Definition / Scope
USA is the largest market of pharmaceuticals followed by Japan. India has moved from the 14th position in 2005 to 10th rank in the market list. The growth of pharma market has been tripled in the last decade from 2005- 2015.
India is one of the top six countries for pharmaceuticals production in the world. India produces 90% of the global measles vaccine and WHO demand products. India is a hub of 10,500 manufacturing plant and over 3000 companies in the pharma industry. India supplies 20% of global generic medicines market exports, in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years.
Indian Pharmaceutical industry is one of the most attractive investment by FDI since 2000. The major factor for the growth are
- Increase return on investment
- Skilled manpower
- Lower risk
- Appropriate infrastructure
The Indian pharma industry is dominated by the foreign companies which are subsidiaries in the country for the production of drug and export to the respective countries.
The pharma industry has enjoyed the inflow of investment of $12600 crore from 2000 in the country. The industry has reshaped itself from manufacturing of drug to Research & Development, manufacturing of generic drug, API, clinical research and testing. It is estimated that approximately 40% of generic drug are imported from India and the trend is growing.
Cost of production of pharma products is quite less as compared to the developed market like USA and half than the European countries. USA imported approximatel $3.8 billion of drug from India. According to report published by Indian Equity Foundation, the Indian Pharmaceutical industry is growing to grow at the rate of 15.92% in the coming years up to 2020.
|Base Year||2018||Researched through internet|
- Government intervention for the price of the drug results in the reduction of profits- Over the decades the government impose price slabs for specific products for the easily availability of the drug at affordable pricing.
- Breach in the IPR by the companies for the manufacture of certain drug- The companies usually suffer IPR conflict from competitors as the risk of parallel products is always present among the manufacturers.
- CCI intervention in M&A lead which increases the time of the deal- The complicated procedure of M&A is always handled inappropriately. CCI takes a long time for the approval of M&A deal.
- Conflict with the distributors and stockists- Manufacturers always has to deal with the conditions imposed by the unions for the distribution of their products at the certain prices.
- Improper distribution channel – Unorganised distributor network followed by poor infrastructure has always been a worry for the industry.
- Low penetration barrier- Any competitor can enter the market and produce generic drug as the substitute of the product which is adapted the consumers.
- Availability of fake products in the market- The industry always face the problem of fake products at a much cheaper price which would diminish the market share of the companies who produce good produce.
- Indian pharma and biotechnology industry is at the growing phase based on the current situation, so there is huge opportunity of development and sustainability in the long run.
- Population- India is the second largest population in the world and the demand for the pharmaceuticals products is never ending. The demand of drug by the population is increasing over the years. Increase income of the individuals in the country is an added advantage for the demand of drug for treatment of various diseases.
- Cost effective raw materials- The raw materials required for the production of drug is easily available at a lesser rate reducing the cost of production. The prices of the raw materials is quite less as compared to the other countries.
- Skill- India is a pool of qualified graduates, academicians and post graduates in the pharma and bio-technology. Skills required by the industry is available in every region which is an added advantage.
- Growing biotechnology industry- Biotechnology is at an initial phase in the country. So the industry is growing at the faster rate compared to other developing countries.
- R&D centres- State and Central Governments are providing incentives for setting up R&D centers in the state.
- Market Accessibility- India is the appropriate place for connectivity across different parts of the world. So exporting is an added advantage for the industry.
- Lack of government grants- There is very less opportunity of grants from the government in the industry. The government is completely relying on the private players for the development of the industry.
- Investment hurdle by the local players- Pharmaceutical industry needs lot of investment for the development a successful company in the long run. Locals does not have adequate funds for the further capita; investment in the industry.
- IPR challenge- The industry is suffering from the Intellectual Property Rights which is not in- line with the global standards due to which the government is facing challenges from other countries.
- Patent protection- The industry faces challenge to safeguard their innovation because the patent laws in the country is week and it is risk for the pharma players.
- Enforcement of trademarks- The players face the problem of trademark protection for their products manufactured in the country.
- Mergers and Acquisitions- M&A are quite challenging for the industry players because the process has to be processed by Competition Commission of India.
- Pricing- The industry players and government are always in the fight for the pricing of the drug. The government has imposed price control mechanism for different drug which has led to the decrease in the profit margins.
- Reach to the rural population- The current infrastructure of India is not supporting supply chain to the rural and remote places in the country.
- Cloud computing- Cloud computing is being adapted by the industry for the mass storage of internal and external stakeholder’s data which will help to improve business functions.
- Social Media- Pharma companies are coming close to the customer by social media platforms to understand the need and trend in the market and forecast the demand for specific drug. Interactive platforms are being created by the companies to closely track the need of the clients.
- Data services- Pharma companies are opening gates of data services which includes sharing of research data with different stakeholders like academics, research labs and public health.
- Analytics- The industry has understood the importance of big data and the application of analytics. Analytics are used for demand forecasting, key trends and supply & supply of products and many more for competitive advantage.
The pricing of the drug is controlled by National Pharmaceutical Pricing Authority (NPPA). The drug is divided into scheduled drug and non-scheduled drug. NPPA is responsible for fixing the price price as well as revise the prices. Scheduled drug are price controlled by the government while non-scheduled are not. Hospitals and large institutions directly negotiate with the manufacturing companies to reduce the price. Retailers and distributors form associations with the manufacturing companies for the product supply in the market.
- The government is making improvement in the Intellectual Property Rights by adapting international standards.
- The government has allowed 100 FDI in the pharmaceuticals industry.
- M&A are closely monitored by the regulators for the competition control.
- The government is planning to provide incentives for bulk drug manufacturers to support ‘Make in India programme. The Government has set- up inter-ministerial committee to look at the issues faced by the pharma players in the country.
- Department of Pharmaceuticals has pooled an investment of Rs. 1000 Crore as venture capital funds to support research and development of bio-technology in the country by the entrepreneurs.
- Telengana has planned for India’s largest pharmaceutical city over 11,000 acres of land.
- The government is taking initiatives for the development of pharmaceutical parks in different states to attract more investment in the country.
Market Size and Forecast
The pharmaceutical industry is forecasted to reach &55 billion by 2020.
Distribution Chain Analysis
India consists of high distributed channel for the movement of drug across the country. The distribution channel are handled by Clearing and forwarding agents. Most companies keep about two to three CFA for every state for the supply of drug. The stockist handles more than one stocks of medicines for more than one company. The retail then distributes the products to the customers. Over 90% of the market supply is controlled by the stockist in the country.
- There is a high for the established players from the new players as the can enter from generic drug manufacturing.
- Availability of the products to all retailers across the country is quite challenging as there are hurdles of distributors and retailers at every part of India.
- Switching cost is very low for the consumers as the alternative products are easily available at the retail drug shop.
- Recovery of the R&D cost is quite controversial as the government body intervene in the pricing of the products for the people.
- Substitutes are easily available in the market.
- Rapid introduction of generic drugs are threat to other players in the market.
- High investments and marketing activities by the competitors are changing the trend of consumption. Highest expenditure based on research and development is done by Sun Pharma (USD 352 Million), followed by Dr. Reddy (USD 199 million).
Key Market Players
Top 10 Pharmaceuticals companies of India by Market Capitalization. The data captured is based on listing in the Indian stock market. • Cipla
- Dr. Reddy Labs
- Aurobindo Pharma
- Sun Pharma
- Cadila Health
- Torrent Pharma
- Jubilant Life