugs at low cost) and (Research focus on domestic drugs
and Manufacturing focus on Exports)
The percentage of occurrence of these scenarios is 82.88 and 81.13 respectively. This
percentage represent the 3 quadrant out of the 4 formed by two by two matrix formed by cross
of these projection mentioned above. These are two scenarios Indian Pharmaceutical
69 | P a g e
Indian Pharmaceutical Industry in 2020
companies have to maintain balance and also GOI must support by maintaining stringent and
strict regulations so that MNC‟s benefit the Indian society in a positive way.
APPENDIX
Experts Rating regarding Impact on Industry
Po1 PO2 Eo1 Eo2 So1 So2 To1 To2 3 4 3 2 2 3 3 3
2 4 4 3 4 4 3 4
4 3 4 4 4 4 4 3
3 4 4 4 4 3 3 3
4 5 4 4 4 4 4 5
4 5 5 5 5 5 3 4
2 4 3 3 3 3 2 4
3 4 2 4 4 4 3 5
3 2 3 4 3 3 3 3
4 3 2 3 4 4 4 4
4 4 4 4 4 3 4 4
2 2 4 4 4 3 3 3
3 3 3 4 4 3 3 4
3 3 4 3 3 4 3 4
3 5 3 4 2 3 5 2
4 3 4 4 4 4 4 4
3 3 3 4 4 3 4 4
4 4 4 4 5 3 4 4
3 4 4 4 4 3 3 4
3 3 2 4 4 3 3 3
4 3 3 2 4 3 3 4
3 4 3 4 2 3 3 4
4 4 4 4 4 4 4 4
4 4 4 4 4 3 5 4
3 5 4 4 4 4 4 4
5 5 5 5 5 5 2 5
4 5 3 4 4 4 4 4
4 4 4 4 4 3 4 4
4 5 4 3 3 3 5 5
4 5 4 3 4 3 4 4
70 | P a g e
Indian Pharmaceutical Industry in 2020
3 4 4 3 3 3 4 4
3 4 5 3 4 2 3 4
4 4 4 3 4 4 4 4
2 3 2 3 4 5 1 5
4 4 4 3 3 3 3 4
3 3 3 3 4 3 4 4
3 5 3 3 4 4 4 5
5 4 4 3 4 4 5 2
4 3 4 5 4 4 4 4
2 5 3 3 3 4 4 3
4 4 3 5 2 4 3 4
3 4 4 3 4 3 2 4
2 4 3 4 3 4 3 4
4 4 4 4 4 4 4 3
Calculations for Conclusion:
This is the way we come out with the two by two matrixes i.e. Po2 and So1. The non
occurrence of these two projections is (100 – 56.63 %) and (100 -62.21%). When we multiply
both these values we will get the probability percentage of non-occurrence of these scenarios
71 | P a g e
Indian Pharmaceutical Industry in 2020
(17.12%) or the present scenario where there is absence of both i.e. Stringent regulations and
availability of low cost drugs. So the probability of occurring of these scenarios is 82.88%.
References:
1. http://pharmaceuticals.gov.in/
2. http://www.pharmaoutsourcingindia.in/press-a-media.html
3. Report by E&Y and OPPI
4. Report by YES Bank
5. http://www.ibef.org/GenericMessage.aspx
6. Experts comments from the Industry.
7. http://www.acrohealth.org/cro-market.php
8. http://appliedclinicaltrialsonline.findpharma.com/appliedclinicaltrials/article/articleDet
ail.jsp?id=506847&sk=&date=&pageID=2
9. http://appliedclinicaltrialsonline.findpharma.com/appliedclinicaltrials/article/articleDet
ail.jsp?id=522049&sk=&date=&pageID=2
10. http://license.icopyright.net/user/readingRoom.act
11. http://www.indiaonestop.com/pharmaceuticals.htm
12. http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-associations/
13. http://cii.in/Publications.aspx?enc=fSTC8XiYaIuWcrOJ/n1U2Q==
14. Some Magazine articles given by experts.
top related