CHAPTER - 1

INTRODUCTION

TO THE INDUSTRY

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INTRODUCTION TO THE INDUSTRY

( INDIAN PHARMACEUTICALS SECTOR)

INDUSTRY PROFILE

The Indian Pharmaceuticals sector has come a long way, being almost non-existing during

1970, to a prominent provider of health care products, meeting almost 95% of country’s

pharmaceutical needs. Indian pharmaceutical sector is one of the fastest growing sectors.

Initially India had to wait for imports of bulk drugs from global majors for re-processing and

now it has become an industry which is driving product development and breaking new

ground in medicine research worldwide.

The Indian pharmaceutical industry has gained significant traction in the last few years. It is

currently on a high growth trajectory and rapidly integrating with the global industry. This

integration is opening up tremendous new opportunities for Indian Pharmaceutical sector

across all segments including generics, research and development of New Chemical Entities

(NCE) and Contract Research and Manufacturing Services (CRAMS). Indian companies are

now well positioned to explore these opportunities as they adopt effective and efficient

business models that are spread across one or more of each of these segments.

India is getting recognition as a strong, and fast growing economy. Thus the industry is

attracting many global entrants. Increasing purchasing power of the growing middle class

population, high orientation towards health consciousness, quality and price driven mindset

have reshaped the market structure of pharmaceutical business. The behaviour and bargaining

power of different interest groups like patients, healthcare providers and regulatory

authorities are expected to reinforce sectoral growth and scope.

Indian pharmaceutical industry is undergoing fast paced changes. The Indian Generics market

is witnessing rapid growth opening up immense opportunities for firms. This is further

triggered by the fact that generics worth over $40 billion are going off patent in the coming

few years which is close to 15% of the total prescription market of the US. The Indian

pharmaceutical companies have been doing extremely well in developed markets such as US

and Europe, notable among these being Ranbaxy, Dr. Reddy’s Labs, Wockhard, Cipla,

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Nicholas Piramal and Lupin. The companies have their strategies in place to leverage

opportunities and appropriate values existing in formulations, bulk drugs, generics, Novel

Drug Delivery Systems, New Chemical Entities, and Biotechnology etc. The industry ranks

fourth globally in terms of volume and in terms of value, it is ranked thirteenth. The industry

has thrived so far on reverse engineering skills exploiting the lack of process patent in the

country. This has resulted in the Indian pharmaceutical players offering their products at

some of the lowest prices in the world. The quality of the products is reflected in the fact that

India has the highest number of manufacturing plants approved by US FDA, which is next

only to that in the US. Multinational companies have traditionally dominated the industry,

which is another trend seeing a reversal. Currently, it is the Indian companies which are

dominating the marketplace with the local players dominating a number of key therapeutic

segments. The market is also very fragmented with about 30,000 entities and the organized

sector consisting of about 300 entities. Consolidation is increasing in the industry with many

local players building a global outlook and also growing inorganically through mergers and

acquisitions.

4.2 History

The pharmaceutical industry in India has evolved through three phases over the past 50 years.

The first was the period prior to 1970, when the industry was relatively small in terms of

production capacities. The second phase spanned the late 1970s to the early 1990s, a period

during which the industry experienced policy-induced growth. In its third phase, during the

1990s, much of the regulatory structure that the Government had imposed during the previous

two decades was dismantled.

Even as late as the mid-1970s, India had a relatively small pharmaceutical industry, with a

total production of just over US$ 600 million. During the subsequent four years, the total

output of the industry more than doubled, the major contribution being made by formulations,

which accounted for 85 per cent of total production. Table 5.2.1 shows the production figures

for the two broad segments of the industry: bulk drugs and formulations.

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Table 4.1: Production figures of bulk drugs and formulations in 1970s (US$ million)

Years Bulk Drugs Formulations Total

1974/75 111.1 493.7 604.8

1975/76 155.2 668.6 823.8

1976/77 167.4 781.3 948.7

1977/78 187.7 1029.9 1217.6

Source: Based On GOI, Ministry of Chemicals & Fertilizers, Annual Report (various

years)

The table shows an overwhelmingly large share of installed capacity of the Indian industry

was in the small-scale sector. In the 70’s 43 were affiliates of foreign firms in which the

parent firms' share in equity holdings exceeded 40 per cent. These foreign affiliates were

deemed to be “foreign-controlled” firms, in accordance with the guidelines stated by the

Foreign Exchange Regulation Act of 1973 (commonly known as FERA). This indicates that

foreign industry had a disproportionately high share in total production in the mid-1970s.

They produced 42 per cent of bulk drugs and formulations put together and about 38 per cent

of the bulk drugs produced by the Indian industry.

Major changes that contributed in the growth of this sector are enumerated below:

4.2.1 The policy regime since the 1970s

Three critical policy initiatives taken by the Government marked a turnaround in Indian

Pharmaceutical Industry:

The Drugs Price Control Order (DPCO), which was adopted in 1970.

Adoption of the new Patents Act, which became effective in 1972

Adoption of a new drug policy in 1978.

The above-mentioned policy initiatives were taken with two broad objectives in view: (i) to

develop a strategy for the expansion of the domestic pharmaceutical industry by relying

essentially on Indian enterprises, and (ii) to establish a structure for keeping the prices of

drugs within affordable limits.

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4.2.1.1 DPCO, 1970

On 16 May 1970, a comprehensive order was promulgated under Section 3 of the Essential

Commodities Act and in super cession of all the earlier orders on the subject. This order was

called the Drugs (Prices Control) Order, 1970. In its introductory form, DPCO was a direct

control on the profitability of a pharmaceutical business, and an indirect control on the prices

of pharmaceuticals. The government stipulated that a company’s pre-tax profit from its

pharmaceutical business should not exceed 15% of its pharmaceutical sales (net of excise

duty and sales tax). In case profits exceeded this sum, the surplus was deposited with the

government. So, a pharmaceutical company had the freedom to decide the prices of its

products. Product-wise margins were also flexible, so long as the overall margin did not

exceed the stipulated norm. Since individual product prices did not require approval from the

government, bureaucratic hurdles were low. At that time, the Indian pharmaceutical industry

was largely dominated by MNC affiliates and subsidiaries. These MNCs were hardly affected

by the relatively mild form of DPCO and continued operating in the domestic market.

However, FERA (Foreign Exchange Regulations Act) which came in mid 70s did curb the

operations of MNCs. Overall, the Indian pharma industry prospered from 1970 to the next

DPCO in 1979.

The first step towards evolving a comprehensive policy regime for the Indian pharmaceutical

industry was taken by the setting up of the Hathi Committee in 1974. The Committee had an

exhaustive mandate that aimed at the realization of the two broad objectives mentioned

above. The Hathi Committee presented its recommendations in 1975.

4.2.1.2 The Hathi Committee, 1974

The Hathi committee report which, under chapter –IV stated -

“The committee believes that health care has a direct relationship with socio

economic growth of the country and a welfare state should treat production,

procurement and distribution of essential drugs, as a social responsibility just as

import as ensuring supply of food and shelter. With a view to tackling the problem

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of large scale production of a Statutory Body which may be called the National Drug

Authority of India (NDA)”.

The report had mentioned several functions for NDA. The Government of India,

however, did not accept this recommendation and no action was taken for creating

NDA. Thus the drug policy formulated by Government of India for the first time in

1978 did not include the concept of NDA.

    

4.2.2 The new drug policy of 1978

The new drug policy announced by the Government in 1978 had the following five broad

objectives: (i) to develop a strong Indian sector with the public sector playing a leading role;

(ii) to channel the activities of the foreign firms in accordance with the national priorities and

objectives; (iii) to deepen the production base of the domestic industry by ensuring that the

production of drugs took place from as basic a stage as possible; (iv) to encourage research

and development and improve the technological sinews of the industry; and (v) to provide

drugs to consumers at reasonable prices.

4.2.3 Post-Liberalisation

As an integral part of economic reforms, the industrial, trade and technology policy

framework that had evolved from 1950s to late 1980s was considerably changed in the 1990s.

The New Industrial Policy (NIP) announced on 24th July 1991 and subsequent amendments

brought far reaching changes in the policy regime evolved thus far. The liberalisation of the

economy in 1991 had a major impact on the two vital policies (Drug Policy and Price

Controls) related to the pharmaceutical industry which are discussed below.

i. Drug Policy

In September 1994, government announced a revision of the Drug Policy, 1986 making

major modifications. The modifications included: abolishing licensing policy for all bulk

drugs except those reserved exclusively for the public sector units and other using new

technologies, removing limitations on the use of imported bulk drugs, allowing foreign

holdings up to 51 percent, and automatic approval for foreign technology agreements in the

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case of almost all drugs. Later on, the pharmaceutical industry was included in the list for

automatic approval up to 74 per cent in March 2000 and to 100 per cent in December 2001.

ii. Price Controls

Another aspect of the reforms has been substantial dilution of the price controls. The Drug

Policy, 1994 liberalized the criteria for selecting drugs for price controls. Inline with the

changes in drug policy a new DPCO was notified in January 1995 bringing down the number

of drugs under the ambit of price controls to 74 from 166 (as was under DPCO, 1987). These

74 drugs accounted for only about 40 percent of the total market thus setting the bulk of the

pharmaceuticals market out of price controls. The exemption period for new drugs, produced

through indigenous R&D was also increased from 5 years to 10 years. Although, the

piecemeal reforms have been criticized for slow industrial progress gradual liberalization of

the policy regime from overbearing governmental control to subtle emergence of ‘open

market’ principles gave time and opportunity to firms and the local administration to adapt to

the changing scenarios.

Table4.2: Depicting the changing trend in the pharmaceutical industry

Bulk Drugs under price control (1970 to 1995)

Year of introduction of the Drug Price Control Order

Number of drugs under price control

1970 347

1979 163

1987 145

1995 74

Source: Indian Credit Rating Agency (ICRA), 1999

The policy regime adopted for the pharmaceutical industry in India thus changed from one in

which the industry was subjected to government controls in the 1970s to one that was almost

completely guided by market forces two decades later. This changed scenario can be best

understood by looking at the sharply declining number of bulk drugs under price control

since 1970, the year in which the first DPCO was introduced in the country in Table 2.2.

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4.3 Government initiatives

The government of India has taken various steps towards developing the pharmaceutical

sector of India. They have taken steps by introducing various policies mentioned as under and

investing in Research and Development to make Indian drug industry competent world wide.

One of the major initiatives was the amendment of the drug patent system of India. Following

are the various policies enumerated with brief descriptions which are major reasons of impact

on this industry.

4.3.1 WTO, GATT and TRIPS agreement

The establishment of the world trade organization has led to a tremendous paradigm shift in

world trade. The agreement on Trade Related Intellectual Property Rights was negotiated

during the Uruguay round trade negotiations of the General Agreements on Trade and Tariffs

and “one of the primary reason for incorporating intellectual property issues into the GATT

framework was the pharmaceutical industry”. India signed the GATT on 15 April1994,

thereby making it mandatory to comply with requirement of GATT, including the agreements

on TRIPS.

The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way these rights are

protected around the world, and to bring them under common international rules. It

establishes minimum levels of protection that each government has to give to the intellectual

property of fellow WTO members. In doing so, It strikes a balance between the long term

benefits and possible short term cost to the society. Society benefits in the long term when

intellectual property protection encourages inventions, especially when the period of

protection expires and the creation and invention enter the public domain. Governments are

allowed to reduce any short-term costs through various exceptions, for example to tackle

public health problem. And, when there are trade disputes over intellectual property rights,

the WTO’s dispute settlement system is now available.

The agreement covers five broad issues:

1.   How basic principles of the trading system and other international intellectual

property agreements should be applied.

2.   How to give adequate protection to intellectual property rights.

3.   How countries should enforce those rights adequately in their own territories.

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4.   How to settle disputes on intellectual property between members of the WTO.

5.   Special transitional arrangements during the period when the new system is being

introduced.

Scenario Post-TRIPS

The most important amendment which had to be introduced by the amendment of 2005 in

order to make the existing patent regime in India TRIPS compliant was the introduction of

pharmaceutical product patents. The amendment of 2005 extends full TRIPS coverage to

food, drugs and medicines. It requires patents to be provided to products as well, while the

patent regime provided by the act of 1970 required patents only to be granted for chemical

processes which resulted in the production of a particular drug. The other implications for the

pharmaceutical sector under the new act are as follows:

(i)  The term of a patent protection has been extended to twenty years compared to the seven

years which was provided by the act of 1970. This was made applicable to all the member

countries and hence rules out all the differences with respect to patent protection which

prevailed in different countries;

(ii)  If the law of the country provides so, then the use of the subject matter of the patent shall

be permitted without the authorization of the patent holder, including use by the government

or any other third party authorized by the government. However such use shall be permitted

only if prior to such use, the user has made efforts to obtain the authorization of the patent

holder and such efforts have not been successful within a reasonable period of time. This

requirement can be waived in case of a national emergency after notifying the patent holder;

and

(iii)  The burden of proof with respect to infringement matters have been reversed under the

new act. The onus of proving on a legal complaint that the process used by one enterprise is

totally different from that which has been used by another would lie on the defendant. Prior

to the amendment the responsibility was on the patent holder to establish patent infringement.

The new amendment was not to affect the drugs which were in the market prior to 1995. As

far as those drugs which were produced between 1995 and 2005, they will have the right to

continue to produce them in return for the payment of a fixed royalty to the patent holder.

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The main problem arises for those drugs which are now being manufactured and patented.

The only way by which such drugs can be manufactured in India is by way of compulsory

licenses. Such compulsory licenses are granted by the government on grounds such as non

availability, high prices, public interest etc

4.3.2 Pharmaceutical Policy 2002

There were several objectives to this policy when it was first implemented in 2002. It

intended to ensure availability of good quality pharmaceuticals at reasonable prices for mass

consumption and intended on encouraging pharmaceutical research and development which

is compatible with India’s needs. The Pharmaceutical Policy 2002 also has the objective to

strengthen the original capability for cost effective quality production and export of

pharmaceuticals by reducing trade barriers in the pharmaceutical sector. Finally, one last

objective of this policy is to encourage new investment in the pharmaceutical industry by

means of introducing new technologies and new drugs.

4.3.3 National Drug Policy

A national drug policy (NDP) is a guide for action, containing the goals set by the

government for the pharmaceutical sector and the main strategies and approaches for

attaining them. It provides a framework to coordinate activities of pharmaceutical

sector participants: the public and private sectors, nongovernmental organizations

(NGO, donors, and other interested parties. A country's drug policy, although similar in

many ways to that of other countries, may differ in its objectives, strategies , and

approaches. National governments are the principal agency in the formulation and

implementation of drug policies, leading a partnership among the government, drug

prescribers, drug dispensers, drug consumers, and those who make, market, distribute,

and sell drugs

4.3.4 Patents Amendment Act (2005)

The Patent Amendment Act 2005 passed by the Parliament in its budget session of 2005

brings the Indian Patent Act in full conformity with the intellectual property system in all

respects. This replaced an ordinance promulgated on December 2004 to meet WTO

obligations. Some of the major amendments have been introduced in Sections 2 and 3 which

are as follows:

Section 2 of the Patent Act is the definition clause:

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According to Section 2(j) invention means a new product or process involving an inventive

step and capable of industrial applications.

(j.a) inventive step means a feature of an invention that involves technical advance as

compared to existing knowledge or having economic significance or both and that makes the

invention not obvious to a person skilled in art.

Thus an invention in order to be patentable, should:

(i)  involve an inventive step capable of industrial application;

(ii)  which should involve technical advances as compared to the existing knowledge or

having  economic significance or both; and

(iii)  be not obvious to a person skilled in art.

Section 3 outlines various situations where an invention (properly so called) can yet be not

patentable. Section 3(d) of the Patents Act 1970 has been amended under the new Act to

prescribe a class of discovery which cannot be subject matter of patent; it reads as follows:

(d) mere discovery of a new form of known substance which does not result in the

enhancement of the known efficacy of that substance or the mere discovery of any new

property or new use for a known substance or the mere use of a known process, machine or

apparatus unless such known process results in a new product or employs at least employs

one new reactant.

Product Patents have been extended to fields of technology such as drugs, food and chemicals

but granting of patents are subject to restrictions as mentioned above (Section 3(d)). This

section prevents frivolous inventions from being patented.

The amendments introduced in the Patents Act exhibit the essence of patentability in the

pharmaceuticals and chemicals is inventive ingenuity, novelty and existence of industrial

application or economic significance of the new product or process.

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4.4 Patent System of India

4.4.1A rigid patent regime

The bedrock of patent protection in India was the India Patents Act 1970, which only allowed

7 years for process patents. The act explicitly ruled out product patents for “substances

intended for use, or capable of being used, as food or as medicine or drug.”

This situation greatly undermined patent protection in India while encouraging the generics

sector. It allowed Indian companies, in partnership with the Council of Scientific and

Industrial Research (CSIR) laboratories, to innovate drug processes that were under patents in

the global market. Such legislation was also responsible for discouraging the participation of

foreign firms, restricting the import of finished formulations and supporting the imposition of

high tariff rates. In addition, there was no provision for an extension of the patent term. The

patent reform of 2005, however, promises to bring about fundamental changes: the term of

patents has been extended to 20 years.

4.4.2 Patent Reform for Indian Pharmaceutical

The pharmaceutical industry, with its rich scientific talent and research capabilities,

supported by Intellectual Property Protection regime, is well set to take a great leap forward.

As regards product patents for drugs, an amendment to the Indian Patents Act has been

carried out through the Patent (Amendments) Ordinance, 2004 on December 26, 2004. The

Ordinance amends the Indian Patents Act, 1970 for the third time with a view to introducing

product patents for drugs, food and chemicals. Apart from manufacture of drugs, the product

patent regime will help the pharmaceutical industry to tap outsourcing of clinical research. By

participating in the international system of IPR protection, India, with its vast pool of

scientific and technical personnel, and well-established expertise in medical treatment and

health care, has unlocked vast opportunities in both exports and outsourcing and has the

potential to become a global hub in the area of R&D based clinical research. The Patent

Ordinance also provides adequate safeguards to protect the interest of the domestic industry,

and the citizen from any increase in prices of drugs.

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4.4.3 Impact of product patent on Indian Pharmaceutical Industry

With a regulatory system focused only on process patents, helped to establish the foundation

of a strong and highly competitive domestic pharmaceutical industry which in the grip of a

rigid price control framework transformed into a world supplier of bulk drugs and medicines

at affordable prices to common man in India and the developing world. Introduction of

product patents will, however, mark the end of a golden age for IPI (Indian Pharmaceutical

Industry). The new regulations will reshape the landscape of IPI forcing significant changes

and divide within the industry.

A look into organization of pharmaceutical producers of India (OPPI) directory shows only

300 units out of 10,000 registered companies are in the organized sector. While process

patent helped to flourish IPI into a world-class generics industry, product patent regime will

filter the best from the pack and would be favourable to players with built-in scientific and

technical resources. The impact of the new regulations will not deter the Indian pharma

majors as they are already doing roaring business in the very countries where these patent

laws are strictly in force.

Research & Development (R&D) is a key to the strength of pharmaceutical industry

especially in the product patent period. The global pharmaceutical industry spent $30.4

billion (2001) on R&D. The R&D expenditure (as a percentage of turn-over) by the IPI is low

(1.9%) when compared global giants (1016%). With transition into the new regime many

Indian companies are mobilizing their resources war chest with an increase in their R&D

budget. Government of India (GOI) encouraged the R&D in pharmaceutical companies by

extending 10 year tax holiday to this sector. Besides, planning commission has earmarked

$34 million towards drug industry R&D promotion fund for the tenth plan.

The focus under the R&D effort is to encourage development of new molecules. A provision

of Rs. 150 crore has been made under the Pharmaceutical Research & Development Support

Fund. A Drug Development Promotion Board under the Department of Science &

Technology has also been set up for the utilisation of this fund. Feasibility of setting up a

Mega Chemical Industrial Estate in the country with world class infrastructure facilities is

also being studied. For the first time in many years, the international pharmaceutical industry

is finding great opportunities in India. The process of consolidation, which has become a

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generalised phenomenon in the world pharmaceutical industry, has started taking place in

India.

4.5 Regulatory Bodies and Regulations

The Department of Chemicals & Petrochemicals (C&PC) under the Ministry of Chemicals &

Fertilizers is responsible for planning, development and control of the Pharmaceutical

industry along with ensuring availability and pricing of drugs and formulations. Apart from

the Department of Chemicals & Petrochemicals, the Ministry of Health & Family Welfare

has responsibility of approval of new drugs, import permission, quality control and clinical

trials under the Drugs & Cosmetics Act, 1940. Besides, State Drug Controllers have

responsibility for licensing, inspection and enforcement under the Drugs & Cosmetics Act,

1940.

1. Department of Pharmaceuticals (Ministry of Chemicals & Fertilizers)

The Department of Pharmaceuticals is formed recently and is a part of Ministry of Chemicals

and Fertilizers. The Department is entrusted with the responsibility of policy, planning,

development and regulation of Pharmaceuticals Industries. The some of the important

functions of the Dept. are as follows:

Drugs and Pharmaceuticals, excluding those specifically allotted to other departments.

Promotion and co-ordination of basic, applied and other research in areas related to

the pharmaceutical sector.

Development of infrastructure, manpower and skills for the pharmaceuticals sector

and management related information.

Education and training including high end research and grant of fellowships in India

and abroad, exchange of information and technical guidance on all matters relating to

pharmaceutical sector.

Promotion of public - private-partnership in pharmaceutical related areas.

International co-operation in pharmaceutical research, including work related to

international conferences in related areas in India and abroad.

Inter-sectoral coordination including coordination between organizations and

institutes under the Central and State Governments in areas related to the subjects

entrusted to the Department.

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Technical support for dealing with national hazards in pharmaceutical sector.

All matters relating to National Pharmaceutical Pricing Authority including related

functions of price control/monitoring.

All matters relating to National Institutes for Pharmacy Education and Research.

Planning, development and control of, and assistance to, all industries dealt with by

the Department.

Bengal Chemicals and Pharmaceuticals Ltd. and other Pharmaceuticals PSUs.

2. Observer Research Foundation

Observer Research Foundation (ORF) is a not-for-profit, multidisciplinary public policy think

tank based in New Delhi with chapters in Mumbai, Chennai and Kolkata. ORF is engaged in

developing and discussing policy alternatives on a wide range of issues of national and

international significance.

Some of ORF's key areas of research include international relations, security affairs, politics

& governance, and economy & development. The objective of ORF is to influence

formulation of policies for building a strong and prosperous India in a globalised world.

ORF pursues this goal by providing informed and productive inputs, in-depth research and

stimulating discussions. Set up in the early Nineties during the troubled period of India's

transition from a protected economy to a new engagement with the international economic

order, ORF examines critical problems facing the country and helps develop coherent policy

responses in a rapidly changing global environment.

As an internationally well-known independent think tank, ORF develops and publishes

informed and viable inputs for policymakers in the Government and for the political and

business leadership of the country. It maintains a range of informal relationships with

politicians, policymakers, policy influencers, civil servants and the media in India and

abroad.

With the objective of Building Partnerships for a Global India, ORF has been associated with

reputed international think tanks and research institutions like the Brookings Institution,

USA; Pacific Council on International Policy, USA; Rosa Luxemburg Foundation, Germany;

Polity Foundation, Russia; Institute of World Economics and Policy, Kazakhstan; and

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Bangladesh Enterprise Institute. ORF also has a partnership with the Federation of Indian

Chambers of Commerce and Industry (FICCI).

3. The Central Drug Standard Control Organization (CDSCO)

In the Ministry of Health is responsible for regulating pharmaceuticals in India. CDCSO’s

main functions include:

oEstablish the drug standards and regulations, and administer the Drugs and Cosmetics

Act

oCo-ordinate with the Drug Controllers in the states and union territories

oApprove import/manufacturing/sale of new drugs in India

oCheck and control the quality of imported and manufactured pharmaceuticals

oIt is the Central License Approving Authority with respect to blood and blood products,

intravenous fluids, sera and vaccines.

Besides the CDSCO, there are other organizations under the Ministry of Health as well.

There is the Central Drugs Laboratory in Kolkata, which is responsible for testing samples of

imported drugs. There is also the Central Indian Pharmacopoeia Laboratory in Ghaziabad,

which undertakes experimental work related to standards for drugs and functions as a

government analyst for several Indian states. The Central License Approving Authority is an

organization that examines applications for licenses with respect to blood banks, and

vaccines. And, finally, there is the Drugs Consultative Committee, which is a statutory

advisory body under the Drugs and Cosmetics Act. This organization issues licenses to

import biological and other unique products.

4. Organisation of Pharmaceutical Producers of India (OPPI)

Organization of Pharmaceutical Producers of India (OPPI) established in 1965, is a premier

association of research based international and large pharmaceutical companies in India and

is also a scientific and professional body. It caters to the needs of Research based

Pharmaceutical Industry thereby creating and sustaining an environment conducive to

innovation and growth, simultaneously, facilitating industry and stakeholders partnership

through various advisory and consultative processes to achieve the Healthcare objectives of

the Nation.

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OPPI Members Follow:

o Good Manufacturing Practices (GMP)

o International Code of Pharmaceutical Marketing Practices

o OPPI’s position on Intellectual Property Rights (IPR)

I. OPPI functions mainly on the following areas:

    1.Continuous dialogue with the stakeholders

    2. Actively engage in knowledge creation & knowledge sharing with value addition

    3. Engage in ‘Corporate Academia’ Interaction

OPPI identifies itself with the country’s national healthcare objectives and encourages

its members to make substantial contributions to social concerns and actively

promotes Corporate Social Responsibility (CSR).

OPPI is an active member of International Federation of Pharmaceutical

Manufacturers Associations (IFPMA), Geneva and the World Self-Medication

Industry (WSMI), France.

The organization aspires to be an Active Partner with Government, Non-Governmental

Organizations (NGOs) and other healthcare providers in improving the health and quality

of life of our people through reduced morbidity and mortality by discovering, developing

and making available safe, cost-effective and quality medicines. In particular, to play an

important role in improving the access to medicines of people in rural areas and those

living at or below the poverty line.  To build on India's existing strengths in

manufacturing and Distribution and substantially enhance the beginnings made in R&D in

order to become one of the leading players in the global pharmaceuticals market.

To develop a realization that the degree of success that the Industry attains in these areas

will be a direct function of the emphasis given to the development of a sound system of

Intellectual Property Rights, Biological Sciences Research (particularly genomics and

proteomics), Clinical Research & Development and Innovative Process Chemistry. To

make India a global sourcing base of high quality pharmaceuticals to international

consumers. To be one of the major creators of intellectual capital and wealth for the

economy.

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CHAPTER -2

INTRODUCTION TO COMPANY

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INTRODUCTION TO THE COMPANY

( ELDER PHARMACEUTICALS)

Elder Pharmaceuticals ranked as the 28th (ORG-IMS) largest pharmaceutical company

commenced operations in 1989.It is rated as the third fastest growing company, by revenue,

in the pharmaceutical industry in FY 2007 in India. Elder Pharmaceuticals principal

activities include the manufacturing and marketing of prescription pharmaceutical brands,

surgical and medical devices. Shelcal Elder’s No.1 brand is one of the top brands in the

Indian Pharmaceutical industry. We believe that we are one of the leading players in the

pharmaceutical formulation market in India, being a market leader in three therapeutic

segments - Women’s Healthcare, Wound Care and Nutraceuticals. Our strategic alliances

with a number of international pharmaceutical entities for marketing their products in India

and overseas international acquisitions have strengthened and enabled us to become a true-

global pharmaceutical company. Internationally benchmarked plants

Elder manufactures API and formulations across 6 manufacturing plants in India and one in

Nepal possessing a capability to manufacture various dosage forms like tablets, capsules,

syrups, injectibles, topical creams and ointments. Over the years, Elder upgraded its

capacities in line with international standards to cater to the requirements of a wider patient

community. Even as it upgraded its facilities, it also invested in capacity expansion through

investments in internationally benchmarked greenfield facilities.

History

Mr. Jagdish Saxena, the founder of Elder, calls himself an entrepreneur by accident. The most

aspiring attribute of Mr. Jagdish Saxena are his affable style and his very affectionate

leanings towards his employees.

In 1960 while he served the Indian Air Force, he had never imagined of establishing his own

company. The turning point came when he decided to leave the defence job to join Tata Fison

in the year 1964. There was no stopping from then as he had a meteoric rise in the corporate

sector and rose to become the Managing Director of Walter Bushnell till the year 1988.

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Elder Saga Unfolds

In 1988 Mr. Jagdish Saxena was forced into entrepreneurship when the company he was

working for shut down its pharma division leaving 300 personnel jobless. With the existing

base of people putting together some savings and loans from banks and friends, Mr. Saxena

started Elder Pharmaceuticals. The initial years were of great struggle.

Elder started out with two or three products in antibiotics and other therapeutic areas. The

real turning point came when Mr.Saxena hit upon the idea of producing calcium supplements

from natural sources and that is how Shelcal was born. It was a product that nobody was

willing to sell and everyone said it would fail. But by the second year, with all marketing

efforts it took off. It became clear that Elder were selling a treatment and not just calcium.

Today the company boasts of 2,600 Elderites. The family tradition fostered in the company is

a great strength that puts the organization in a very different league. Elder boasts of seven

factories and is continuously expanding the manufacturing capacity through brownfield and

greenfield expansions. Through its strategic international alliances are looking at launching

many more brands in the chronic and niche segments. Elder’s vision is to reach Rs 1,000

crore (Rs 10 billion) by 2010.

Milestones

Year Elder Over the Years

2007Negotiated a 51% stake in Bulgaria’s Biomeda Group

2007NeutraHealth acquisition, we acquired 20.0 per cent. Of the share capital of

NeutraHealth Plc (“NeutraHealth”)

2007Commissioned Paonta Sahib Plant

2006Commisioned plant in Nepal

2006Joint-Venture with Universal Group of Companies, Nepal

2005Commisioned Selaqui Plant

2004Tie-Up with Bioagra, France

2003Patalganga Bulk Drug Plant Commissioned

2000Tie-up with Paul Hartmann

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2000Elder registered as a Public Limited Company

1998Tie-up with Fujisawa

1994Tie-up with Haw Par, Singapore

1994Export House Recognition

1993Export Certificate of Merit

1992Chemixoil Certificate of Merit

1991R & D recognition from Gov of India

1989First Factory at Nerul commissioned

1989Mr. Jagdish Saxena sets up Elder Pharma in Mumbai

 This growth transpired on the back of a healthy industry environment and a better-than-

industry performance by some of our leading products. I will specifically mention the success

of two such products:

• Shelcal, our flagship brand in the women care segment , turned into a Rs. 1,000-mm

product during the year under review.

• Somazina, an in-licensed cerebral disorder product from the portfolio of Ferrer, Spain,

emerged as a brand leader, contributing Rs. 73.68 mn to our revenues.

What gives me a sense of excitement is not what we achieved during the last few years; we

are invigorated by the prospect of growing at 30% y-o-y and achieving a turnover of Rs.

10,000 mn by 2010.

Organic growth

At Elder, we plan to grow organically as well as inorganically. Our existing products will

continue to be marketed deeper and extensively, accelerating offtake. For instance, by 2010,

on a conservative estimate, we expect to generate revenues of least Rs. 2,000 mn from

Shelcal alone.

At Elder, we will continue to leverage our research and introduce new products as well as

widen the product basket through in-licensing route; we believe that this is the most effective

way to strength revenues and market share. We demonstrated the effectiveness of this

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strategy in 2006-07; we launched two new products and created a pipeline of 8-10 products

that will be launched in 2007-08.

At Elder, we recognise that it is not only important to widen our therapeutic reach but equally

important to be present in the right spaces. In view of this, we plan to address growing

opportunities in the neutraceutical segment through our current portfolio. Elder currently

supply a range of neutraceutical products and is among the top five neutraceutical companies

in the Indian market. We are working at in-licensing technologies and products in the

neutraceutical segment.

While enriching our formulations portfolio, we are strengthening our API presence as well.

Our APIs were largely used for captive consumption; however we currently posses over 15

API products that are being released for merchant sale. We see a growing opportunity in this

segment: with China’s API growth expected to decline due to government regulation, India is

attractively placed to plug the gap. At Elder, we posses a robust pipeline of API generic

products,

which will strengthen our revenues once commercialised. APIs to enhance their proportion in

our turnover from 8% to 20% by 2010.

Inorganic growth

At Elder, we see a growing rule for inorganic growth as a means of enhancing our scale with

speed and enriching our portfolio through prudent selection.

We acquired a 20% stake in a £25-mn company in England, NeutraHealth PLC, for Rs. 460-

470 mn. This investment provides us with an access to multiple brands in the UK, helping us

address the needs of the regulated EU markets, one of the fastest growing today.

To capitalise on the opportunities coming of the CIS, we acquired a manufacturing unit in

Bulgaria for Rs. 270 mn, which is expected to grow the turnover from Rs. 325 mn to Rs. 700-

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800 mn in a few year. The unit, with a facility to manufacture formulations in solid dosage

forms, will also generate revenues through contract manufacturing services. We have already

tied up with a few companies for contract manufacturing in Bulgaria, which will be initiated

once the Bulgaria acquisition goes on stream.

During the year under review, we also commissioned a manufacturing facility for betalactum

products in Nepal through a joint venture. The products, already marketed, are expected to

contribute significantly from 2007-08 onwards. The cost competitiveness of the unit will help

us target the growing markets of South East Asia besides addressing the attractive markets of

India and Nepal.

Capabilities

The international acquisitions, joint ventures and exports are strengthening our presence in

select markets with attractive potential. However, India itself remains considerably under-

penetrated. A growing population in a strengthening economy is catalysing the demand for

pharmaceutical products and as purchasing power rises, the market will widen for Elder’s

products.

What gives me the optimism that the Rs. 10,000-mn revenue target for 2010 is indeed

achievable is our marketing breadth and depth, which has already resulted in the growth of

strong brands and created a basis for successful marketing alliances with international

companies. Besides, we posses strong manufacturing and R&D capabilities reflected in a

team of

40 experienced and motivated people. We have also built in regulatory capabilities, evident

from the DMF of one molecule (Clarithromycin), filed during the year under review; we

expect to file four-five DMF in 2007-08. We are also expanding our R&D facility in Nerul

(Navi Mumbai) at an investment of Rs. 100mn.

We are continuously expanding our manufacturing capacity through brownfield, greenfield

and inorganic expansions; the former are being conducted in excise-free zones that will

enhance our viability. One such facility for topical dosage forms in Paonta Sahib, Himachal

Pradesh, was commissioned during the year under review. We expect to commission another

facility in Uttarakhand by March 2008.

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People

I must conclude by saying that the growth envisioned for 2010 will be driven by a team of

2,600 motivated Elderites with a periodic inclusion of exports who will enrich their careers,

add value for our shareholders and bring smiles on the faces of those who keep us in

business.

PROBLEMS OF THE ORGANIZATION

The INR 6 billion Elder Pharmaceuticals Limited, manufacturer of Shelcal, has extended its

control over its Bulgarian acquisitions by hiking its stake in its Bulgarian subsidiary Elder

Biomeda AD to 61% from the present 51% for an undisclosed sum. The balance 39% stake in

Elder Biomeda AD is held by the original owners of Biomeda group. In Dec 2007, Elder had

formed a subsidiary in Bulgaria called Elder Biomeda AD Limited which acquired 100%

equity in 3 leading Bulgarian pharmaceutical companies belonging to the Biomeda group.

The original owners of Biomeda Group companies were in exchange given 49% shares of

Elder Biomeda AD at that time. Of the three companies’ one has a manufacturing unit for

formulations, another is a distribution company for pharmaceutical and allied products and

the third is a logistics support company with strategically located warehouses.

Biomeda group is among the top 10 distributors & manufacturers of oral dosage

pharmaceutical formulations in Bulgaria. Elder is planning to quickly spread in major

regulated markets with specific focus on EU & CIS countries. The Bulgarian entities will

launch many products in the next 8-10 months in Europe & CIS. Bulgaria, being a part of

European Union, offers an excellent opportunity for Elder Pharma to enter EU as well as CIS

countries. “This shall be our strategic gateway to the EU & CIS Markets. Bulgaria offers low

infrastructure cost (compared to other EU countries), lower production & labor cost and low

construction cost as compared to other EU countries. Additionally, the WHO GMP approved

and US FDA compliant seven manufacturing units of Elder in India will offer its

nutraceutical product range to its internationally acquired companies”. Says Alok Saxena,

Director International, Elder Pharmaceuticals. Europe remains an attractive market to launch

pharmaceutical products in, because centralized regulatory ruling allows for immediate

access to all member states. Also, EU expansion to 27 countries offers greater market

opportunities By 2012, Elder will enjoy a pan-European presence, covering all the key

markets of Europe which will be the stepping stone towards spreading its footprints across

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the world – both in regulated as well as unregulated markets. Elder’s existing export markets

are Asia, Africa, Latin America and European Union. Elder already exports to more than 25

countries products like Ampicillin, Amoxycillin, Roxythromicin, Azithromicin,

Clarithromicin, Amlodypin Besylate, meloxicam among others. Formulations exported

include Hormones, Anti-biotics, enzymes and Multi-Vitamins. The company also exports

OTC and Herbal products.

COMPETITION INFORMATION

V-PHARMA

Elder Pharmaceutical is a distribution oriented company intermediates between the retailers

and manufactures., As a distributed of the above various medical products, it takes pride in

conglomerate of Pharma retailers and chemists. and Elder Pharmaceutical team strives hard

to come up with the challenging products sales concept meeting stringent quality.

Earlier it was a partnership firm with "Sanghi Pharmaceuiticals Ltd.". It got seperated in 1998

and restablished as "Elder Pharmaceutical Ltd.". This company works on the principel of low

profit percentage but high turnover to increase the profit.

The company deals with the distribution of the products of these companies:

(i) FDC - Fair Deal Corporation

(ii) Shilya Life Sceinces

(iii) Nicolas Piramal India Ltd.

(iv) Tablet India Ltd.

The company has modern distributor facility in Jaipur, the pink city of India. We thus ensure

least time lapse in shipping your goods, enabling you to gain distinct competitive edge.

Products which you enquire and leave us for manufacturing are first indigenously developed

in our laboratory, carefully scaled up and professionally manufactured. The production

portfolio is further well supported by skillful chemist and sophisticated analytical

instruments.

In a short span of five years, we have to our credit renowned pharma, chemical and biotech

companies as our discerning customers. Our clientele is mainly spread in jaipur Delhi &

NCR, Haryana, UP, MP and Uttaranchal. We have numerous satisfied customers in our

account. They are end users, traders and distributors from around the world.

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We aim to become highly respected, technology based, research oriented global company.

We strive hard to excel in every part of our activity and would like to delight our demanding

customers with quality, competitive pricing and timely deliveries.

Vision

We believe that for any dynamic organistion, improvement is a continuous process. We strive

hard to excel in every part of our activity. We stand for what we say and what we do. We set

objectives for future and directs every one to achieve the set goal. We aim to become the

front runners in our field.

Products

V-Pharma have world class distribution system that are highly reliable and also affordable.

Few of products are as mentioned below which Elder Pharmaceutical can sell to the

distributer:

Benzotriazole/Acridine

Bromocompounds

Carboxylic Acids/Dicarboxylic Acids

Laboratory Reagents

Morpholine / Phenanthroline

Quinoline / Isoquinolines

Phenol / Resorcinol / Anisole

MARKETING FUNCTIONS

A marketing program in order to be successful must have a right mixture of marketing mix,

not to mention market research, a quality product, an extensive distribution network

acceptability, strong dose of promotion coupled with a right price. A unique feature of the

pharmaceutical market is that it is one of the most fragmented markets in the country.

The maximum market is held by small companies, the largest pharmaceuticals company

holding only 6 percent of the market share. This leads to unique marketing mixes.

Function of Sales

In India front and marketing (doctor convincing and sales) is where the action is. The point of

differentiation has been the relationship with doctors (through medical representatives) But

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doctor aren't always enthused. Says Savita Mikhi, who runs a private clinic in Delhi, "many

companies believe wrongly that a nattily clad medical representative or literature printed on

glossy paper makes for impressive communication.

Advertising

Elder Pharmaceutical marketers in the Jaipur region, having just been allowed to advertise

drugs on Television, have taken the big risks. They are advertising like crazy and even have

the websites to keep patients fully informed of diseases dosages side effects and so on. In

India too, earlier this year .To begin with, they will try to bring their skills to the ordinary

business of making audiovisual, prints or multimedia sales pitches to the doctors. This could

improve the communication of OTC products, which have been turning more love and care

oriented. Johnson & Johnson's touch therapy commercial is good example of the use of

emotion. Advertising agencies will have to educate themselves well, because the main reason

that in house publicity departments manage to torpedo the suggestion of agency help is the

fact that no body wants their wonder pills to be handled by bubble gum jingle makers. Says

the marketing manager of a small, but fast growing Indian company, "Advertising agencies

may be good for selling the image of the company as whole but at the level of each brand,

what can they do? They don't know anything."

Marketing Research Function

Marketer, in order gain information, conducts market research, which in Indian

pharmaceutical industry can be as simple as chatting with doctors, retailers and hospital

administration or as complex as surveying a nationally representative sample of specialists or

corporate hospitals and identifying the emerging health care needs. The pharmaceutical major

are fond of syndicated data. Many companies routinely buy ORG (Operation Research

Group) panel study and C-MARKTM studies for different brands and keep them in computer

memory for easy retrieval and analysis. For them, it just feels good to know that data can be

accessed when needed. But when it comes to developing strategies for their brands, these

companies do not operate on the basis of this data.

On the contrary, CadilaTM Health care (ZydusTM) group, takes the data very seriously. It

has meetings with all of the brand managers every month to study the implications and

develop strategic actions along with top management teams. This company is using

information actively, whereas many other companies use the information either as an

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academic appendage during a presentation of low immediate relevance or as a defense shield

during a performance review.

Marketing research data only provides a base for action in the market place, the action which

has to be implemented through various mix's of promotion. It is important to understand that

the promotional mix for any brand or organization is dependent upon the mix of advertising,

personal selling and public relation. Over use of personal selling in pharmaceuticals via

medical representatives and limitations on advertising pharmaceutical products due to FDA

(Federal Drug Administration) restrictions, presents an opportunity to explore the role of and

exploit the Public Relations function in the pharmaceutical industry.

Use of Public Relation

Very few pharmaceutical marketers in India use public relations as a marketing tool. Elder

Pharmaceutical one of them think Public Relation entails sending out a few press releases,

holding a few conferences and conducting some event when company launches a new

molecule or product. In reality, Public Relation usually ends up making a point at a very

personal level. Its impact in the industry is seen at several levels affecting doctors and brands.

Some years ago, CiplaTM was forced to make use of Public Relation tools when its major

communication medium--medical representatives turned--un-cooperative. The company

conducted meetings for not more than 10 customers at a time and ensured that thousands of

such meetings took place at different locations in the country. This helped ciplaTM in

building one-to-one relationship with its customers. Prudent use of Public Relation has also

helped the organization in creating a positive platform for direct response communication.

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SWOT ANALYSIS

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SWOT ANALYSIS

Strengths:

We can respond very quickly as we have no red tape, no need for higher management

approval.

We can give really good customer care, as the current small amount of work means

we have plenty of time to devote to customers.

Our lead consultant has strong reputation within the market.

We can change direction quickly if our approach isn't working.

We have little overhead, so can offer good value to customers.

Weaknesses:

Our company has little market presence or reputation.

We have a small staff with a shallow skills base in many areas.

We are vulnerable to vital staff being sick, leaving.

Our cash flow will be unreliable in the early stages.

Opportunities:

Our business sector is expanding, with many future opportunities for success.

Local government wants to encourage local businesses with work where possible.

Our competitors may be slow to adopt new technologies.

Threats:

Will developments in technology change this market beyond our ability to adapt?

A small change in focus of a large competitor might wipe out any market position we

achieve.

The consultancy may therefore decide to specialize in rapid response, good value services to

local businesses. Marketing would be in selected local publications, to get the greatest

possible market presence for a set advertising budget. The consultancy should keep up-to-

date with changes in technology where possible.

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CHAPTER 3

CONCEPTUAL DISCUSSION

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CONCEPTUAL DISCUSSION

While many pharmaceutical companies have successfully deployed a plethora of strategies to

target the various customer types, recent business and customer trends are creating new

challenges and opportunities for increasing profitability. In the pharmaceutical and healthcare

industries, a complex web of decision-makers determines the nature of the transaction

(prescription) for which direct customer (doctor) of pharma industry is responsible.

Essentially, the end-user (patient) consumes a product and pays the cost .

Use of medical representatives for marketing products to physicians and to exert some

influence over others in the hierarchy of decision makers has been a time-tested tradition.

Typically, sales force expense comprises an estimated 15 percent to 20 percent of annual

product revenues, the largest line item on the balance sheet. Despite this other expense, the

industry is still plagued with some very serious strategic and operational level issues.

From organizational perspective the most prominent performance related issues are enlisted

below:

a) .Increased competition and unethical practices adopted by some of the propaganda base

companies.

b). Low level of customer knowledge (Doctors, Retailers, Wholesalers).

c). Poor customer (both external & internal) acquisition, development and retention strategies

d). Varying customer perception.

e). The number and the quality of medical representatives

d). Very high territory development costs.

f). High training and re-training costs of sales personnel.

g).. Very high attrition rate of the sales personnel.

h). Busy doctors giving less time for sales calls.

i). Poor territory knowledge in terms of business value at medical representative level .

j). Unclear value of prescription from each doctor in the list of each sales person.

k). Unknown value of revenue from each retailer in the territory

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l). Absence of ideal mechanism of sales forecasting from field sales level, leading to huge

deviations

m). Absence of analysis on the amount of time invested on profitable and not-soprofitable

customers and lack of time-share planning towards developing customer base for future and

un-tapped markets.

Patents

Patents are a vital aspect of the global pharma industry. Patent protection is essential to spur

basic R&D and make it commercially viable. But, only the developed nations endorse

product patents. Most third world countries have patent laws but enforcement is totally lax.

New Drug Approval (NDA)

Prior to launching its products in any country, a pharma company undertakes atent

registration to protect its own interests. To protect the interests of the consumers, it is

necessary that the product be approved by the drug authorities in that country. Mostly the

process for seeking approval is initiated alongside the patent registration process.

WTO

Due to pressure from the developed countries, across the world uniformity in patent laws is

being implemented under WTO (World Trade Organization - earlier GATT i.e. General

Agreement on Tariffs & Trade). Presently, different countries have different patent types and

life period. WTO has decided upon a product patent life of 20 years in all countries.

RESEARCH & DEVELOPMENT (R&D)

The pharmaceutical industry is characterized by heavy R&D expenditure. It is only the large

pharmaceutical companies who can allocate significant resources for R&D to introduce new

products. As the products are an outcome of significant R&D expenditures incurred by these

companies, they have their products patented. The patent allows the companies concerned to

wield immense pricing power for their new products.

THE COMPETITION

The level of competition on day to day basis in very high in Acute segment however the

degree of competition in not as much as high in Chronic therapy area. As doctor has to

prescribe drug for a long time in chronic cases and patient is suppose to consume it without

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any change of brand. While in acute cases doctor is changing brands on day to day basis. In

acute area however there is a large competition from local and propaganda companies.

Pharmaceutical Company Business Strategies

What’s the secret behind successes? For one, the company operates in niche formulations

(chronic) segments such as psychiatry, cardiovascular, gastroenterology and neurology.

While most of the top Indian companies have focused on antibiotics and anti–invectives

(acute), Sun Pharma focused on therapeutic areas such as depression, hypertension and

cancer. The company has introduced the entire range of products and has gained leadership

position in each of these areas. Being a specialty company insulates Sun Pharma from the

industry growth. The first quarter results for FY02 explain this to some extent. While the

industry was affected to a large extent by a slowdown in the domestic formulations market,

Sun Pharma logged a growth of 26% in revenues. Over the years Sun has also used the

strategy of acquisitions and mergers to grow quickly. It acquired Knoll Pharma’s bulk drug

facility, Gujarat Lyka Organics, 51.5% in M. J. Pharma, merged TamilNadu Dadha Pharma

& Milmet Labs and acquired Natco’s brands. Post Merger with TamilNadu Dadha Pharma

the company gained presence in gynecology and oncology segments.

The bases of marketing strategies can be best described in these two models in both

acute and chronic segments:

(i) Super Core Model involving the search for, and distribution of a small number of

drugs from Chronic Threapy Area that achieve substantial global sales. The

success of this model depends on achieving large returns from a small number of

drugs in order to pay for the high cost of the drug discovery and development

process for a large number of patients. Total revenues are highly dependant on

sales from a small number of drugs. This model incorporates highly specialized

approach in all the manner . Initially the competition is seems more at entry level

but since growth is stable and more in this area ; every company is striving very

hard to enter in this area. The major strategy in this model involves right focus to

highly specialized customer by well trained team.

(ii) Core Model in which a larger number of drugs from Acute Threapy Area are

marketed to big diversified markets. The advantage of this model is that its

success is not dependant on sales of a small number of drugs. Here presenting a

large number of product and taking the advantage of opportunity cost is one of the

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important strategy. Other strategy includes daily reminders to cross the perceptual

filter and get the brand name in to the sub-conscious state of mind .

Figure 2 presents market share of top therapeutic segment in the year 2001 with projection

made for year 2010.However product choice will depend largely on the internal capabilities

of the companies. Here it is very much evident from this projection that lots of opportunities

lies with chronic therapy segment however growth is initially slow but it may generate good

revenue in long run.

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Marketing approaches of Super Core Model

In pharmaceutical market there has been a significant shift from Acute towards Chronic

Threapy area. Chronic segments are driving the growth of the market as leading prescribers

in these segments are specialists as opposed to general practioners. This is evident from high

growth rates achieved by firms like Sun Pharma, Dr.Reddy Laboratories and Dabur Pharma

Ltd. Who have focused on these segments The doctor's prescription has become just the

starting point in determining what drug the retailer dispenses. During last five years pharma

companies have started identifying the hidden potential of oncological market also. A number

of drugs have been launched into the oncological market by pharmaceutical companies,

including new biological drugs and drugs that can be used as a support for patients

undergoing cytotoxic chemotherapy.

As a matter of fact, pharmaceutical companies are merging, and, through the merging

process, the portfolio of the new companies changes.

Medical representatives are rearranged throughout the new companies. Some of the sales

representatives are now afraid of losing their job, due to the changing scenario and the

possible lay offs. On the other hand, the new, bigger, pharmaceutical companies are

competing more and more with one another, and, in order to stress their products, might

adopt a more aggressive sales strategy. For example, sometimes in the same geographical

area there are eight to ten representatives for just one company, or different representatives

for the same drug in different settings. As a result of the new, aggressive strategy, the

aggressiveness of representatives has also been increasing, since the larger stress exerted by

their companies might affect their stay in the company. Therefore, they tend to have more

frequent visits to encourage doctors to prescribe drugs and thus increase sales.

In this model medical representatives are the key actors for example in a small cardiology

unit almost 40 sales representatives interacting with doctors, and most of them are coming for

a visit on a regular once-a-month basis as this is the restriction put by doctors of meeting only

once in a month that to on a fix time only, in order to stress the usefulness of their products

and push clinicians towards the use of their drugs. This means that, basically, there are at

least two representatives every day in busy clinic asking for a ‘short’ meeting to support their

product.

Pharmaceutical marketing is a specialized field where medical representatives form the

backbone of entire marketing effort. Pharmaceutical companies also appoint medical

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representatives and assign them defined territories. Medical representatives meet doctors,

chemists and stockiest as per company norms. Medical representatives try to influence

prescription pattern of doctors in favor of their brands.

The pharmaceutical distribution channel is indirect with usually three channel members i.e.

depot/C&F, stockiest and chemist. Pharmaceutical companies appoint one company depot or

C&F agent usually in each state and authorized stockist(s) in each district across the country.

Company depot/C&F sends stocks to authorized stockists as per the requirement. Retail

chemists buy medicines on daily or weekly basis from authorized stockiest as per demand.

Patients visit chemists for buying medicines either prescribed by a doctor or advertised in the

media. Here patient is end customer and doctor is direct customer for any pharmaceutical

company. But for doctor customer (patient) is more important so he wants an effective supply

chain management from prescribed company. And for pharmaceutical companies their

customer that is doctor is more important that’s why they emphasize more on supply chain

management. Ultimately endcustomer is benefited out of this.

For marketing of these type of products companies require more and more skilled field force

to develop good rapport with their direct customer (doctor). Moreover field force should have

good product knowledge and USP of their products over other so as to convince doctors and

PULL the demand for their products i.e. from Doctor to Retailer to Stockist to CFA to

company.

In this system, doctors are the core customers and the major thrust is given to build and retain

these customer because they are pulling the demand for products hence companies also give

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main emphasis in building and retaining these customers. All efforts are being put for

generating secondary sales i.e. from stockist to retailer. Ensuring of auto demand with

limited availability and maximum liquidation of the products is the main characteristic of this

approach.

For retaining and developing customers, the companies normally provide gifts like

sponsorship for various conferences like RSSDI, FOGSI, APICON, UPCON etc. For

example Dabur having PASS (Professional Academic and Scientific Services) activities for

promoting its chronic therapy range.

Also it is interesting to note that since this is a pull system demand is being pulled in to the

market so generally representatives calculate

Normally there are absolutely no chances of dumping of goods at stockist and retailer level is

yet reported also payment recovery of companies is also very good.

Marketing approaches of Core Model

In present scenario companies are focusing more and more on the availability of products so

as to enjoy good image in their customer’s (doctors) chamber. Many companies such as

Glaxo, Pfizer, Dabur, FDC, Aventies, and Cipla etc. are known for their availability of

products.

For marketing of these types of products companies require more and more field force to

remind their products on daily basis to their direct customer (doctor). Moreover field force

should have good knowledge of product schemes and offers. Also field force is required to

have a good rapport with retailers. Field force also required to ensure good availability of

their products to convince doctors and PUSH their products i.e. from to Stockist to Retailer

to Doctor.

It has been observed that sometimes there are more than fifteen or sixteen representatives in a

day are meeting with their customer and requesting for same type of products.

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Although field force visits are important for an update on drugs and their use. The doctors

are, in general, sneaking away, trying to hide from sales representatives, since there are too

many and they are too pushy and there is too little time, and the representatives probably

have noticed that the reluctant doctors have always less time for short meetings and less

interest and tend to reduce the time of the visit.

SECONDARY SALES * 2 – OPENING STOCK= ORDER

The relationship between clinicians and representatives has always been good and

pharmaceutical companies have provided, and still provide, the major economical support for

customers' continuous medical education. Something needs to be done to find a solution to

this problem that takes into account the needs of both pharmaceutical

companies and their representatives on one side and physicians on the other, for a better

professional interaction.

In this system, doctors and retailers are the core customers and the major thrust is given to

build and retain these customers. Here retailers are also core customer as most of the times

they are substituting the products based on their own discretion.

For retaining and developing customers, the companies normally provide utility gifts to

remind the products on daily basis.

Also it is interesting to note that since this is a push system products are being pushed in to

the market so generally representatives place product orders from their stockist on the basis

of SKUs sold and schemes. In this pumping the goods in the market and ensuring more and

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more primary sales i.e. from CFA to Stockist and availability of goods are major

strategies.

Normally the chances of dumping of goods at stockist and retailer level are reported also

payment recovery of companies is also not very good.

Here the role of supply chain managers can be to provide considerable value to their

companies by understanding the customers' delivery requirements. A very powerful tool for

understanding these requirements is account segmentation. A company can use account

segmentation to identify market segments Such as Acute & Chronic therapy market. which is

well positioned to serve and then organize its product range and even SKU’s and service in a

superior way.

Companies are fighting (for customers) like never before and if anything is certain then it is

further intensification of this war, and because of this companies are increasingly looking at

Logistics, as a weapon to gain Competitive Advantage and it is true that Logistics has.

Indian Pharmaceutical Company Background

The Indian pharmaceutical sector is witnessing tremendous growth with the contract research

and clinical trials businesses taking wing, and the new patent regime opening new avenues

for players in the country. The country's pharmaceutical market is a US$ 7.3 billion

opportunity with the domestic retail market expected to cross the US$ 10 billion mark in

2010 and be worth an estimated US$ 12-13 billion in 2012.

The Indian pharmaceutical industry ranks 4th in terms of volume (with an 8 per cent share in

global sales) globally In terms of value it ranks 13th (with a share of 1 per cent in global

sales) and produces 20-24 per cent of the world's generic drugs (in terms of value).

India is also one of the top five active pharmaceutical ingredients (API) producers (with a

share of about 6.5 per cent). The Indian Pharmaceutical Industry today is in the front rank of

India's science-based industries with wide ranging capabilities in the complex field of drug

manufacture and technology. The sector is estimated to be worth US$ 6 billion, and growing

at over 13 per cent annually. Indian pharmaceutical companies now supply almost all the

country's demand for formulations and nearly 70 per cent of demand for bulk drugs.

Exports

The Indian pharmaceutical industry ranks 17th with respect to exports value of bulk actives

and dosage. Several factors make the Indian pharmaceuticals an industry to reckon with,

Page | 42

namely: Self-reliance--displayed by the production of 70 per cent of bulk drugs and almost

the entire requirement of formulations within the country

Low cost of production

Low R&D costs

Innovative Scientific manpower

Strength of National Laboratories

As a result exports constitute nearly 40 per cent of the production, with formulations

contributing 55 per cent and bulk drugs 45 per cent. The industry comprises large, medium

and small-scale operators out of which some 300 companies' together account for nearly 90

per cent of the domestic market, while the rest is accounted for by a large number of small

companies which total about 9000 units. According to the Pharmaceutical Export Promotion

Council (Pharmexcil), the pharmaceutical exports in 2007-08 stood at US$ 6.68 billion

against US$ 5.73 billion in 2006-07, recording a growth rate of 16 per cent. The industry has

been clocking export growth rate, recording 18 per cent, 23 per cent and 17 per cent growth

rates during 2006-07, 2005-06, and 2004-05, respectively.

Growth

According to a McKinsey study, the Indian pharmaceutical industry is projected to grow to

US $ 25 billion by 2010 whereas the domestic market is likely to more than triple to US$ 20

billion by 2015 from the current US$ 6 billion to become one of the leading pharmaceutical

markets in the next decade. India today has the distinction of producing high quality generic

medicines that are sold around the world. Further, India is poised to be one of the fastest

growing pharmaceutical markets in the world. The following factors have fuelled the growth

for the drugs and pharmaceutical market:

A huge patient base

Increasing incomes

Improving healthcare infrastructure

An increase in lifestyle-related diseases

Penetration of health insurance

Adoption of patented products

Patent expiries and aging population in the US, Europe, and Japan

As a result, a number of multinationals have entered the Indian Pharmaceutical market.

Already 15 of the 20 largest pharmaceutical companies in the world have a presence in India.

Page | 43

In fact, during April 2000 to October 2007, drugs and pharmaceuticals are the tenth largest

FDI-attracting sectors in India.

CRAMS

Contract research and manufacturing services (CRAMS) has become a promising medium for

the Indian pharma industry, with India increasingly being viewed as global hub for CRAMS.

Over the last 5 years the CRAMS industry has been contributing close to 8 percent of the

total Indian pharmaceutical business. Developed countries are expected to further propel the

CRAMS industry to grow at a CAGR of nearly 32 percent from 2006 to 2013 as India offers

global pharma companies both quality and cost advantage. Contract research--including both

drug discovery research and clinical research--has been growing at a phenomenal rate. While

clinical trials represent 65 per cent of this market, new drug discovery makes up the

remaining 35 per cent. Indian companies are playing an important role in early drug

discovery processes due to their substantial experience in the field of generic drugs with India

becoming an established venue for chemistry and drug discovery developments than China.

Frost and Sullivan estimates outsourced contract research in India to reach US$ 2 billion by

2010. Similarly, according to a McKinsey report, the global clinical trial outsourcing to India

in the pharmaceutical industry is estimated to be worth US$ 1.23 billion by 2010.

Over 15 prominent contract research organizations (CROs) are now operating in the country

which includes names such as Novartis, Johnson & Johnson, Pliva, Astra Zeneca, Bristol-

Myers Squibb and GlaxoSmithKline among others. Contract manufacturing is another new

opportunity for the Indian pharmaceutical industry. Already, India has the largest number of

US Food and Drug Administration (US FDA)-approved plants outside the US, with over 100

facilities. And now even small and medium scale pharmaceutical companies are setting up

new and upgraded high-quality manufacturing plants to take part in this growing segment.

The Boston Consulting Group estimates that the contract manufacturing market for global

companies in India would touch US$ 900 million by 2010.

Generics

According to a report by global pharmaceutical market intelligence company, IMS Health the

Indian generic manufacturers will grow to more than US$ 70 billion as drugs worth

approximately US$ 20 billion in annual sales will face patent expiry in 2008. In fact, with

nearly US$ 80 billion worth of patent-protected drugs to go off patent (including 30 of the

best selling US patent-protected drugs) by 2012, Indian generic manufacturers are positioning

Page | 44

themselves to offer generic versions of these drugs. Also, there is global shift towards use of

generics as governments worldwide are under tremendous pressure to curtail steeply

escalating healthcare budgets. Consequently, the generics industry in India after capturing the

US markets, is gradually making its foray into Japan, South Africa, Europe and the

Commonwealth.

Indian pharmaceutical companies with their reverse-engineering expertise, abundant

investment in research facilities and availability of skilled manpower are favorably placed in

the global generic market.

Already, Indian drug companies account for over 25 per cent of the total generic drug

applications made to the FDA of US, which accounts for over half of the US$ 60 billion

market. The US FDA's latest generic initiative GIVE (Generic Initiative for Value and

Efficiency)-aimed at increasing the number and variety of generic medicines available to

consumers and healthcare providers -- is expected to further fuel the export plans of Indian

pharmaceutical companies.

Drug Master Filings (DMFs)

DMFs are confidential, proprietary assets that present to the US FDA the formulae,

processes, test methodology, and other data relevant to the manufacture of products used in

the composition, packaging and processing of pharmaceuticals or biologics.

Indian companies like Aurobindo Pharma, Wockhardt, Ranbaxy, Dr Reddy's Lab and Sun

Pharma have been in the fore-front in this segment. out of the total 187 DMFs filed with the

US FDA during October-December 2007, Indian companies alone accounted for 89 DMFs,

accounting for a whopping 47.6 per cent of the total DMFs. While Ranbaxy filed the highest

number filings with 13 DMFs, Dr Reddy’s and Aurobindo Pharma followed next with 10

DMFs each.

Going global

The Indian pharmaceutical industry has shown robust growth in terms of infrastructure

development, technology base creation and a wide range of production with a determination

to flourish in the rapidly changing environment, thereby establishing its global presence. Last

month, Indian drug firms acquired six overseas companies, including the US$ 255 million

acquisition of US-based Draxis Health Inc by Jubilant Organosys. The Indian Pharmaceutical

industry has increased its competitive intensity owing to pricing pressures and striving

consistently to innovate.

Page | 45

Dr Reddy's Laboratories was the most aggressive company, buying three companies in

Europe and the US. Troikaa Pharmaceuticals has developed an injectible (Dynapar AQ) of

lower dosage volume with much lesser pain for relief in post-operative pain, trauma pains,

fractures, renal and biliary colic and other acute painful conditions. Tremendous growth in

the sector has prompted foreign medical equipment makers to float Indian subsidiaries -- 30

of them received import clearances in 2007.

Leading healthcare providers such as Harvard Medical International and Cleveland Clinic

have entered the country through joint ventures. Teva Pharmaceutical Industries, the world's

largest manufacturer of copycat patented drugs (generics), plans to invest over US$ 1 billion

in India to acquire Indian drug companies and set up greenfield manufacturing facilities.

India is an interesting geography for several global drug majors who are attracted by the huge

talent pool, scientific skills and cheap labour that has enabled Indian companies manufacture

drugs at about a third of the cost in the West.

Biotechnology Industry in India

Currently holding two per cent share of global market, the biotechnology industry in India

has immense potential to emerge as a global key player. Going by a forecast in 'Bio Reality in

India: Report 2008', by international real estate consultants Cushman & Wakefield, the

industry is expected to cross the US$ 5 billion mark, through its products as well as services

by 2010. By this time, it is estimated to occupy 140 million square feet of industrial area. An

Ernst and Young survey projects India as one of the emerging biotech leaders, ranked third in

the Asia-Pacific region, based on the number of biotech companies in the country.

Market Size and the Key Opportunity Segments

According to an industry survey, carried out by Association of Biotech Led Enterprises

(ABLE), biotechnology industry in India notched up a growth of 20 per cent during 2007-08

and the revenues earned were worth US$ 2.56 billion as against US$ 2.1 billion during the

last fiscal. Research services touched US$ 500 million and bio IT (bioinformatics) was US$

250 million. Out of the five broad categories-Biopharma, Agri-biotech, Bioinformatics,

Bioindustrial and Bioservices-that the biotech industry in India can be divided into, according

to the product offerings, the first three are the most important segments according to their

revenue contribution.

While the bio-pharma segment accounts for two-thirds of the total sector revenue, the agri-

biotech sector in India is growing at 30 per cent for the last five years, being the fastest

Page | 46

growing industry among all the biotech industries in the country. The Indian bioinformatics

market, which deals with creation and maintenance of extensive electronic databases on

various biological systems, is set to double by 2010, from US$ 32 million to US$ 62 million

by 2010, according to a report by research firm ValueNotes Outsourcing Practice.

The segment derives 90 per cent of its revenue from outsourcing. Since the global

bioinformatics market is expected to grow at a CAGR of 16 per cent over 2007-10, it would

actually be conducive to its growth in India at a rate of 25 per cent.

Biotech Hubs

Being home to 200 diverse companies, the biotech cluster in Bangalore alone leads the pack,

whereas other cities like Hyderabad, Chennai, Pune and Mumbai also have come up as

preferred destinations to set up a biotech facility.

According to the Cushman & Wakefield analysis, Bangalore is estimated to witness

approximately 6.5 million square feet demand from this sector alone between 2007 and 2010.

Hyderabad has witnessed infrastructural development in the biotech domain wherein the

Knowledge Park, the Biotech Park, Genome Valley and other projects have come up giving

the city an advantage over others. Over 53 international biotech companies have established

their operations in the Genome Valley over the last one year. Additionally, this city will

witness development of two biotech SEZs and three biotech parks in the next couple of years.

A genomics centre is being set up at Tidel Park in Chennai, to explore the Indian genetic

pool, leverage on the pool of Indian bioinformatics scientists and low cost software skills,

facilitate research and enable entrepreneurs to commercialise their findings. The city will

witness development of three more biotech parks and a biotech SEZ in the coming years.

In addition to the above, tier II and tier III cities like Vadodara, Coimbatore, Goa, Mysore,

Madurai, Kolkata, Gurgaon, Thrissur, Nagpur and Thiruchirapalli have significant potential

to emerge as biotech corridors, attracting investments from various stakeholders of the

industry.

Investment Scenario

Investment alongside the outsourcing activities, i.e. export, has remained the key driver for

growth in the biotech sector. In the last fiscal, investments increased by 21 per cent at US$

637,607 million with 48 per cent of the total biotech market shared between the 20 leading

Indian companies.

Page | 47

As the survey carried out by Association of Biotech Led Enterprises suggests, 56 per cent of

the sector's total revenue of US$ 1.44 billion came from exports. Around 70 per cent of

exports were from Bio-pharma, and 26 per cent from bio-services segments.

According to the official sources, Bangalore's biotech companies had maintained 35 per cent

growth rate with investment of US$ 250 million in 2007-08.

Spread over 700 acre of land, the western India's first ever largest biotech park, which is

being established in Savli town near Vadodara, Gujarat, is expected to attract an investment

of Rs 4,000 crore (US$ 916 million) in next five years.

Apart from that, Indian biotech market has seen a surge of investments through the FDI route,

private equity and hedge funds, for collaborative R&D, bioinformatics, contract research and

manufacturing and clinical research. Indian companies have been bullish in expanding

foreign base through joint ventures, mergers and acquisitions and other investment channels.

One such major development has been that of Indian biotech firm Biocon's snapping up of 70

per cent stake in German pharma player AxiCorp, in the beginning of this year, in a bid to

acquire strong footing in the European market.

Government Initiative

The Indian government was among the first in the world to recognise the importance of

biotechnology back in 1986 and has, since then, been consistently endeavouring to provide

and foster an environment conducive to biotech development. The government is trying to

boost the sector by providing sector-specific promotion policy and requisite infrastructure in

terms of biotech parks (some examples are TICEL Bio Park in Hyderabad, Tidel Park in

Chennai) and SEZs.

The government has already initiated a project to conduct genome-wide research on a range

of agronomically important crops. Nanoelectronics Centres have been launched by the

government, as a joint project of the Indian Institute of Science (IISc) Bangalore and Indian

Institute of Technology, Bombay (IITB) with an investment of Rs 100 crore (US$ 22.81

million).

The country gave its nod for commercial cultivation of Bt cotton in early 2002. Growing

manifold, within six years, the Bt cotton acreage today accounts for about 70 per cent of the

total area under cotton cultivation. Since then, agri-biotech continues to be the fastest

growing industry among all the biotech industries in the country.

Page | 48

Recent Achievements

Some of developments in the recent times bear testimony to the robust growth momentum in

Indian biotech industry: Homegrown biotech major, Biocon Limited, according to a report

released by Med Ad News, has been ranked among the top 20 global companies in the

segment. It also is the only Asian company to feature in this ranking at number 20. The

companies have been raked according to their revenue and income.

Asia's first and the world's second human DNA bank has been set up at the Biotech Park in

Uttar Pradesh's Lucknow district. The members of the DNA bank will receive a microchip-

based DNA card containing information of their fingerprints, and anthropological details.

Biovet, an integrated biotechnology firm, launched Asia's first Bio Safety Level-4 (BSL-4)

manufacturing facility, specifically designed to facilitate product development and

manufacturing of vaccines like Foot and Mouth Disease vaccine (FMD), in Malur, near

Bangalore.

Biotechnology firm Avesthagen's Founder-CMD, Dr Villoo Morawala-Patell, has been

conferred France's national award, Officer of the National Order of Merit. A team of

scientists, led by Indian American Suresh Subramani, is believed to have cracked a vital

biological puzzle that may hold the key to everything from ageing to cancer.

Moving up the Value Chain

Indian biotech companies are moving beyond providing only low-end R&D services, or the

pre-clinical and clinical services at 40 to 60 per cent of the cost incurred in these countries.

Instead, they are steadily moving up the value chain by offering research and development

(R&D) services in drug discovery and validation based on genomics, proteomics, pathway

analysis (determining how toxic or radioactive substances reach humans) and clinical trials

on humans. Several global pharma companies are now partnering these India-based biotech

firms, involving significant cost arbitrage and quicker turnaround time.

Trends: Nanotech & Stem cell Bank

With the global nanotech market expected to cross US$ 1 trillion by 2010, it is going to be

the next big thing in India. The maximum research in nanotechnology is taking place in the

biotechnology and medicine segments. The Indian government has allocated Rs 1,500 crore

(US$ 344 million) for the development of nanotechnology which involves studying and

working with matter on an ultra-small scale. Virtuous Innovation, a group company of

Page | 49

Khandelwal Laboratories, has already invested over Rs 150 crore (US$ 34 million) in four

companies in the last five years to develop nanotech drugs, related technologies and other

products. It has also developed a patented technology on Gene Repair Therapy (GRT) to

stimulate dormant genes in an attempt to cure diseases like cancer and AIDS.

Indian firm, Dabur has commercialised Nanoxel, an injectible vial for dispensing the cancer

drug Paclitaxel, in India and abroad, last year. Another biotech segment which has seen huge

corporate interest is the development of stem cell therapy. Estimates suggest about 15-20

million people will go for stem cell therapies every year in India.

Manipal Group has invested close to Rs 50 crore (US$ 12 million) for research into stem cell

therapy. LifeCell, which has recently started a stem cell transplantation centre in Chennai,

plans to set up another five facilities by 2009. Cryobanks plans to invest about Rs 500 crore

(US$ 114 million) to develop five therapy centres. Players like the Reliance Group, Apollo

Hospitals, Fortis are among the others venturing into the sector.

Going by the trend, India may soon emerge as the global hub for cure to deadly diseases such

as diabetes, cancer, neurology and cardiac problems with the help of regenerative medicine,

comprising stem cell therapies and tissue engineering.

Page | 50

CHAPTER 4

RESEARCH METHODOLOGY

Page | 51

RESEARCH METHODOLOGY

Title : Different Marketing Tools of a Pharmaceutical Company in Reference of ELDER PHARMACEUTICAL LIMITED

Justification of the Title : The current shift in the marketing strategy is work by

multinational pharmaceutical Companies .It is now high-end (rather than adaptive)

development that is being carried out by leading companies. And, increasingly, other

companies are finding themselves competing against, or working with, new innovation-based

companies. My study focuses on the processes and outcomes of globally distributed

pharmaceutical companies. This article will present the changing marketing strategies when a

pharma company shifts from Acute base to Chronic therapy base. This research paper will

also give an insight about shift in supply chain process and customer and end-customer

perception which is the base of formulation of different marketing strategies.

Significance

Pharmaceutical companies spend $5 billion a year selling prescription drugs to consumers.

Direct-toconsumer (DTC) promotion of medications includes advertisements in newspapers

and magazines, TV ads, coupons, and industry-funded websites, newsletters, and patient

support services. Turn on your television and you are likely to catch a commercial for the

latest sleep aid or depression medication featuring happy, attractive people. On average, an

adult in the U.S. is exposed to 100 minutes of DTC television ads for every minute spent

seeing a doctor. DTC promotion focuses only on a handful of drugs – the ones that are most

profitable. Marketing dollars are primarily spent on the newest, most expensive drugs, for

which some risks may not yet be known.

MANAGERIAL USEFULNESS OF THE STUDY

In the United States, direct-to-consumer ads are regulated by the Food and Drug

Administration (FDA). However, the FDA does not approve ads before distribution and lacks

the staff to monitor the accuracy of all DTC ads. When the FDA learns of a misleading ad,

the agency can complain in writing and require the company to stop using the ad. But such

letters are rare, and it may take many months for the FDA to force a drug company to stop

circulating a misleading drug ad. Television and radio ads for drugs don’t provide consumers

with all known risks.

Page | 52

OBJECTIVE

To find the growth potential of the pharmaceutical marketing mix done though the

prescription.

I would be finding out that if there is a limitation in Marketing in Pharmaceutical

sector for example crisis Management as a tool used by Pharma company like J&J or

other conduction through that data will be affected by that limitation

SCOPE OF THE STUDY

Organizational stress is a process by which the organization becomes deformed slowly and

gradually by the constant impairment of the system. Stress is inevitable and sometimes

chosen voluntarily. Coping with stress can mean confronting or escaping the problem and

taking steps to prevent its recurrence it involves, solving the problem yet stresses are an

unavoidable part of life.

METHODOLOGY

Data has been collected through one to one interaction and discussion with various people

who are involved in the business of insurance as Sales manager, Life Advisors, Marketing

Manager Customers and others. Newspapers, Internet, Magazines and Journals would

provide ample material about latest trends and practices in insurance industry. Kotak

organizes various outdoor activities to boost its business and brand. Interaction with

customers during such outdoor activities would enable to understand the success ratio of such

kind of outdoor activities. Various products of the company would be discussed with respect

to their benefits and advantages. Various insurance players would be compared with respect

to their market share and products that they offer.

Primary Data has been collected through discussions and observation of various people

involved in the business whereas Secondary Data through annual reports of the company,

newspaper, magazines, journals and internet.

Page | 53

The data collected is Primary data and Secondary data which is both quantitative and

qualitative data, which was further analyzed in order to draw conclusions and suggestions.

PRIMARY DATA: I will collect the primary data through the questionnaire which is

close and open ended both.

SECONDARY DATA: Internet, Book and Journal.

Tool Used: Bar Graph , Pie Diagram

Sampling Method: Random Sampling chosen by the gathering of data

Sample Size: 100

Page | 54

CHAPTER – 5

FACTS & FINDINGS

Page | 55

FACTS & FINDINGS:

1. Do you satisfy with the kind of marketing promotion plan Ranbaxy is doing for Elder

Pharmaceutical

Yes

No

2. Do you think Elder Pharmaceutical Brand

will grow faster than its competitor other Company?

Yes (Because I think I am associated with that). - 52 %

No.- 48 %

3. Rate your satisfaction level using Elder Pharmaceutical:

Excellent 22 %

Very good. 18 %

Good. 28 %

Average. 14 %

Low 18 %

4. What is the age of yours?

a) 0-15 6%

b) 15-30 47%

c) 30-40 31%

d) 40-60 16 %

e) 60 above Nil

Page | 56

Yes 26

No 25

5. The gender of the various respondents are as follows:

Male. 68 %

Female 32 %

6. Did buying Elder Pharmaceutical gives you Value for money?

Yes (Because I think I am associated with that).

NO

7. The occupation of the respondents are as follows:

Serviceman 30%

Business Man 20%

Student 25%

House wife 10%

Farmer Nil

Others 15%

8. Income per month of the respondents are calculated as follows:

a) 0-5000 04%

b) 5000-10000 20%

c) 10000-15000 28%

d) 15000-20000 16%

e) 20000-25000 24%

f) 25000- 30000 06 %

g) More than 30000 02 %

Page | 57

Yes 26

No 25

9. Now respondents were asked for their preference for branded and non- branded Health

care product.

Branded 76 %

Non Branded 24 %

10. Why you are using Elder Pharmaceutical as a health supplement product?

Due to its reasonable Price. 22%

Quality associated with Brand Name. 31%

Previous experience about that product or company. 11%

Due to advertisement shown good thing about it. 28%

Suggested by doctor or shop vendor 08%

11 Rate your awareness for choosing appropriate following attributes about Elder

Pharmaceutical product (know about the entire product range) through advertisement:

Excellent 22%

Very good. 29%

Good. 31%

Average. 09%

Low 09%

Q12. Number of Retailers targeted in demographically in Delhi & NCR region is

Area Name Number of outlets visitedEast of Kailash 13%Madanpur Khadar 15%Amar Colony/ Lajatpat Nagar 4 14% DDA Flats, Kalkaji 13%Batla House, Jamia 15%Srinivas Puri 15%NFC/ Taimur Nagar 15%

Page | 58

13. The medicine sales vis a vis its different company product of V Pharma

Area Name

Fair Deal Corporation

Shilya Life Science product

Nicolas primal product

Tablet India product

East of Kailash 84.21% 89.47% 68.42% 73.68%Madanpur Khadar 100.00% 55.00% 100.00% 60.00%

Amar Colony/ Lajatpat Nagar 4 92.59% 81.48% 88.89% 70.37%DDA Flats, Kalkaji 88.89% 94.44% 72.22% 38.89%Batla House, Jamia 100.00% 88.89% 66.67% 72.22%Srinivas Puri 96.67% 63.33% 90.00% 43.33%NFC/ Taimur Nagar 100.00% 100.00% 100.00% 100.00%

Q 14. What kind of Trade scheme that offered by the company for retailers

Company Trade Scheme Display

Direct selling service 16%

More Margin 55%

Add on Gift 29%

Page | 59

CHAPTER – 6

DATA ANALYSIS

&

INTERPRETATION

Page | 60

DATA ANALYSIS & INTERPRETATION

1. Do you satisfy with the kind of marketing promotion plan Ranbaxy is doing for Elder

Pharmaceutical

Yes

No

51%49%

Yes NO

Out of 50 people from our survey suggested that 51% people are suggested that this outdoor

marketing activity or direct marketing activity doing by the Ranbaxy is perfectly fine which

consist direct interaction with Ranbaxy (Elder Pharmaceutical) people to know more about

the product.

Now also along with 51% very competitive answer we received that 49% people are actually

not liked the outdoor media activity doing by us because they think newspaper and the

television would be best channel to promote Elder Pharmaceutical.

Page | 61

Yes 26

No 25

2. Do you think Elder Pharmaceutical Brand will grow faster than its competitor other

Company?

Yes (Because I think I am associated with that).

No.

Yes52%

NO48%

Growth

Do you think Elder Pharmaceutical growing faster than the competitor that questioned asked

because we need to know how many people having faith on their company or how many

people should be targeted in four vertical to communicate them that our growth strategy

should be more than the competitor.

From our survey it is concluded that 52% respondent says they believing that Elder

Pharmaceutical is growing faster than the competitor because they are associated with this

growth with the company in their respective space and the contrary of that 48% respondent

think that growth is not more than or very less than competitor i.e. J&J in their respective

area of work.

Page | 62

3. Rate your satisfaction level using Elder Pharmaceutical:

Excellent

Very good.

Good.

Average.

Low

Excellent22%

Very good18%

Good28%

Average14%

Low18%

Satisfaction Level

We try to gauge with this question about the customer satisfaction level in this following four

vertical form our survey sample size of 50.

28% respondent out of 50 people is giving us good signal that there satisfaction level is lower

than excellent and very good while 22% respondent think there satisfaction level were

excellent for following four vertical also 18% respondent are chooses very good to work with

both of the company. Low area is 18% where people are not satisfied with the Elder

Pharmaceutical product because they think they don’t have any requirement of that, company

need to work towards this filling up this gap also try to turn 14% respondent are saying

average level satisfaction level towards there work.

Page | 63

4. What is the age of yours?

a) 0-15 b) 15-30 c) 30-40 d) 40-60 e) 60 above

The age of the respondents can be shown under the following heads. The respondents

can be divided into the following categories

Age of the respondents

6%

47%31%

16%0-15

15-30

30-40

40-60

It is known from the graph that the main respondents are belonging to 20 - 30 age-group.

Page | 64

5. The gender of the various respondents are as follows:

Male.

Female

Gender of respondents

68%

32%

male

female

According to the survey conducted the female were 32% and male were 68%. Also

because not having too many female at shopping around the soap

Page | 65

6. Did buying Elder Pharmaceutical gives you Value for money?

Yes (Because I think I am associated with that).

NO

56%

44%

Yes NO

Over this question 56% respondent believe on the Elder Pharmaceutical they replied that

Elder Pharmaceutical is give the value of the money where 44% people still believe that

Elder Pharmaceutical would not give better value of money than the others.

Page | 66

Yes 26

No 25

7. The occupation of the respondents are as follows:

Serviceman

Business Man

Student

House wife

Farmer

Others

Occupation of the respondents

30%

20%25%

10%

0%

15%serviceman

businessman

student

housewife

farmer

others

The occupation of the respondents was very much fluctuating. This is done so as to gain more

knowledge about the different strata of the society. Also from the result clearly mentioned

that 30 % people are service man including working in Private firm, MNC or multinational

organization. While 25 % are student because we want to know that how new generation is

aware about the 100 % safe parameter. Apart from this 10 % respondents are house wife a

significant number is required because until or unless house wife is not contributed their

views that Elder Pharmaceutical advertisement would not be successful

Page | 67

8. Income per month of the respondents are calculated as follows:

0-5000

5000-10000

10000-15000

15000-20000

20000-25000

Income of the respondents

4%20%

28%16%

24%

6%

2% 0-5000

5000-10000

10000-15000

15000- 20000

20000-25000

25000-30000

>30000

The income of the respondents is very much fluctuating. This is done so as to gain more

knowledge about the different strata of the society. Also from the survey 28 % are earning in

between 10000-150000 per month salary while 24 % earning in between of 5000-10000 per

month while this data we cannot say is not biased because Salary is a part everybody is not

very comfortable with telling you. While 20 % people responded that his/her salary in

between of 20000-250000 rupees.

Page | 68

9. Now respondents were asked for their preference for branded and non- branded Health

care product.

Branded

Non Branded

76%

24%

Preference for branded and non- branded health care product

Branded Non branded

The ¾ customer base prefers branded Health care solution for their own consumption or for

their family rather than non branded Health care solution it also shown the good opportunity

for Elder Pharmaceutical India for there more growth

Page | 69

10. Why you are using Elder Pharmaceutical as a health supplement product?

Due to its reasonable Price.

Quality associated with Brand Name.

Previous experience about that product or company.

Due to advertisement shown good thing about it.

Suggested by doctor or shop vendor

22%

31%11%

28%

8%

Attributes about using Elder Phar-maceutical

Price Brand name experience Advertisment Doctor

According to our survey 31% people are deeply associated with as a brand name of Elder

Pharmaceutical while that contributes advertisement and communication is the largest chunk

of it further 28% respondent buy Elder Pharmaceutical product because they think

advertisement influenced him to buy their product that is good sign for the company to show

how advertisement help this brand to extend 32 year old to new positions of 100 % safer.

Page | 70

11 Rate your awareness for choosing appropriate following attributes about Elder

Pharmaceutical product (know about the entire product range) through advertisement:

Excellent

Very good.

Good.

Average.

Low

Excellent22%

Very good29%

Good 31%

Average9%

Low9%

Knwoledge about Revital

According to our survey 29% respondent think about they know about Elder Pharmaceutical

is very good out of five point scale while 31% people having good knowledge about Elder

Pharmaceutical product it also clearly state that if company launching new add or adding one

new component to their add line only 9% people according to our survey didn’t have

understanding for that other wise 91% people aware that what kind of product that Elder

Pharmaceutical is launched in a market and what is there benefits is.

Page | 71

Q12. Number of Retailers targeted in demographically in Delhi & NCR region is

Area Name Number of outlets visitedEast of Kailash 13%Madanpur Khadar 15%Amar Colony/ Lajatpat Nagar 4 14% DDA Flats, Kalkaji 13%Batla House, Jamia 15%Srinivas Puri 15%NFC/ Taimur Nagar 15%

This is a very brief analysis for collecting primary data I visited these demographically area

in Delhi. Which is also contributed as a sample size for the report which is 100 retailers I

targeted to gathered all the data from different retailers in these areas.

Srinivas puri is the place where I found more retailers i.e. 21% contributed to the primary

data analysis. Whereas amar colony i.e.Lajpat Nagar contributed 19% which is one of the

posh area of south Delhi to sales about the different medicine of the company through Elder

Pharmaceutical company

Page | 72

13. The medicine sales vis a vis its different company product of V Pharma

Area Name

Fair Deal Corporation

Shilya Life Science product

Nicolas primal product

Tablet India product

East of Kailash 84.21% 89.47% 68.42% 73.68%Madanpur Khadar 100.00% 55.00% 100.00% 60.00%

Amar Colony/ Lajatpat Nagar 4 92.59% 81.48% 88.89% 70.37%DDA Flats, Kalkaji 88.89% 94.44% 72.22% 38.89%Batla House, Jamia 100.00% 88.89% 66.67% 72.22%Srinivas Puri 96.67% 63.33% 90.00% 43.33%NFC/ Taimur Nagar 100.00% 100.00% 100.00% 100.00%

East

of Kail

ash

Madan

pur Khad

ar

Amar Colony/

Lajatp

at Nag

ar 4

DDA Flats

, Kalk

aji

Batla H

ouse, Ja

mia

Sriniva

s Puri

NFC/ T

aimur N

agar

0.00%50.00%

100.00%150.00%200.00%250.00%300.00%350.00%400.00%450.00%

Tablet India productNicolas primal productShilya Life Science productFair Deal Corporation

This question tells about the company product Elder Pharmaceutical sells more in different

area of Delhi & NCR where as is show clear depth of distribution system of the V Pharma. If

we look at the graph clearly shown that Elder Pharmaceutical sells more product of Tablet

India where as Nicholas primal product is also has a good distribution and effective selling to

the retailer through the V Pharma

Page | 73

Q 14. What kind of Trade scheme that offered by the company for retailers

Company Trade Scheme Display

Direct selling service 16%

More Margin 55%

Add on Gift 29%

Direct selling service

16%

More Margin55%

Add on Gift29%

The three value added service that Elder Pharmaceutical provided to the retailers where as it

seems to the good growth for the company and direct sales force would be give more benefit

to the retailers. According to our survey result 55% retailers purchase medicine from the

Elder Pharmaceutical because of the more margin provided by the Elder Pharmaceutical to

the retailers.29% retailers purchase medicine through Elder Pharmaceutical because company

would give him add on gift on every purchase to the retailers.

Page | 74

CHAPTER -7

RECOMMENDATION

Page | 75

RECOMMENDATION

I. The challenge facing Elder Pharmaceutical marketers in the next decade will be to

demonstrate value of product through promotional innovation, combined with the required

emphasis on efficiency and safety of their product. To do so, they should turn to Pharma

coeconomics--an evolving field that examines the issues in the context of the market's

health care system.

II. Health care system, of what is understood of the term, differs from country to country, place

to place and city to city. Lay persons in India tend to examine only single patient cost. But

from a social perspective one may want to know what sort of treatment option minimizes

overall costs. In the future the degree of fragmentation is likely to decline significantly wide

product portfolio and distribution strength could become a key competitive advantage

among the larger players. Smaller players focused on research and development will

probably be approached for alliance by larger companies.

III. Domestic companies with International research and development or marketing ties are

likely to succeed. In long term as companies established major presence in other parts of

wider health care pharmaceuticals chain, there is likely to e an emergence of a new set of

competitors -- the integrated health care firms -- that will have significantly greater power

than pure pharmaceutical companies.

IV. Quality of product will increase as a result of consolidation. However, declining global price

realization from the product going off patent will likely put pressure on prices of generics in

India. With a wider product availability, and opening of insurance sector, the penetration of

drugs and per capita expenditure of health care is likely to increase.

Page | 76

CHAPTER – 8

CONCLUSION

Page | 77

CONLCUSION

Analysis of the Elder Pharmaceutical marketing tactics reveals the extent of their influence

on patient care and medical research. These tactics can be arranged into five categories

according to the potential for harm to patients (from least to most harmful): physicians-

targeted promotions, direct- to-consumer advertising, unethical recruitment of physicians,

researchers’ conflicts of interest, and data manipulation in clinical trials. Drug companies’

promotions subconsciously influence physicians’ prescription patterns. Heavy advertising to

consumers results in more prescriptions being written, whether or not the new drug is in the

best interests of patients, and therefore strongly correlates with sales increases for the

promoted new drug. The pharmaceutical industry’s public relation firms unethically recruit

physicians to endorse their companies’ clinical studies. Researchers’ financial conflicts of

interest often influence results in the corresponding studies; in many cases, the employed

researchers receive extra financial benefits, such as stock options and funding for future

projects, from the drug company for which they are conducting clinical trials. Distributional

companies manipulate research data to prevent negative data from leaking to the public.

Much evidence suggests that the pharmaceutical industry’s economic influence on the

medical field is substantial. Despite the threats these activities pose to the reliability of

medical care and the integrity of research, the reputation for quality in American healthcare is

not yet lost; the continuing quality of American healthcare will depend primarily on the

morality of next generation’s scientists and doctors.

Page | 78

CHAPTER – 9

BIBLIOGRAPHY

Page | 79

BIBLIOGRAPHY

Magazines

Business Today -March3, 2002 subscription

Articles

Economic Times- December 15, 2001

Indian Express-September 3, 2000

Websites

www.google.com www.wikipedia.com

Page | 80

CHAPTER -10

ANNEXURE

Page | 81

QUESTIONNAIRE

1. Do you satisfy with the kind of marketing promotion plan Ranbaxy is doing for Elder

Pharmaceutical

Yes

No

2. Do you think Elder Pharmaceutical Brand

will grow faster than its competitor other Company?

Yes (Because I think I am associated with that). -

No.-

3. Rate your satisfaction level using Elder Pharmaceutical:

Excellent

Very good.

Good.

Average.

Low

4. What is the age of yours?

a) 0-15

b) 15-30

c) 30-40

d) 40-60

e) 60 above

Page | 82

Yes

No

5. The gender of the various respondents are as follows:

Male.

Female

6. Did buying Elder Pharmaceutical gives you Value for money?

Yes (Because I think I am associated with that).

NO

7. The occupation of the respondents are as follows:

Serviceman

Business Man

Student

House wife

Farmer

Others

8. Income per month of the respondents are calculated as follows:

h) 0-5000

i) 5000-10000

j) 10000-15000

k) 15000-20000

l) 20000-25000

m) 25000- 30000

n) More than 30000

Page | 83

Yes

No

9. Now respondents were asked for their preference for branded and non- branded Health

care product.

Branded

Non Branded

10. Why you are using Elder Pharmaceutical as a health supplement product?

Due to its reasonable Price.

Quality associated with Brand Name.

Previous experience about that product or company.

Due to advertisement shown good thing about it.

Suggested by doctor or shop vendor

11 Rate your awareness for choosing appropriate following attributes about Elder

Pharmaceutical product (know about the entire product range) through advertisement:

Excellent

Very good.

Good.

Average.

Low

Q12. Number of Retailers targeted in demographically in Delhi & NCR region is

Area Name Number of outlets visitedEast of KailashMadanpur KhadarAmar Colony/ Lajatpat Nagar 4DDA Flats, KalkajiBatla House, JamiaSrinivas PuriNFC/ Taimur Nagar

Page | 84

13. The medicine sales vis a vis its different company product of V Pharma

Area Name

Fair Deal Corporation

Shilya Life Science product

Nicolas primal product

Tablet India product

East of KailashMadanpur Khadar

Amar Colony/ Lajatpat Nagar 4DDA Flats, KalkajiBatla House, JamiaSrinivas PuriNFC/ Taimur Nagar

Q 14. What kind of Trade scheme that offered by the company for retailers

Company Trade Scheme Display

Direct selling service

More Margin

Add on Gift

Page | 85