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INDIAN PHARMACEUTICAL INDUSTRY

EXECUTIVE SUMMARY:
 Leading Pharma Producer:
 Supplied 50% of global demand for various vaccines.
 Highest exporter:
 Exports stood at $13.69 billion in FY20 and expected to reach $22 billion by
2022.
 Fastest growing sector:
 Expected to grow at 22.5% CAGR.
 Second largest contributor of global biotech and pharmaceutical workforce
 High Potential generic market:
 Accounts for 20% of global exports in generics.
 Domestic generic market is expected to reach 28billion USD by 2020.
 Fastest growing healthcare sector:
 Expected to cross $372 billion by 2022
 Fastest growing Biotech industry:
 Expected to cross $100 billion by 2024-25

ADVANTAGE INDIA:
 Cost Advantage:
 Low cost, High R&D Investments and high quality gives competitive advantage in
domestic and foreign markets.
 Increasing investments:
 Private companies are increasing investments in R&D.
 Economic Drivers:
 Increasing drug affordability
 Increasing health insurance
 Increasing penetration of pharma in rural areas
 Policy Support:
 100% FDI
 Union Budget 2020-21 – 9.03 Billion USD in Ministry of Health and Family
welfare.
 Pharma Vision 2020- To make India, a global manufacturing leader.

MARKET OVERVIEW:
 4 segments:
 Active Pharmaceutical Ingredients (API)/Bulk Drugs – Branded & Generic- India
is the 3rd largest market for APIs globally.
 Formulations – Branded & Generic- Largest formulations exporter experiencing
double-digit growth over next 5 years
 Contract Research And Manufacturing Services (CRAMS) - Strong talent pool and
cost savings make this one of the fastest-growing industry segments
 Biosimilar
 India Domestics pharma sector turnover reached 20.03 Billion USD in 2019.
 Medicine Spending is projected to grow at 9-12% in next 5years, becoming top 10 countries in
terms of medicine spending.
 70% - Generic Market, 21% - OTC medicines and 9% - patented drugs.
 India is the world’s largest provider of generic medicines; the country’s generic drugs account
for 20 percent of global generic drug exports (in terms of volumes). Indian drugs are exported to
more than 200 countries in the world, with the US as the key market.
 Indian pharma companies are capitalizing on export opportunities in regulated and semi
regulated markets.
 Pharmaceutical exports from India, which include bulk drugs, intermediates, drug formulations,
biologicals, Ayush & herbal products and surgical.
 The biggest export destination for Indian pharma product is the US.
 India plans to setup an early Rs1 lakh crore (US$1.3billion) fund to provide boost to companies
to manufacture pharmaceutical ingredients domestically.
 In FY19, highest expenditure on Research and Development was done by Lupin, followed by
Cipla.

RECENT TRENDS & STRATEGIES:


 Cost Leadership: Vertical Integration of APIs
 Differentiation: Through R&D producing variety of products
 Market Expansion: Penetrating to new industry segments and new countries
 Mergers and Acquisition: Collaboration with local players and with Biotech firms

GROWTH DRIVERS:
 Supply Side Drivers:
 Launch of patented drug: Following the introduction of product patents, several
multinational companies are expected to launch patented drugs in India
 Cost Advantage
 Skilled Manpower
 Scope of Generic Market: India’s generic drugs account for 20 percent of global
exports in terms of volume, making it the largest provider of generic medicines
globally. The generics drug market accounts for around 70 percent of the India
pharmaceutical industry and it is expected to reach US$27.9 billion by 2020
 OTC Drugs: Increasing penetration of chemists leads to increasing OTC markets
in rural areas.
 Increasing Medical Infrastructure:
 Innovation and R&D
 Demand Side Drivers:
 Accessibility: Growing investments in Medical infrastructures and devices, beds
 Affordability: Rising Income, Through increasing health insurance, free generic
medicines by government, Affordable medicines through Pradhan Mantri
Bhartiya Janaushadhi Pariyojana
 Acceptability: Rising levels of education levels, increasing greater propensity to
self-medicate boosting OTC market.
 Epidemiological Factors: Rise in the population lead to patient pool, New
diseases and life style change diseases.
 Growing Health Insurance: Increasing penetration of health insurance

 Policy Support:
 Pharma Vision 2020- To make India end to end drug discovery.
 Reduced time for approval of new facilities
 100% FDI
 India plans to set up 1lakh crores rupees for the domestic manufacturing plant.
 Union Budget – 9.03 billion USD in Ministry of family and health welfare
 Pharmaceutical Parks
 BIRAC- Biotechnology Industry Research Assistance Council to promote research
and innovation capabilities in India Biotech industry.

OPPORTUNITIES:
 Clinical Trials Market:
 India is leader in this market
 With genetically diverse population and skilled doctors, investment is expected
to grow in this market
 High End Drugs:
 With growing population and income, demand for high end drugs is growing and
its production.
 Penetration into Rural Markets:
 With 70% of population living in the Rural markets, Indian pharma companies
can tap this market by developing network and distribution.
 CRAMS: Market is growing with more than 1000 players.

 India pharmaceutical market along with markets of China, Russia and Brazil will spearhead the
growth in these markets.
 India ranks 13th in terms of value and 3rd in terms of volume globally.
 Generic Market make 70-80% of the Indian Retail market.
 Local players have a dominant position due to formulation development capabilities and early
investments.
 Prices are low and driven by intense competition.

INDUSTRY ASSOCIATIONS:
 Bulk Drug Manufacturers Association
 Federation of Pharma Entrepreneurs
 Indian Pharmaceutical Alliance
 Pharmexcil
PORTERS FIVER FORCE MODEL:
The Threat of New Entrant: LOW TO MODERATE
 It has become very important for the pharmaceutical companies to focus on research
and development to sustain their position in market. The cost associated with research
and development is very high. Also, there are the stringent government regulations for
approval, price, quality and manufacturing of new drugs which act as high barrier.
Besides this, various other challenges such as drawing up appropriate distribution
strategies, selecting the right products, anticipating competition among others are
limiting the entry of new barrier in market.
 Many pharmaceutical companies are progressing in the market by shifting from
traditional business approach to emerging new business approach. The new business
technique includes contract research (drug discovery and clinical trials), contract
manufacturing and co-marketing alliance. Many new companies to enter the market
without burden of costly tasks such as research and development, clinical trials and
manufacturing of drugs. Moreover, patent expiry is one of the reasons which is offering
opportunities for lower cost generic manufacturer in terms of greater market access.
Additionally, the government has increased their focus on healthcare cost cutting. It is
creating pressure on the authority to allow early introduction of low-cost drugs in the
market. This, in turn, poses a big opportunity for pharmaceutical companies with
approved facility and sound knowledge of regulatory issues. Therefore, all these factors
are responsible for the high threat from a new entrant.
 High as it is impacted by factors like licensing issues, distribution network, patents,
high initial investment, getting approval for setting up plants by regulatory authority,
etc.
 Entry barriers in the emerging markets are high due to its branded nature. The
companies
 which are emerging as the next growth driver requires licensing, clinicals trial,
extensive regulatory approval, well
 distribution network, patents, brand presence, thus making it difficult to enter & exit
this segment. On the other hand,
 companies focusing on markets like US and UK, which are of unbranded in nature, are
relatively easy to enter.
The Threat of Substitutes: LOW TO MODERATE
 The demand for generic drugs compared to branded drug has increased because of cost.
Generic manufacturers do not incur the high cost involved in research and development
and regulatory activities such as FDA approval and clinical trials. These are the reasons;
they can offer their product at cheaper price. This increases the threat of substitutes.
Also, Homeopathy and Ayurvedic medicines can act as substitutes.
 :Low as the substitutes that exist are alternative medicines and treatments particularly
prevalent in the eastern culture are of poor quality and their effectiveness is not well
established. Within the industry, biotechnology could prove to be a threat to synthetic
pharmaceutical products.
 The threat of substitution is higher in unbranded markets, where one generic can be
substituted
 by the other pharmacists. In branded markets and for biosimilars, it is the doctor or
physician who can substitute one
 drug for another. Thus, threat of substitution is high.
Bargaining Power of Buyers: MODERATE
 There are many companies in market providing similar products. Because of this reason,
buyers such as hospital and other healthcare organization have an option to select. They
generally pressurize the pharma companies to keep prices of the drugs low. Moreover,
pharmaceutical industry has one unique feature that the buyer is different from
influencer who is a doctor. The consumer has no option but to buy drug as prescribed by
physician. Therefore, the bargaining power of patient is very low.
 : Medium as the buyers (patients) of the pharmaceutical products are directly
dependent on the influencers (doctors in this case) for the brand of pharmaceutical
product that they have to buy. However, the Government has National
Pharmaceutical Pricing Authority which keeps a control on the pricing.
 Generic (low-cost versions of the branded drugs) drugs offer cost effective alternatives
to the
 innovator drugs and thus offer significant saving for buyers. First to market generics
and biosimilars offer significant
 cost saving for insurance companies in the developed market. In branded markets,
patients/pharmacists cannot
 usually substitute between brands. Thus, bargaining power of buyers is high
Bargaining Power of Suppliers: LOW
 Pharmaceutical products require various types of organic chemical. There are a number
of chemical suppliers present in the market. Instead of buying chemicals at the high
cost, pharma companies can switch from one company to other.
 Low because there are many suppliers and the cost of switching suppliers isn’t very
high. Raw materials/chemicals constitute a major cost and suppliers cannot opt for
higher margins as there are many alternative options in the market.
 The bargaining power is high for API companies with difficult to manufacture
products.
 These companies command premium prices. However, a majority of API suppliers
have low bargaining power since they
 produce products which are simple to manufacture or commoditized of suppliers as a
whole is medium.
The Intensity of The Competitive Rivalry: HIGH
 Due to increasing demand of high-quality drugs, low-to-moderate entry barrier to the
new entrant, the presence of a number of large and small firm this market is highly
competitive.
 Growth opportunities for pharma companies are expected to grow in next few years,
with many drugs going off patent in the US and other countries thus increasing
competition.
 : High because it is a Very fragmented industry where the top 300 of 24,000 players
involved in manufacturing account for a large portion of sales. Top 20 companies
account for 60% of sales in the Indian Pharmaceutical Industry; which is an indicator of
a skewed market.
 Competitiveness among the Indian Pharma players is high. With the top 300 (of 24,000
 manufacturing units) players accounting for 85% of sales value, the industry is highly
fragmented. With the lack of
 visible opportunities in the US post the patent cliff (2012-13), competition is expected
to heat up

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