Introduction To Pharma Industry 14j5o

The History of the Pharmaceutical Industry The origins of the pharmaceutical industry can be traced back to the chemical industries (of 19th century) in the upper Rhine Valley of Switzerland. These industries were producing dye stuffs. When dye stuffs were found to have antiseptic properties, a number of these industries turned into pharmaceutical industries e.g. Hoffman-La Roche, Sandoz, Ciba-Geigy, etc. By 19th century, many of the drug stores in Europe and North America had developed into larger pharmaceutical companies. Most of today’s major pharmaceutical companies were founded in the late 19th and early 20th centuries. The industry expanded rapidly in the sixties, benefiting from new discoveries. In the 1960s attempts were made by the U.S. Food and Drug istration (FDA) to increase regulation of pharmaceutical industries and to limit financial links between companies and prescribing physicians. Pharmaceutical companies were required to prove efficacy and safety of the drug in clinical trials before marketing them. The history of Indian pharmaceutical market in 1970's was almost non-existent. Today, India has gained immense importance and carved a niche for itself in the pharmaceutical domain. In fact, it has emerged as a big mart for the pharmaceutical industry. In today's world, Indian pharmaceutical industry ranks 3rd in of volume and 14th in of value. Today in India, Pharma Industry rank's first of India's science-based industries with wide ranges of capabilities in the complex field of drug manufacture and technology. The industry is estimated to be worth $4.5 billion, which is growing at 8-9% annually. It is one of the best and highly organized sectors. The sector specializes in term of technology, quality and range of medicines manufactured. The product of the industry ranges from simple headache pills to sophisticated antibiotics and also complex cardiac compounds. The Indian Pharma Industry has around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. 250 large units and about 8000 Small Scale Units, form the core of the pharmaceutical industry in India. The units produced have the complete range of medicines which are ready for consumption by patients.

Future growth prospects of Pharma industries: The growth of Pharmaceutical industry in India is US$ 3.1 billion with growing rate at 14% year. In of the global market, India currently holds a modest 12% share, but it has been growing at approximately 14% per year during the last four year. India gained its foothold on the global scene with its innovatively engineered generic drugs and Active Pharmaceutical Ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research. India also has a vast pool of trained pharmaceutical scientists, doctors and researchers, which opens up avenues for t collaborative research for new drug discoveries along with t intellectual property rights. Pharma industry promotes the sustainable development in the vital field of medicines by boosting the quality producers and many units approved by regulatory authorities in USA and UK. The companies associated with this sectors which are international have stimulated, assisted and spearheaded the dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. The growth of Indian Pharma Industry has grown tremendously since 2008-09 in of exports. The Indian pharmaceutical industry has grown from a humble Rs 1,500 crore turnover in 1980 to approximately Rs 1,00,611 in 2009-10. The Indian Pharmaceutical industry consists of more than 20,000 ed units which are highly fragmented. It has been expanding in a tremendous manner in the last two decades and includes 250 pharmaceutical companies which control 70% of the market. A report from the U.S. consulting firm Mckinsey & Co. projects that the Indian pharmaceutical market will balloon to $55 billion by 2020 if the population continues to grow at its current rate and prevalence of illnesses continues its rapid rise. The 1.3% annual rise in the population, plus a steady increase in disease, will make the patient pool in India 20% larger in ten years that it is today. At $55 billion in annual sales, the pharmaceutical industry will be four times its current $12.6 billion size. If things go super well, according to what Mckinsey calls the “aggressive growth scenario,” the industry could grow even faster to $70 billion by 2020.

The Indian drug market, currently valued fourth in of volume and 13th in of value is expected to become one of the largest in the world. IMS estimates the healthcare market in India at Rs 1,40,000 crore by 2020. The Indian pharmaceutical market is expected to touch $40 billion (Rs 1.8 lakh crore) by 2015, predicts the global management consulting major, Mckinsey & Co.

Six trends will influence the growth of the Indian Pharmaceutical market over the next decade:      

Doubling of disposable income and the number of middle class households Expansion of medical infrastructure Greater penetration of health insurance Rising prevalence of chronic diseases Adoption of product patents and Aggressive market penetration led by smaller companies

Top 10 Pharma companies in India 2014 (based on their sales, profit and loss): 1. Cipla 2. Dr. Reddy’s 3. Ranbaxy 4. Lupin 5. Aurobindo Pharma 6. Sun Pharma 7. Cadila Health 8. Torrent 9. Jubilant life 10.Wockhardt

Government policies in pharmaceutical Industry: Pharmaceutical policy comprises the interplay of regulation for the purposes of safety and efficacy, health and social policy (access and equity), and for industry (economic) development. There is in each nation state a distinct policy and regulatory mix reflecting the attributes of domestic policy networks, including relative strengths of different types of drug firms. Major pharmaceutical companies, mostly based in the USA, operate globally integrated innovation, production, and marketing networks. Globalisation increasingly entails outsourcing production of chemical raw materials, manufacturing, clinical trials, and other steps in the production chain to low-cost locations such as India and China. Since the early 1990s product safety controls have, in the main, been standardised across developed countries through the International Conference on Harmonization process sponsored by regulatory agencies and industry associations in the USA, the European Union, and Japan. When we talk about pharmaceutical policy, it implies a branch of health policy that covers various aspects of the pharmaceutical industry like as the development of new medicines, provision and use of medications within a health care system, considering both brand name and generic drugs. Pharmaceutical policies also cover products derived from living sources referred as, biologics which are different from chemical compositions, vaccines and natural health products.

The main pharmaceutical policies of India under the following heads: Drug Price Control Order (DPCO): Drugs and formulations have been subjected to price control from a very long time, almost 3 decades now. The economic reforms presented by the Government of India in July 1991, targeted the Pharmaceutical Industry only in 1994 and that too partially. Price control in a large number of industries has already been abolished. Intellectual Property Rights (IPR): The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) provides for minimum norms and standards in certain categories of intellectual property rights which are discussed in this section.

Pharmaceutical Policy 2002: The basic objectives of Government's Policy relating to the drugs and pharmaceutical sector were enumerated in the Drug Policy of 1986. The drug and pharmaceutical industry in the country today faces new challenges on of liberalization of the Indian economy, the globalization of the world economy and on of new obligations undertaken by India under the WTO Agreements.

Pharmaceutical policy includes: Contents         

Funding of Research in the Life Sciences Patent Law Licensing Pricing Reimbursement Formulary management Eligibility Prescribing Pharmacy services

Porter's Five Forces Strategy Analysis for Pharmaceutical Industry in India: The Indian pharmaceutical industry is one of the fast growing sectors of the Indian economy and has made rapid strides over the years. From being an import dependent industry in the 1950s, the industry has achieved self-sufficiency and gained global recognition as a producer of low cost high quality bulk drugs and formulations. Leading Indian companies have developed infrastructure in over 60 countries including developed markets like US and Europe. Porter's Five Forces Model helps strategic business managers analyze the industry in which their companies operate to determine what can be done to get an advantage over their existing competitors and also to determine how attractive a particular industry would be for new entrants.

Porter’s five forces are: 1) 2) 3) 4) 5)

Industry competition Barriers to entry Threat of substitutes Bargaining power of suppliers Bargaining power of buyers

Industry competition: (High)  Pharma industry is one of the most competitive industries in the country with as many as 10,000 different players fighting for the same pie  The rivalry in the industry can be gauged from the fact that the top player in the country has only 6% market share, and the top five players together have about 18% market share  High growth prospects make it attractive for new players to enter in the industry  In Pharma industry product differentiation is not possible since India has followed process patents till date, with laws favouring imitators  Product differentiation is not the driver, cost competitiveness is. However, companies like Pfizer and Glaxo have created big brands in over the years, which act as product differentiation tools

Barriers to entry: (Low)  Pharma industry is one of the most easily accessible industries for an entrepreneur in India  The capital requirement for the industry is very low, creating a regional distribution network is easy, since the point of sales is restricted in this industry in India  Quality regulations by the government may put some hindrance for establishing new manufacturing operations  High entry barriers due to costs associated with research & development of new drugs (i.e. years of investment in R&D for a drug that may/may not work)  The impending new patent regime will raise the barriers to entry

Threat of substitutes: (High)  Demand for Pharma products continues and the industry thrives  One of the key reasons for high competitiveness in the industry is that as an on going concern, Pharma industry seems to have an infinite future  Demand for generic versus brand name drugs has increased because of the costs  Generic drug companies do not have the high costs associated with the research & development of new drugs and that allows them to sell at cheaper prices

Bargaining power of buyers: (Medium)  End of the product is different from the influencer (read doctor). The consumer has no choice but to buy what doctor say  Hospitals & other health care organizations buy in bulk quantities and exert pressure on pharmaceutical companies to keep prices in check  Regular patients have lost bargaining power due to price increases in generic drugs  The buyers are scattered and they as such does not wield much power in the pricing of the products  Government with its policies, plays an important role in regulating pricing through the NPPA (National Pharmaceutical Pricing Authority)

Bargaining power of suppliers: (Low)    

Pharma industry depends upon several organic chemicals The chemical industry is again very competitive and fragmented The chemicals used in the Pharma industry are largely a commodity Sales for the pharmaceutical industry concentrate in a handful of large players and that has decreased the bargaining power of suppliers  The suppliers have very low bargaining power  The companies in the Pharma industry can switch from their suppliers without incurring a very high cost.

Conclusion:  This model gives a fair idea about the industry in which a company operates and the various external forces that influence it  Industry is not static in nature, it is dynamic  The larger players in the industry will survive with their proprietary products and strong franchisee  In the Indian context, companies like Cipla, Ranbaxy and Glaxo are likely to be key players  The change in the patent regime, will see new proprietary products coming up, making imitation difficult  The barriers to entry will increase going forward  Government too will have bigger role to play.