RESEARCH PROJECT ON PRODUCT AND BRAND MANAGEMENT

PHARMACEUTICAL INDUSTRY ANALYSIS

SUBMITTED TO: Mr. Yash Shridhar Faculty IISE

SUBMITTED BY: Tonika Mallick PGDM 1 En. No. 1127

INTERNATIONAL INSTITUTE FOR SPECIAL EDUCATION

EXECUTIVE SUMMARY

The Indian pharmaceutical industry has come a long way from waiting for imports ofbulk drugs from global players for re-processing to becoming an industry which isdriving the product development and is breaking new grounds in medical researchworldwide.The project gives a view of the pharmaceutical industry, its structure, segmentation &classification.The Indian pharmaceutical industry has a unique amalgamation of two major criticalfactors that make it so attractive and thereby add impetus to its growth. These are: The process patent regime Price controlsThe implementation of Good Manufacturing Practices has further supplemented thegrowth of this industry which is now producing bulk drugs for all the major therapysegments, which are now most in demand. In addition to this, the competencies thatIndia has achieved in process re-engineering and organic synthesis have helped derivethe most cost-effective solutions which are also compliant with the quality standards.The purpose of this report is to provide an extensive outlook on the pharmaceuticalindustry. The broad objectives of this report are:

To study the growth and trend of Indian Pharmaceutical Industry and itscontribution to Indian economy.

To study the bottlenecks in patenting and suggest suitable measures in the lightof the problematic issues in patenting with a focus on TRIPS Agreement.

To perform a SWOT Analysis of the pharmaceutical industry. To study the contribution of the top players of this industry towards the growth of the

sector and the whole economy and what are their achievements(acquisitions). To identify the major issues concerning the pharmaceutical companies in in India and

provide solutions.

The report provides a complete synopsis on the Indian pharmaceutical market and its present demographics.The report also highlights the market share of major pharmaceutical companies and also the Opportunities that are available to the industry in the fields of- Generics, Biotechnology and Outsourcing. The reports also presents the future prospects of the industry,

which is an indicative of vast potential and growth opportunities, and also the possiblechallenges that the Indian pharmaceutical industry may face ahead.

CONTENTS

1. Pharmaceuticals Industry Origins and Evolution History of pharmaceuticals India

2. Indian Pharmaceuticals Industry : OverviewIndustry : Structure Segmentation Classification

3. Domestic growth Drivers4. Advantages in India

5.Current scenario 6.Current Statistics 7.Process of New Drug Development 8.Research and Development 9.Pharmaceutical Regulatory Bodies In India 10.Patent- key facet of Indian Pharmaceutical Industry 11.Indian companies as global players in the Pharmaceutical industry 12. Top 10 pharmaceuticals in India According to Pharmaceutical sales busters 13.About the Companies… Ranbaxy ltd Dr. Reddy pharmaceuticals ltd Cipla ltd Glaxo smithcline Sun pharmaceuticals ltd Cadilla Healthcare ltd Wockhardt Lmt

14.Market share of top 10 pharma companies15.Opportunity16.SWOT Analysis17.Major Issues18.Key Findings19.Growth Scenario20.Key expectations from Budget21.Steps to Strenghthen22.Future of the Pharmaceutical Industry23.Issues and Challenges24.Conclusion25.Bibliography

PHARMACEUTICAL INDUSTRY ORIGINS AND EVOLUTION

The modern pharmaceutical industry is a highly competitive non-assembled1 global industry. Itsorigins can be traced back to the nascent chemical industry of the late nineteenth century in theUpper Rhine Valley near Basel, Switzerland when dyestuffs were found to have antisepticproperties. A host of modern pharmaceutical companies all started out as Rhine-based familydyestuff and chemical companies e.g. Hoffman-La Roche, Sandoz, Ciba-Geigy (the product of amerger between Ciba and Geigy), Novartis2 etc. Most are still going strong today3.Over time many of these chemical companies moved into the production of pharmaceuticalsand other synthetic chemicals and they gradually evolved into global players. The introductionand success of penicillin in the early forties and the relative success of other innovative drugs,institutionalized research and development (R&D) efforts in the industry 4. The industryexpanded rapidly in the sixties, benefiting from new discoveries and a lax regulatoryenvironment. During this period healthcare spending boomed as global economies prospered.The industry witnessed major developments in the seventies with the introduction of tighterregulatory controls, especially with the introduction of regulations governing the manufacture of‘generics’5. The new regulations revoked permanent patents and established fixed periods onpatent protection for branded products, a result of which the market for ‘branded generics’6emerged. HISTORY OF PHARMACEUTICALS IN INDIA

The first Indian pharmaceutical company, Bengal Chemicals and Pharmaceutical Works, which still exists today as one of 5 government-owned drug manufacturers, appeared in Calcutta in 1930. For the next 60 years, most of the drugs in India were imported by multinationals either in fully-formulated or bulk form. The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970, enabled the industry to become what it is today. This patent act removed

composition patents from food and drugs, and though it kept process patents, these were shortened to a period of five to seven years. The lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market, and while they streamed out, Indian companies started to take their places. They carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby steps towards drug innovation, the industry as a whole has been following this business model until the present.

INDIAN PHARMACEUTICAL INDUSTRY : AN OVERVIEW

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. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously. 

Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. 

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market. 

Over the last two years the pharmaceutical market value has increased to about US $ 355 million because of the launch of new products. According to an estimate, 3900 new generic products have been launched in the past two years. These have been by and large launched by big brands in the

pharma sector. And in the year 2005 Indian pharmaceutical companies captured around 70% of the domestic market.

As in the present scenario, only a few people can afford costly drugs, which have increased price sensitivity in the pharmaceutical market. Now the companies are trying to capture the market by introducing high quality and low price medicines and drugs. 

With the Product Patent Act, which came into action in January 2005, this industry is able to attract big MNCs to India. Earlier these big firms had apprehensions in launching new drugs in the Indian market. 

At present, a large number of Indian pharmaceuticals companies are looking for tie-ups with foreign firms for in-license drugs. GlaxoSmithKline is among the top choices for the firms that wish to launch their product in India, but do not have any branch over here. 

Contract research and pharmaceutical outsourcing are the new avenues in the pharmaceutical market. Contract manufacturing is growing at a very fast pace and is estimated to grow to US $30billion, whereas contract research is estimated to reach US$6-10 billion. 

Indian multinational companies like Dr.Reddy's Lab, Cipla, Ranbaxy, etc have created awareness about the Indian market prospects in the international pharmaceutical market. Approvals given by Foods and Drugs Administration (FDA) and ANDA (Abbreviated New Drug Application)/DMF (Drug Master File) have played an important role in making India a cost-effective and high quality product manufacturer. Furthermore, the changes that took place in the patent law, change of process patent to product patent, have helped in reducing the risk of loss for intellectual property.  The Indian pharmaceutical industry traditionally relied on “reverse engineering” i.e.product copying, through which vast profits were made. In recent years, however, thelarger domestic companies have realised the need to undertake original research and /or penetrate into the regulated generics markets in the USA/EU in order to survive inthe global market. At the same time, the Indian pharmaceutical industry is renownedfor supplying affordable generic versions of patented drugs for illnesses likeHIV/AIDS to some of the world’s poorest countries. Some of the strategies that have been followed by Indian pharmaceutical companiesfor their growth in the global markets have been as follows: Geographic diversification with few companies focussing on increasingpresence in the regulated markets and others exploring thedeveloping/under-developed markets of the world.17 As a part of diversification strategy, some of the companies have acquiredbrands, facilities and businesses overseas. Some companies have evenstarted their local marketing in foreign markets. Partnerships for supply of bulk drugs and formulations with the genericcompanies as well as innovators. For regulated markets such as the US, there are companies focussing onvalue added generics, niche segments or patent challenges in the US. Focus on offering research and manufacturing services on a contractualbasis(CMOs and CROs).

Apart from these strategies Indian companies have to devise newer strategiescontinuously to survive in the highly competitive global market in an industry that ischaracterised by - high capital requirement, high technical requirement, high processskills, high value addition prospects, high export volumes, high market sophistication.Indian companies are following the route of mergers and acquisitions to make inroadsin the foreign markets. They need to consolidate further in different parts of the world

to become trans-national players. Indian companies will have to rise above thestatement of Michael Porter (1990), that most multi-national firms are just nationalfirms with international operations. They shall certainly be at an advantage, as theirstrong national identities will give them a competitive advantage in the globalmarkets.

INDUSTRY STRUCTURE

The Pharmaceutical industry in India is fragmented with over 3,000 small/mediumsized generic pharmaceutical manufacturers. It has over 20,000 units out of which 300units are in the organized sector; while others exist in the small scale/unorganisedsector. The leading 250 pharmaceutical companies control 70% of the market withmarket leader holding nearly 7% of the market share. There are also 5 Central PublicSector Units that manufacture drugs. These companies are:· Indian Drugs & Pharmaceuticals· Hindustan Antibiotics Ltd.· Bengal Chemical and Pharmaceuticals Ltd.18· Bengal Immunity Ltd.· Smith Stanistreet Pharmaceuticals Ltd.The Indian pharmaceutical industry consists of manufacturers of bulk drugs andformulations. Bulk drugs include the active pharmaceutical ingredients (APIs) whichare used for the manufacture of formulations. According to estimates, the proportionof formulations and bulk drugs is in the order of 75:25. There are over 60,000formulations manufactured in India in more than 60 therapeutic segments. More than85% of the formulations produced in the country are sold in the domestic market.India is largely self-sufficient in case of formulations, though some life saving, newgeneration-technology-barrier formulations continue to be imported.The Indian pharmaceutical industry has the highest number of plants approved by theUS Food and Drug Administration outside the US. It also has the large number ofDrug Master Files (DMFs) filed which gives it access to the high growth generic bulkdrugs market. The industry now produces bulk drugs belonging to all majortherapeutic groups requiring complicated manufacturing processes and has alsodeveloped “good manufacturing practices” (GMP) compliant facilities for theproduction of different dosage forms. Setting up a plant is 40% cheaper in Indiacompared to developed countries and the cost of bulk drug production is 60-70percent less. The strength of the industry is in developing cost effective technologiesin the shortest possible time for drug intermediates and bulk activities withoutcompromising on quality. In accordance with WTO stipulations, India grants productpatent recognition to all New Chemical Entities.

INDUSTRY SEGMENTATION

Indian pharmaceutical industry can be widely classified into bulk drugs, formulationsand contract research. Bulk drugs are the Indian name for Active PharmaceuticalsIngredients (API). Formulations cover both branded products and generics. Indianpharmaceutical sector is self sufficient in meeting domestic demand and exportssuccessfully to various markets globally. The existence of process patents in India tillJanuary 2005 fuelled the growth of domestic pharmaceutical companies anddeveloped them in areas like organic synthesis and process engineering, as a result ofwhich, Indian pharmaceuticals sector is able to meet almost 95 percent of thecountry’s pharmaceutical needs. India is globally recognized as a low cost, highquality bulk drugs and formulations manufacturer and supplier. Contract Research, anascent industry in India has witnessed commendable growth in the last few years. As

per Yes Bank /OPPI report (2007-08), formulation segment (including domesticformulation and formulation exports) constituted 72%of the total pharmaceuticalindustry (in terms of sales) while bulk drugs and contract research constituted 25%and 3% of pharmaceutical industry respectively.

SEGMENT WISE SALES

CLASSIFICATION OF INDIAN PHARMACEUTICAL INDUSTRY

Formulations constitute nearly 81% and bulk drugs account for the remaining 19%. Indian pharmaceutical industry has about 2400 licensed manufacturers and more than 100,000 drugs.

On the basis of formulations, the pharmaceutical industry can further be classified into:Prescription medicines: Also known as ethical formulations. They can be dispensed only on the prescription from a qualified medical practitioner.Over-the-counter medicines: Also known as OTC formulations. They can be dispensed even in the absence of prescription, e.g. analgesics, cough drug, etc.

On the basis of formulations patent, pharmaceutical industry can be classified asBranded formulations: They are ethical formulations prepared using a bulk drug under product patent and are marketed by a single pharmaceutical company.Generics: They are formulations that do not contain any patented bulk drug and can be manufactured by more than one company.

DOMESTIC GROWTH DRIVERS:

Pharmaceutical sector is one of the most globalized sectors among the Indianindustries. The downside is pharmaceutical sector traditionally has been immune tobusiness cycles. The upside of Indian pharmaceutical sector, however, is influenced bya mix of global and local factors. Global factors are important as most Indiancompanies ship a major portion of their production to overseas markets. Also,multinationals operating in the Indian market follows the central research and globalmarketing model. Their actions are largely dictated by global trends although localissues are given due importance. The domestic market is critical for both Indian

companies and multinationals. For Indian companies, the domestic market lendsstability to bottom line and offer means to cope with fluctuations in global demand.The growth drivers for Indian pharmaceutical market are:

Growing Population and Improving Incomes: Household incomes are risingin India; the proportion of middleclass in Indian population is also increasing.Statistics show a clear migration of population towards middle and upperclasses. Rise in income levels is always accompanied by greater demand formedical facilities and pharmaceutical products. Middle class is already 70million strong and is expected to grow even fast, accounting for a higher shareof total population. Increase in living standards will lead to longer lifeexpectance and higher consumption of drugs and health care services.

Changing lifestyles: Rising incomes and improving literacy rates are leadingto change in lifestyles. While incomes provide the means to access medicalfacilities and products, improving literacy boost awareness about diseases andlead to higher consumption of drugs. Changing lifestyles, however, is leadingto a change in disease profile especially in urban areas. Hectic lifestyles andhigh cholesterol diets are resulting growing incidence of diseases such ascardio vascular diseases and cancer.

Research and Development: The R&D efforts of Indian companies havebeen largely focussed on chemical synthesis of molecules and their costeffective production thereof. India has a large pool of technical and scientificpersonnel with good English language skills. Indian scientists have developeda high degree of chemical synthesis skills while engineers have developedcompetencies in producing molecules cost effectively. These skills have helpedIndian companies tap generic markets abroad successfully in the past and willcontinue to do so.

Healthcare Expenditure: Indian healthcare system is largely run by the govtwith private sector playing a small, but important part. The healthcare systemin India comprises government hospitals in cities and towns and a network ofhealth centres in rural areas. This is supplemented by a string of privatehospitals and clinics in largely urban areas. The public expenditure on healthhas been growing at a decent rate while private expenditure has been recordingmarginal growth.

Insurance Sector giving a Lift: Indian insurance sector has been thrown opento private sector. Large sections of Indian population are not covered by healthinsurance schemes. Currently, less than 10% of the Indian population iscovered by some form of health insurance.

ADVANTAGES IN INDIA

Competent workforce: India has a pool of personnel with high managerial and technical competence as also skilled workforce. It has an educated work force and English is commonly used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs and exports sophisticated bulk drugs. 

Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal framework and strong financial markets. There is already an established international industry and business community. 

Information & Technology: It has a good network of world-class educational institutions and established strengths in Information Technology.

Globalisation: The country is committed to a free market economy and globalization. Above all, it has a 70 million middle class market, which is continuously growing. 

Consolidation: 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 generalized phenomenon in the world pharmaceutical industry, has started taking place in India.

Indian Pharmaceutical Sector: Current Scenario

According to the Economic Survey (2006-07), the pharmaceuticals industry had achieved a turnover of about US$ 12 billion in 2005-06, and is expected to grow by 13% in 2007. Its pharma export value reached about US$ 4.7 billion during 2005-06.

Pharmaceutical industry accounts for about 2.91% of total FDI into the country. The FDI in pharmaceutical sector is estimated to have touched US$ 172 million, thereby showing a compounded annual growth rate of about 62.6%. Drugs and pharmaceuticals sector is at 8th rank in India's top 10 FDI attracting sectors. According to the Economic Survey for the year 2006-07, the value of pharma output has increased ten times over the last 15 years.

From Rs. 50 billion in 1990 it has grown to Rs.550 billion (US$ 12 billion) in 2005-06. Driven by growing number of pharmaceutical units, increased knowledge skills, improved quality and increasing national as well as international demand, India is now recognized as a leading global pharma player.

Innovation, through more value to the user, through efficiencies in distribution, logistics and product promotion

The Indian pharmaceutical industry ranks 4th in terms of volume (with an 8 per cent share in global sales) 13th in terms of value (with a share of 1 per cent in global sales) Produces 20-24 per cent of the world's generic drugs (in terms of value 17th in terms of pharmaceutical export value

Drugs worth $ 190 billion in annual revenues would be vulnerable to generics

The global generics market is expected to grow at about 15 percent to reach $ 70 billion in the year 2008.

The rise in generics gives way to specialty products such as hormones, steroids, peptides

and biosimilars.

Global pharma industry would see revenue growth of only 5% to reach $ 735 billion in the year 2008.

CURRENT STATISTICS

India pharma Mkt size FY09 Rs 93881 ($19 bn) cr on the basis of sales, g=13% India is the world’s 4th largest producer of pharmaceuticals by volume (accounting for

around 8% of global production) In value terms, production accounts for around 1.5% of the world total. Employs around 500,000 Indian company meets 95% of domestic sales Fragmented industry contributes 1.6% to GDP. 5,600 smaller licensed generics manufacturers 270 large R&D based pharmaceutical companies in India and their share is around 70% India produces 22% of world generics Per capita consumption of drugs is very low $93 as compared to $412(Japan),

$222(Germany), $191(US) India among top 5 bulk drug producers in world Ranbaxy is 7th world’s largest generic manufacture

RESEARCH AND DEVELOPMENT

Government has taken various policy initiatives to strengthen R & D in the pharma sector.

Fiscal incentives are awarded to R & D units towards the development of new drug molecules, clinical research, new drug delivery systems, new R & D set ups and infrastructure provision.

Certain leading R & D companies have increased their Research and Development spending to over 5 percent of their turnover in comparison to an average spending of 2 per cent.

Pharma units interested in obtaining Income Tax Exemption under Section 35(2AB) need

to get their Research and Development unit recognized by CSIR. A Pharmaceutical R & D Promotion Fund to the tune of Rs150 crore has been established

for promoting R & D in the pharma sector.

Process of new drug development

PHARMACEUTICAL REGULATORY BODIES IN INDIA

National Pharmaceutical Pricing Authority (NPPA)-

· NPPA is an organization of the Government of India which was established,to fix/ revise the prices of controlled bulk drugs and formulations and toenforce prices and availability of the medicines in the country, under theDrugs (Prices Control) Order, 1995.· The organization is also entrusted with the task of recovering amountsovercharged by manufacturers for the controlled drugs from the consumers.33· It also monitors the prices of decontrolled drugs in order to keep them atreasonable levels.

Central Drugs Standard and Control Organization (CDSCO) –

CDSCO lays down standards and regulatory measures of drugs, cosmetics,diagnostics and devices in the country. It regulates clinical trials and marketauthorization of new drugs. It also publishes the Indian Pharmacopeia. The mainfunctions of the Central Drug Standard Control Organization (CDSCO) includecontrol of the quality of drugs imported into the country, co-ordination of the activitiesof the State/UT drug control authorities, approval of new drugs proposed to beimported or manufactured in the country, laying down of regulatory measures andstandards of drugs and acting as the Central Licensing Approving Authority in respectof whole human blood, blood products, large volume parenterals , sera and vaccines.The CDSCO functions from 4 zonal offices, 3 sub-zonal offices besides 7 port offices.The four Central Drug Laboratories carry out tests of samples of specific classes ofdrugs.

Department of Chemicals & Petrochemicals (DCP)

DCP is responsible for the policy, planning, development, and regulation of thechemical, petrochemical, and pharmaceutical industries in India. This departmentaims:· To provide impartial and prompt services to the public in matters relatingto chemical, pharmaceutical and petrochemical industries;· To take steps to speedily redressal of grievances received;· To formulate policies and initiate consultations with Industry associationsand to amend them whenever required.

“PATENT” THE KEY FACET OF INDIAN PHARMACEUTICAL INDUSTRY

WHAT IS A PATENT?

Patent is a legal document granted by the government giving an inventor theexclusive right to make, use and sell an invention for a specified period of time. It isalso available for significant improvements on previously invented articles. Theunderlying idea behind granting patents is to encourage innovators to advance thestate of technology. According to the UN definition, a patent is a legally enforceableright granted by country’s government to its inventor.Patent Law represents one branch of a larger legal field known as intellectualproperty rights. Patent Law centres on the concept of novelty and non-obviousinventions. The invention must me legally useful. The imitators and all independentdevisors are prevented from using the invention for duration of patent.

BACKGROUND OF PHARMACEUTICAL INDUSTRY WITH RESPECT TO PATENTS:

Indian Pharmaceutical industry is undergoing fast paced changes. The IndianGenerics market is witnessing rapid growth opening up immense opportunities forfirms. This is further triggered by the fact that generics worth over $40 billion aregoing off patent in the coming few years which is close to 15% of the totalprescription market of the US. The Indian pharmaceutical companies have beendoing extremely well in developed markets such as US and Europe. The quality andaffordability of generic drugs have made India a virtual pharmacy to the world.Nearly 70 percent of generic drugs manufactured in India are exported to otherdeveloping countries. The expansion of AIDS treatment over the past few years hasbeen driven by the accessibility and affordability of generic ARVs (anti-retro viraldrugs) from India.Pharmaceutical multinationals have maintained a low-key presence in Indian marketdue to absence of product patents and rigid price controls. In the domestic market,the share of Indian companies has steadily increased from around 20 per cent in 1970to 70 percent nowThe industry has thrived so far on reverse engineering skills exploiting the lack ofprocess patent in the country. This has resulted in the Indian pharmaceutical playersoffering their products at some of the lowest prices in the world. The quality of the36products is reflected in the fact that India has the highest number of manufacturingplants approved by US FDA, which is next only to that in the US.

Patents Act 1970 in its original form does not differentiate between Process andProduct patents for medicines, food and chemicals. One of the important features ofthe Act was that it did not provide product patents for the three mentioned industries.These industrial sectors were covered by product patent only. In addition the DrugPrice control Order, 1970 put a cap on the maximum price that could be charged andensured that the life saving drugs are available at reasonable prices. The Act of 1970safeguards the interests of the inventor and consumer in an even-handed manner. TheAct has been promulgated in keeping with the Socialistic Principles outlined in theDirective Principles of State Policy.Therefore with a regulatory system focused only on process patents, helped toestablish the foundation of a strong and highly competitive domestic pharmaceuticalindustry which in the grip of a rigid price control framework transformed into aworld supplier of bulk drugs and medicines at affordable prices to common man inIndia and the developing world.

PATENTING' INDEPENDENCE: 1972

The Indian Patents Act of 1972 granted independence to the Indian pharmaceuticalindustry. There was nothing much that Cipla or any other Indian pharmaceuticalcompany could do before that.The hands of all the Indian pharmaceutical companies were tied by the then patent lawthat put the interest of foreign monopolies before the health of millions of sufferingIndians. April 20, 1972 was a red-letter day for India. It was the day when the PatentsAct (Act 39 of 1970) came into force, replacing the Indian Patents and Designs Act of1911. The new Patents Act abolished product patents and allowed process patents forseven years only.Come to think of it, the rationale behind the patent amendment of 1972 was not verydifferent from the rationale behind the Independence movement. Our freedom-fightersessentially fought for the right to decide what was best for our country rather than bedictated to by foreign powers.The Indian Patents Act of 1972 granted the pharmaceutical sector the right to produceany drugs the country needed. It did away with the shackles imposed by monopoly. It

refused to let multinational corporations (MNCs) wear the noble garb of intellectualrights.If IT professionals give a thought to the significance of this old law they caneasily imagine what could have been the plight of the Indian IT industry if Microsoftand other software giants were to prevent any Indian from doing any developmentalwork on their software platforms???There are no two opinions on the view that the Amendment brought by the Act in1972, played an important role in avoiding the health care catastrophe.In 1971, MNCs had an over 70 per cent share of the Indian pharmaceutical industry.In 2007, in a reversal of roles, Indian companies commanded 83 per cent. In 1971,Alembic was the only Indian among the top 12 companies in the Indianpharmaceutical market. In 2007, there are only three MNCs in the top-12 list.Pharmaceutical business models are changing. The world is now discovering India asa preferred place for clinical research. In more ways than one, the industry appears setto keep up its growth and progress, but for the 2005 Act.Now we shall see in the next section of the report what exactly does the Patent Act

2005 indicate and suggest.

PATENTS AMENDMENT ACT (2005)

The Patent Amendment Act 2005 passed by the Parliament in its budget session of2005 brings the Indian Patent Act in full conformity with the intellectual propertysystem in all respects. The major amendments introduced in Sections 2 and 3 of theIndia patent Act suggest:An invention in order to be patentable, should:(i) involve an inventive step capable of industrial application;(ii) involve technical advances as compared to the existing knowledge or havingeconomic significance or both; and(iii) not be obvious to a person skilled in art.Section 3 outlines various situations where an invention (properly so called) can yetbe not patentable.Section 3(d) of the Patents Act 1970 has been amended under the new Act toprescribe a class of discovery which cannot be subject matter of patent under thefollowing clauses:

· Mere discovery of a new form of known substance which does not result inthe enhancement of the known efficacy of that substance· Mere discovery of any new property or new use for a known substance· Mere use of a known process, machine or apparatus unless such knownprocess results in a new product or employs at least one new reactant.Product Patents have been extended to fields of technology such as drugs, food andchemicals 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 inthe pharmaceuticals and chemicals is inventive ingenuity, novelty and existence ofindustrial application or economic significance of the new product or process.

SCENARIO POST TRIPS:The amendment of 2005 extends full TRIPS coverage to food, drugs and medicines.It requires patents to be provided to products as well. The other implications for thepharmaceutical sector under the new act are as follows· The term of a patent protection has been extended to twenty yearscompared to the seven years which was provided by the act of 1970.· If the law of the country provides so, then the use of the subject matterof the patent shall be permitted without the authorization of the patentholder, including use by the government or any other third partyauthorized by the government. However such use shall be permittedonly if prior to such use, the user has made efforts to obtain theauthorization of the patent holder and such efforts have not beensuccessful within a reasonable period of time. This requirement can bewaived in case of a national emergency after notifying the patentholder.· The onus of proving on a legal complaint that the process used by oneenterprise is totally different from that which has been used by another

would lie on the defendant. Prior to the amendment the responsibilitywas on the patent holder to establish patent infringement.

WHAT IMPLICATIONS DOES TRIPS HAVE FOR INDIAN PHARMACEUTICAL INDUSTRY?

If 1972 was motivated by national interest, 2005 was prompted by internationalpressure, by an ill-perceived need to "belong" to the international community. ThePatents Act 1972 resurrected a flagging domestic pharmaceutical industry. This Acthad a much wider purpose; to help the Indian who had to fight TB, diabetes and amultitude of diseases with affordable medicines.Every country has its own specific need-based patent laws, which are national laws.There is no harmonization in patent laws of different countries. Each country has todecide for itself its own destiny.Today we have a population of over 1,100 million. The diseases that used to worry usthe most are still around. There is the additional scourge of HIV/AIDS. Millions ofIndians need medicines. Most of them cannot afford to pay high prices.Going by global experience, product patents that are now again enforced, can onlylead to monopolies and these, in turn, to high prices. Africa and the AIDS issue of1990-2000 is a clear example.India needs to build in enough safeguards even in our current patent law. Perhaps inour haste to join WTO, we neglected many important issues.A product patent system will make India dependent on the multinational companiesfor technology and for permission to produce the patented drug. Exorbitant priceswill be charged and the Indian pharmaceutical industry will become subservient tothe MNCs. They will lose the position that they had gained in the wake of the Act of1970.The immediate and the most drastic effect that TRIPS compliance and introductionof the new Act of 2005 will have will be with respect to the health sector in India.The patients are the ultimate beneficiaries of the pharmaceutical research anddevelopment. By denying product patents India will be able to encourage bulkgeneric drug production at cheap prices.However generics are not the only solution to counter the problem of access tomedicines. Generic production of drugs will not necessarily result in the innovationof new and more effective drugs and by not acknowledging innovation India will runthe risk of not having access to future medicines which will in turn affect publichealth.

The actual problem lies in the fact that the product patents not only increase the costof the drugs and medicines, but that most of them fail to introduce research anddevelopment in the neglected diseases. Hence while on one side the introduction ofproduct patents will help in development of new and more effective drugs, theproblem still remains that the research and development undertaken by the drugmanufactures evade the neglected diseases and the diseases which are region specific

such as medicines for malaria and tuberculosis which are found prevailing indeveloping countries like India.

A DEBATE ON PRODUCT PATENT AMENDMENT- NOVARTIS CASE

Protestors marched in India against Novartis. WHY?Nearly a quarter of a million people from 150 countries voiced concerns over thenegative impact of a legal challenge brought by Novartis that could have on access tomedicines in developing countries and had asked Novartis to drop the case. Had thechallenge been won by Novartis it would have been a major blow to production,domestic use and exports of generics to the world. The drug at issue was a cancerdrug (Glivec) which Novartis sold at US$2500 per patient per month while genericversions of Glivec in India only cost about US$175 per patient per month.A court case brought by Swiss drugs giant Novartis in India could define how theindustry distributes discount medicine to the developing world while maintainingprofits.Novartis moved the court on contesting that India's patent law could leave millionswithout access to affordable drugs. Opponents accused the Basel-based firm ofsqueezing the competition.In 2005, the Indian government introduced patent protection for drugs for the firsttime. But the law only protects completely new compounds that were invented after1995, a deviation of the industry standard.The Novartis leukaemia drug Gleevec (Glivec in some countries) fell foul of thisruling as it was deemed to be a new form of an existing treatment that was developedbefore the cut-off date.This opened the door for generic pharmaceutical companies to copy the treatment,which was earlier distributed free to thousands of patients in India, at a fraction of thecost.

"We are deeply convinced that patents save lives. If the patent law is undermined theway it is happening in India, there will be no more investment into the discovery oflifesaving drugs," said Novartis head of corporate research Paul Herrling.The company insisted that it will continue to offer Gleevec free to patients in Indiawho cannot afford it.Watchdog groups such as Médicins sans Frontières, said generic competition hasdramatically reduced the cost of drugs. They launched a petition against Novartis

while hundreds of activists protested in the streets of the Indian capital, New Delhi.

Lot at stakeThe Geneva-based International Federation of Pharmaceutical Manufacturers andAssociations (IFPMA) was "very concerned" about the Indian patent law.Companies need to have assurances that they can obtain adequate patent protectionthat gives a fixed period of legal monopoly in which they can recoup what they haveinvested in research so that they can continue their research.Otherwise they would not have a sustainable industry and that will preclude theirability to improve treatments.But the Médicins sans Frontières argued that blocking cheaper generic copies wouldkeep the cost of treatments such as Gleevec artificially high.The consequence of a ruling in favour of Novartis would have led to fewer and fewerdrugs in the market. In the long term it would have killed the competition fromgeneric drugs.However it was admitted that even the Indian generic drug companies, althoughcapable of producing Gleevec at a tenth of that charged by Novartis for a monthlydose, were also looking to make a profit.Thus it cannot be said that Novartis are the bad guys of the movie and that thegeneric.

A POSSIBLE SOLUTION TO THE PRODUCT PATENT ISSUE. The most practicable solution to the problem which at the same time allows forTRIPs compliance would be granting of dual licenses. This would mean that thepatent would be partly product patent and after a reasonable time being given to theinventor to make a reasonably large profit it would be converted to a process patentwhereby the patented drug can be manufactured by competing manufacturers usingan alternative process. This would solve the problem of excessive hike in prices andwould render the drugs more accessible to the millions suffering. Collaboration withthe MNCs on various fronts such as research and development, manufacturing andmarketing will help Indian Pharmaceutical companies make profitablebreakthroughs.As far as India’s pharmaceutical industry is concerned, various options are possiblein the WTO regime. But ultimately, the path currently is followed by internationalstandards for patent protection moves inevitably toward a clash between publichealth and intellectual property.Stringent intellectual property protection for pharmaceuticals would only retardpublic health initiatives in the coming years. Given the rapid evolution of the AIDScrisis throughout the world, with more than 35 million cases alone in India, a twentyyearterm of market exclusivity for new treatments is not reasonable if we expect tomake real progress in containing the disease. It might well be appropriate for agoverning body to clearly define a list of essential medicines, such as antiretroviral(ARV) agents, that would be subject to somewhat more relaxed patent protectioncompared to other drugs.

INDIAN COMPANIES AS GLOBAL PLAYERS IN THE PHARMACEUTICAL INDUSTRY

ABOUT THE COMPANIES…..

RANBAXY LABORATORIES:

Source: Pharmaceutical Sales Busters

Ranbaxy Laboratories Limited is India's largestpharmaceutical company. Incorporated in 1961, Ranbaxy exports its products to 125 countries with ground operations in 46 and manufacturing facilities in seven countries. The company went public in 1973, and Japanese companyDaiichi Sankyo gained majority control in 2008.[1]

Atul Sobti is currently Ranbaxy CEO and Managing Director,[2] having taken over from Malvinder Singh in May 2009.

Formation

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a portmanteau word from the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir Singh and Gurbax Singh. After Bhai Mohan Singh's son Parvinder Singh joined the company in 1967, the company saw a significant transformation in its business and scale. His sons Malvinder Mohan Singh and Shivinder Mohan Singh sold the company to the Japanese company Daiichi Sankyo in June 2008.

Trading

In 1998, Ranbaxy entered the United States, the world's largest pharmaceuticals market and now the biggest market for Ranbaxy, accounting for 28% of Ranbaxy's sales in 2005.[citation needed]

For the twelve months ending on 31 December 2005, the company's global sales were at US $1,178 million with overseas markets accounting for 75% of global sales (USA: 28%, Europe17%, Brazil,Russia, and China: 29%). For the twelve months ending on December 31, 2006, the company's global sales were at US $1,300 million.

Most of Ranbaxy's products are manufactured by license from foreign pharmaceutical developers, though a significant percentage of their products are off-patent drugs that are manufactured and distributed without licensing from the original manufacturer because the patents on such drugs have expired

Acquisition

On June 11 2008, Daiichi-Sankyo acquired a 34.8% stake in Ranbaxy, for a value $2.4 billion. In November 2008, Daiichi-Sankyo completed the takeover of the company from the founding Singh family in a deal worth $4.6 billion by acquiring a 63.92% stake in Ranbaxy.

The addition of Ranbaxy Laboratories extends Daiichi-Sankyo's operations - already comprising businesses in 21 countries.[citation needed] For Ranbaxy, the deal frees up its debt and imparts more flexibility into its growth plans.[citation needed] The combined company is worth about $30 billion.

Dr. REDDY’S LABORATORIES:

Dr. Reddy’s Laboratories Ltd. trading as Dr. Reddy's, founded in 1984 by Dr. K. Anji Reddy, has become India’s second biggest pharmaceutical company. Dr. Anji Reddy had worked in the publicly-owned Indian Drugs and Pharmaceuticals Ltd. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has more than 190 medications ready for patients to take, 60 active pharmaceutical ingredients for drug manufacture, diagnostic kits, critical care and biotechnology products.

Dr. Reddy’s began as a supplier to Indian drug manufacturers, but it soon started exporting to other less-regulated markets that had the advantage of not having to spend time and money on a manufacturing plant that that would gain approval from a drug licensing body such as theU.S. Food and Drug Administration (FDA). Much of Reddy’s early success came in those unregulated markets, where process patents – not product patents – are recognized. With that money in the bank, the company could reverse-engineer patented drugs from more developed countries and sell them royalty-free in India and Russia. By the early 1990s, the expanded scale and profitability from these unregulated markets enabled the company to begin focusing on getting approval from drug regulators for their formulations and bulk drug manufacturing plants in more-developed economies. This allowed their movement into regulated markets such as the US and Europe.

By 2007, Dr. Reddy’s had six FDA-plants producing active pharmaceutical ingredients in India and seven FDA-inspected and ISO 9001 (quality) and ISO 14001 (environmental management) certified plants making patient-ready medications – five of them in India and two in the UK.[1]

Revenue: $ 1.5 Billion (May 2007)

Net Income:$216 Million (May 2007)

CIPLA LIMITED:

Cipla, is a prominent Indian pharmaceutical company, best-known outside its home country for manufacturing low-cost anti-AIDS drugs for HIV-positive patients in developing countries. Founded by Khwaja Abdul Hamied as The Chemical, Industrial & Pharmaceutical Laboratories, Cipla makes drugs to treat cardiovascular disease, arthritis, diabetes, weight control, depression and many other health conditions, and its products are distributed in more than 180 countries worldwide. [1] Among the hundreds of generic medications it produces for international distribution are atorvastatin, amlodipine, fluoxetine, venlafaxine hydrochloride and metformin. Recently, Cipla sold the manufacturing rights of its high-end emergency contraceptive pill, I-pill, to its pharma field counterpartNicholas Piramal (Piramal Healthcare) for

Rs. 95 crores. Cipla earned a revenue of total Rs. 33 crores (approx.) from the sales of their popular contraceptive pill, to date.

Technology services

Cipla offers services like consulting, commissioning, engineering, project appraisal, quality control, know-how transfer, support, and plant supply.

Apart from its presence in the Indian market, Cipla also has an export market and regularly exports to more than 150 countries in regions such as North America, South American, Asia, Europe, Middle East, Australia, and Africa. For the year ended 31 March, 2007 Cipla’s exports were worth approximately Rs. 17,500 million. Cipla is also considerably well-known for its technological innovation and processes for which the company received know-how loyalties to the tune of Rs. 750 million during 2006-07[citation needed]. Cipla has been approved by regulatory bodies such as:

World Health Organization

Food and Drug Administration (FDA), USA

Therapeutic Goods Administration (TGA), Australia

Pharmaceutical Inspection Convention (PIC), Germany

National Institute of Pharmacy (NIP), Hungary

The Medicines and Healthcare products Regulatory Agency (MHRA) is the UK government agency

Cipla has recently launched i-Pill which is a single dose emergency contraceptive and has acquired a great deal of popularity in a short span of time. Other latest launches of Cipla include products such as Nova, Moxicip, Flomex, Fullform, Montair LC, and Imicrit.

HIV/AIDS in the developing world

Today (2007), Cipla is the world's largest manufacturer of antiretroviral drugs[citation needed] (ARVs) to fight HIV/AIDS, as measured by units produced and distributed (multinational brand-name drugs are much more expensive, so in money terms Cipla medicines are probably somewhere down the list). Roughly 40 perent of HIV/AIDS patients undergoing antiretroviral therapy worldwide take Cipla drugs.[citation needed]

t developed a three-in-one tablet called Triomune containing a fixed-dose combination (FDC) of three ARVs (Lamivudine, stavudine and Nevirapine), something difficult elsewhere because the three patents were held by different companies. Another popular fixed-dose combination is produced under the name Duovir-N. This contains Lamivudine, Zidovudine and Nevirapine. Cipla manufactures generic versions of many of the most commonly prescribed anti-retroviral medication in the market[2], and is a highly capable manufacturer in its own right. India is quickly becoming a global player in the pharmaceutical industry, and many of these companys' (such as

Cipla) are evolving to become R & D companies and competing in the global marketplace.

Cipla is one of the first companies to register AIDS drugs under the US program PEPFAR.[3]

2007 AHF campaign

In August 2007 Cipla was confronted by a US-based group known as AIDS Healthcare Foundation (AHF) with a well-funded campaign of full-page ads in various Indian newspapers suggesting Cipla was pricing an AIDS drug called Viraday higher in India than in Africa.[4]

Antiflu and Virenza

In December 2008, Cipla won a court case in India allowing it to manufacture a cheaper generic version of oseltamivir, marketed by Hoffmann-La Roche (Roche) under the trade name Tamifluunder the Cipla tradename Antiflu. In May 2009, Cipla won approval from the World Health Organization certifying that its drug Antiflu was as effective as Tamiflu, and Antiflu is included in the World Health Organization list of prequalified medicinal products.

GLAXO SMITHCLINE:

Glaxo SmithKline is the world's leading research based pharmaceuticals company. It was formed on December 27, 2000 as a result of merger of two leading international organizations viz., GlaxoWellcome and Smithkline Beecham. 

The company is working hard to improve the quality of the human life by enabling people to do more, feel better and live longer. It believes that there is no achievement without integrity. The company has its headquarters in UK with operations based in USA, and has 85 manufacturing sites in over 37 countries. The company has combined sales of over 20 billion pounds, market share of about 7%, and intellectual property of more than 100,000 employees worldwide.

Out of these 100,000 employees, approximately 35% are in manufacturing units, 16% are in R&D, and 40% are in sales and marketing. The manufacturing plants of the company in India are located in Nabha, Rajahmundry and Sonepat, and have employee strength of about 2700.

GSK Consumer healthcare Ltd. and GSK Pharmaceuticals Ltd. are the two businesses of GSK

in India with headquarters at Gurgaon, Haryana. Its products include: 

1. GI & Analgesics: Crocin, and Eno 2. Rubefacients: Iodex3. Nutritional: Boost, Horlicks, Viva, and Maltova 

SUN PHARMACEUTICALS INDUSTRIES LTD.:

Type Public (BSE: 524715)

Industry Pharmaceutical

Founded Mumbai, India 1983

Headquarters Mumbai, India, India

Products Formulations & Bulk Drugs

Revenue ▲Rs. 42.7 billion INR (2009)

Net income ▲Rs. 18.7 billion INR (2009)

Employees 8000 (2008)

CADILLA HEALTHCARE LIMITED: 'Cadila Healthcare' is an Indian pharmaceutical company head quartered at Ahmedabad in Gujarat state of westernIndia. The company is the fifth largest pharmaceutical company in India,[1] with US$290m in turnover in 2004. It is a significant manufacturer of generic drugs.

Products

From nine pharmaceutical production operations in India as well as a major R&D operation Zydus Cadila develops and manufactures a large range of pharmaceuticals as well as diagnostics, herbal products, skin care products and other OTC products. The company also makes EverYuth Naturals Walnut Scrub & Ultra Mild Scrub -India 's leading scrub brand , EverYuth Naturals Golden Glow Peel-Off-the no. 1 in the peel-off category and a face wash range .It is also the maker of Sugar Free, India's most popularartificial sweetener,[1] and Nutralite, India's most popular cholesterol-free margarine.[2]

[Active pharmaceutical ingredient plants

The company makes active pharmaceutical ingredients at three sites in India:

Ankleshwar plants - Zydus Cadila's plant complex at Ankleshwar in Bharuch District of Gujarat, has been producing drug material since 1972. There are around 10 plants in the complex, which is ISO 9002and ISO 14001 certified as well as FDA Approved. Total plant capacity at Ankleshwar is around 180 million tonnes.

Vadodara plant - Zydus Cadila's plant at Dhabhasa, in Vadodara District's Padra taluka (in the eastern part of the district) in Gujarat, was commissioned in 1997 by a company called Banyan Chemicals, and acquired by Zydus Cadila in 2002. The plant has a 90 million tonne capacity. It is an FDA-approved facility that is also approved to WHO GMP guidelines.

Patalganga plant - Zydus Cadila acquired an API plant at Patalganga in Maharashtra state, 70 km fromMumbai, in the 2001 German Remedies deal. This plant operates to

WHO GMP standards.

WOCKHARDT LIMITED:

Type Public (NSE: WOCKPHARMA)

Industry PharmaceuticalsHealth care

Founded 1960s

Founder(s) Habil Khorakiwala

Area served Worldwide

Key people Habil Khorakiwala (Chairman)Murtaza Khorakiwala(Managing Director)Huzaifa Khorakiwala(Executive Director)

Products FormulationsBiopharmaceuticalsNutrition productsVaccines

Revenue ▲ USD 650 million

Employees 7,000 (2009)

INDIA’S TOP 10 PHARMACEUTICAL COMPANIES CONTRIBUTES

30% OF MARKET SHARE( on the basis of standalone sales).

Company Name MARKET SHARE %

Cipla Ltd. 5.60

Ranbaxy Laboratories Ltd. 4.76

Dr. Reddy'S Laboratories Ltd. 4.47

Sun Pharmaceutical Inds. Ltd. 4.03

Aurobindo Pharma Ltd. 2.98

Cadila Healthcare Ltd. 2.07

Glaxosmithkline Pharmaceuticals Ltd. 1.79

Matrix Laboratories Ltd. 1.60

Ipca Laboratories Ltd. 1.36

Orchid Chemicals & Pharmaceuticals Ltd. 1.29

OPPORTUNITIES

The main opportunities for the Indian pharmaceutical Industry are in the field of:

1. generics (including biotechnology generics)2. biotechnology3. outsourcing (including contract manufacturing, information technology (IT)

and R&D outsourcing)

Generics

Prescription drugs worth $40 billion in the U.S. and $25 billion in Europe are due to lose

patent protection by 2007-08. Indian firms will likely take around 30 percent of the

increasing global generics market, the Associated Chambers of Commerce and Industry of

India (Assocham) forecast. Currently, the Indian industry is estimated to account for 22

percent of the generics world market. Low production costs give India an edge over other

generics-producing nations, especially China and Israel, says Assocham's president

Mahendra Sanghi. He suggests that it will be easier for Indian firms to win larger generics

market shares overseas than at home, particularly in the U.S. and Europe.13

Indian drug manufacturers currently export their products to more than 65 countries

worldwide.14 Their largest customer is the U.S., the world's biggest pharmaceutical market.

The use of generic drugs is growing quickly in the U.S. due to cost pressure by payers and

the introduction on January 1 this year of the Medicare Part D prescription benefit, giving

seniors and people with disabilities prescription drug coverage for the first time. With 74

facilities, India has the largest number of U.S. Food and Drug Administration (FDA)-

approved drug manufacturing facilities outside the U.S. Indian firms now account for 35

percent of Drug Master File applications and one in four of all U.S. Abbreviated New Drug

Application (ANDA) filings submitted to the FDA.15 Analysts at Credit Lyonnais Securities

Asia say they expect the number of generic drug launches by Indian companies in the U.S.

to increase from 93 in 2003 to over 250 by 2008.16

Biotechnology Generics

Firms based in India and China could be among the first to bring biogenerics (generic

versions of biological products) to the regulated markets and faster than expected. The first

biogeneric product was approved by the European Medicines Agency (EMEA) which refers

to these products as “biosimilars,” in April 2006.

IMS estimates that biotechnology products accounted for 10 percent of global pharmaceutical

sales in 2004, or about $55 billion in worldwide sales for the year.19 By 2003, the U.S.

accounted for 62 percent of the global biotech drugs market, while in that year Japan's

share of the total had fallen to 7 percent from 28 percent in 1994.20 Patents on the first

generation of blockbuster biopharmaceuticals are beginning to expire, and the high cost of

these products means the generic versions will find large markets among hard-pressed

governments and other payers. Sales of biogenerics are flourishing in the unregulated

markets. The only regulated-market approvals so far are in Australia, granted in October

2004 for the recombinant DNA growth hormone Omnitrope, manufactured by Sandoz,

as well as in the EU, granted in April 2006.

An early beneficiary when the regulated markets finally establish frameworks for biogenerics

is likely to be Wockhardt.22 This pharmaceutical and biotechnology company was one of

the first Indian drug manufacturers to enter the European market, achieving this through a

series of acquisitions; it now has three subsidiaries in Europe, acquiring first The Wallis

Laboratory in 1997 and CP Pharmaceuticals in 2003, both in the UK, then Esparma of

Germany in 2004.

Biopharmaceuticals are central to Workhardt's growth strategy, and the firm expects this

area of its business to take off in 2006. Reporting at the end of December 2005, it says it

has more than 55 registrations for biopharmaceuticals pending, and 26 approvals in 18 countries. According to analysts at SSKI India, Wockhardt is one of the few players in India,

and even globally, to have the requisite capabilities in biogenerics production.23

Biotechnology

In 2003-04, biopharmaceuticals accounted for 60 percent of India's total biotechnology

market, which was worth an estimated $709 million-up 39 percent over the previous period.

Investment in the sector was up 26 percent to $137 million-and exports accounted for 56

percent of industry revenues. The domestic biopharmaceuticals sector grew 38.5 percent

and had the largest local market share, at 76 percent, followed by bioagriculture at 8.4

percent, bioservices at 7.7 percent, and industrial products at 5.5 percent and bio-informatics

at 2.5 percent.25

With 200 biotech companies and total revenues of $500 million annually, India's

biotechnology sector is still in the relatively early stages of development. However, it is

growing fast, with an initial emphasis on vaccines and bioservices. The industry is situated

mainly in Karnataka, although there are operations in Andra Pradesh, Hyderabad, Kerala,

Maharashtra and West Bengal. The top 10 players in terms of revenues in 2004 were

Biocon, Serum Institute of India, Panacea Biotec, Nicholas Piramal, Novo Nordisk,

Venkateshwara Hatcheries, Wockhardt, GSK, Bharat Serums & Vaccines, and Eli Lilly & Co,

reports Burrill & Co, the U.S.-based life sciences merchant bank. As is generally the case

worldwide, most biotech companies in India have developed along the contract or

collaborative research models.

Observers also warn that India's nascent biotechnology sector could face particularly strong

competition from China, the only developing country to participate in the international

Human Genome Project.27 Also, massive levels of state investment mean Chinese firms are

now producing hepatitis vaccines, recombinant insulin, interferon and other generic

therapeutic biologics. As is the case throughout the industry, India is regarded as having the

edge over China in terms of qualified, English-speaking employees, intellectual property

rights, and judicial and quality standards. However, if China does emerge as the dominant

biotechnology player, this could have very serious implications for India.

Outsourcing

IT Outsourcing

India's status as an information technology superpower, with access to specialist skills and

24/7 work hours, is a huge advantage as it strengthens its position as the destination of

choice for contract research, including drug discovery. Eighty-two percent of U.S.

companies overall rank India as their first-choice IT outsourcing destination, says leading

international clinical research organization Chiltern International,28 adding that IT and ITenabled

services (ITES) companies have been expanding their activities in India to new

business segments such as bioinformatics and life sciences; those doing so or planning to

include Accenture, Intel, Satyam, Cognizant, IBM, Oracle and TCS. Wipro Spectramind,

India's largest third-party offshore business process outsourcing provider, is conducting

bioinformatics work for global pharmaceutical companies.

MNCs that have already entered into off shoring contracts include Pfizer India, which has

signed a preferred provider contract for its biometrics division with Cognizant Technologies

India and is also working with SIRO Clinpharm; Wyeth, working with Accenture in clinical

trial data management; GSK, whose biomedical data sciences and clinical data management

centre in Bangalore supports studies for the group worldwide; and Novartis, which has a

software development centre for specialized drug development programs.

Contract Manufacturing

The global pharmaceutical market is estimated to represent a $48 billion opportunity for

India by 200730, in terms of:

• manufacturing outsourcing-supply of active pharmaceutical ingredients (APIs) and

intermediates

• development outsourcing-conducting preclinical and clinical trials

• customized chemistry services-contract research services for compounds pre-launch.

Worldwide revenues for pharmaceutical industry contract manufacturing and research

services (CRAMS) totaled $100 billion in 2004 and will grow at an average annual rate of

10.8 percent to reach $168 billion by 2009, say analysts at Frost & Sullivan. Within this

total, the global market for contract manufacturing of prescription drugs is estimated to

increase from a value of $26.2 billion to $43.9 billion, although the over-the-counter

medicines and nutritional products sector will show the fastest growth.31

The Asian region has recently been challenging North America and Europe's traditional

domination of the global pharmaceutical contract manufacturing market: India and China

could potentially account for 35 percent to 40 percent of the outsourced market share for

active pharmaceutical ingredients, finished dosage formulations and intermediates.

Two major developments suggest that Indian drug manufacturers are set to benefit from

an outsourcing boom. First, such an upsurge in business always occurs when a number oftop-selling drugs come off-patent, as is about to happen. Second, the arrival of India'sproduct patent regime has increased international companies' confidence in India'soutsourcing industry. At the same time, those Indian firms that will not have the ability toinvest in R&D will be able to exploit the strengths they have developed as the world'sleading suppliers of affordable essential drugs.

SWOT ANALYSIS OF PHARMA SECTOR

Strengths

Cost effective technology

Strong and well-developed manufacturing base

Clinical research and trials

Knowledge based, low- cost manpower in science & technology

Proficiency in path-breaking research

High-quality formulations and drugs

High standards of purity

Non-infringing processes of Active Pharmaceutical Ingredients (APIs)

Future growth driver

World-class process development labs

Excellent clinical trial centers

Chemical and process development competencies

Indian manufactures can produce drugs at 40% to 50% of the cost to the rest of the world. In some cases, this cost is as low as 90%.

Well developed chemistry R & D and manufacturing infrastructure with proven track record in advanced chemistry capabilities, design of high tech manufacturing facilities and regulatory compliance

Weaknesses

Low Indian share in world pharmaceutical market (about 2%)

Lack of strategic planning

Fragmented capacities

Low R&D investments

Absence of association between institutes and industry

Low healthcare expenditure

Production of duplicate drugs

The NPPA (National Pharma Pricing Authority), sets prices of different drugs, which leads to lower profitability for the companies

Large no. of small players increases competition and reduces efficiency

Opportunities

Incredible export potential

Increasing health consciousness

New innovative therapeutic products

Globalization

Drug delivery system management

Increased incomes

Production of generic drugs

Contract manufacturing

Clinical trials & research

Drug molecules

The new patent product regime will bring with it new innovative drugs. This will increase the profitability of MNC pharma companies and will force domestic pharma companies to focus more on R&D

Large number of drugs going off-patent in Europe and in the US between 2005 to 2009 offers a big opportunity for the Indian companies to capture this market

Can become a global outsourcing hub for pharmaceutical products

Threats

Small number of discoveries

Competition from MNCs

Transformation of process patent to product patent (TRIPS)

Outdated Sales and marketing methods

Non-tariff barriers imposed by developed countries

Containment of rising health-care cost.

Stricter registration procedures

High entry cost in newer markets

Threats from other low cost countries like China and Israel exist

MAJOR ISSUES CONCERNING PHARMACEUTICAL COMPANIES IN INDIA

Failure of the new patent system: Prerequisites associated with Sec 3(d) of the Patent (Amendment) Act 2005 restrict the copyright of an existing drug. Moreover, mandatory licensing permits Indian companies to keep producing generics of copyright products for overseas selling to underdeveloped nations.

Lack of proper infrastructure: Issues associated with regular power cuts and lack of suitable transport infrastructure will decelerate the expansion of the sector.

Inadequate funds: Restricted funding from FIs, venture capitalists and the government may decelerate the expansion of biotechnology sector in India.

Regulatory impediments: Rising of due meticulousness and conformity with product standards leads to high costs and interruption in the launch of new products.

Severe competition: Low margins and restricted capital to assist R&D is the result of intense pricing competition among local producers. This rivalry will further deepen from the joining in of the big drug companies in the Indian market to control the cost benefit and large reserve sources.

Key findings

The Indian pharmaceutical market was valued at $7,743m in 2008, an increase of 4.0% over 2007. Business Insights anticipates that Indian pharmaceutical market will grow at a faster pace than the global pharmaceutical market, approximately at a CAGR of 13.2% during 2009-14 to reach a total value of $15,490m in 2014.

ndia has emerged as a key destination for global pharmaceutical companies due to its high growth prospects led by ageing population, changing disease profile, and improving patent regime and socio-economic conditions.

The Indian pharmaceutical market is highly competitive and fragmented with the top 10 players accounting for 36.1% of the total R&H sales in 2008.

India started to comply with World Trade Organization's Trade Related Aspects of Intellectual Property Rights (WTO-TRIPS) agreement and recognized product patents with the amendment of the Indian Patent Act in January 2005. Indian companies plan to capitalize on Japanese government initiatives to promote generic drugs to reduce healthcare costs.

THE GROWTH SCENARIO

India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per year. It is one of the largest and most advanced among the developing countries. 

Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year 2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk drugs will account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%). In financial year

2001, imports were Rs 20 bn while exports were Rs87 bn.

KEY EXPECTATIONS FROM BUDGET

CUSTOM DUTY

Exemption of custom duty for import of all capital goods, inputs, consumables and reference standards for R&D purposes

Extension of customs duty exemption to more life saving drugs and other anti–Aids and anti–cancer formulations

EXCISE DUTY

Goods manufactured in R&D centres should be exempted from excise duty and service tax

Extension of excise duty exemption to more life saving drugs and other anti –Aids and anti –cancer formulations

OTHERS

Strengthen and increase capital outlay for academic institutions engaged in scientific research

Requirement of a single window clearances instead of multiple clearances from different institutions for testing a new molecule

Passing of Central Drug Authority Bill –pending for the last five years

Removal of cost based price controls

Continuation of the tax shelter in specified zones like Himachal Pradesh, Sikkim and Jammu

Cut off date for the tax holiday should be extended till March 31, 2012.{1}

Benefit should be expanded to cover expenditure incidental to research carried outside R&D facility such as clinical trials, bio-equivalence studies etc carried on in India or in any foreign country.

STEPS TO STREGHTHEN THE INDUSTRY

Indian companies need to attain the right product-mix for sustained future growth. Core competencies will play an important role in determining the future of many Indian pharmaceutical companies in the post product-patent regime after 2005. Indian companies, in an effort to consolidate their position, will have to increasingly look at merger and acquisition options of either companies or products. This would help them to offset loss of new product options, improve their R&D efforts and improve distribution to penetrate markets.

Research and development has always taken the back seat amongst Indian pharmaceutical companies. In order to stay competitive in the future, Indian companies will have to refocus and invest heavily in R&D.

The Indian pharmaceutical industry also needs to take advantage of the recent advances in biotechnology and information technology. The future of the industry will be determined by how well it markets its products to several regions and distributes risks, its forward and backward integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-marketing and licensing agreements.

THE FUTURE OF INDIAN PHARMACEUTICAL INDUSTRY

The dream of Indian pharmaceutical companies for marking their presence globallyand competing with the pharmaceutical companies from the developed countries likeEurope, Japan, and United States is now coming true. The new patent regime has ledmany multinational pharmaceutical companies to look at India as an attractivedestination not only for R&D but also for contract manufacturing, conduct of clinicaltrials and generic drug research. With market value of about US$ 45billion in 2005,the generic sector is expected to grow to US$ 100billion in the next few years.The Indian companies are using the revenue generated from generic drug sales topromote drug discovery projects and new delivery technologies. Contract research inIndia is also growing at the rate of 20-25% per year and was valued at US$ 10-120million in 2005. India is holding a major share in world's contract researchClinical Research Outsourcing (CRO), a budding industry valued over US$ 118million per year in India, is estimated to grow to US$ 380 million by 2010, as MNCsare entering the market with ambitious plans. By revising its R&D policies thegovernment is trying to boost R&D in domestic pharmaceutical industry. It is givingtax exemption for a period of ten years and relieving customs and excise duties of allthe drugs and material imported or exported for clinical trials to promote innovativeR&D.The future of Indian pharmaceutical sector is very bright because of the followingfactors:

Clinical trials in India cost US$ 25 million each, whereas in US they cost between US$ 300-350 million each.

Indian pharmaceutical companies are spending 30-50% less on custom

synthesis services as compared to its global costs. In India investigational new drug stage costs around US$ 10-15 million, which

is almost 1/10th of its cost in US (US$ 100-150million). Treatment to prevention, from generalised to personalised medicine, from

distribution chain to direct consumer sales and from multilateral to unilateral regulatory regime.

With market value of about US$ 45billion in 2005, the generic sector is expected to grow to US$ 100billion in the next few years.

Clinical Research Outsourcing (CRO), a budding industry valued over US$ 118 million per year in India, is estimated to grow to US$ 380 million by 2010

WHAT IS IN STORE FOR THE FUTURE?

We can expect a significant level of consolidation- a major portion of smallplayers are likely to be wiped out.

Many of the existing players are family owned businesses .No one should besurprised if many more deals on the lines of the Ranbaxy-Daiichi deal comethrough. It is the classic “bird in the hand” principle –if the founders can earn afew billions without too much effort, why should they spend hundreds ofmillions and ten years or more in trying to develop new drugs.

The present scenario presents an excellent opportunity for multinationalenterprises to establish manufacturing bases in India through the take-over

route. The availability of talented scientists at a relatively low cost makes India an ideal location for manufacturing quality drugs. A word of caution is necessary though such enterprises may have to follow a dual pricing policy, one for the local market and another for the global market.

The Indian government would do well to take another look at its policies There is not much incentive for companies to invest in new drugs. The

corporations engaged in R&D need tax breaks and innovative incentives.

ISSUES AND CHALLENGES

1. Mergers and AcquisitionsCurrently, as the generics business is weighed down by stiff competition and decliningR&D productivity, alliances and partnerships is the need of the hour for thepharmaceutical industry rather than the preference. In recent times, most of theleading players have inked M&A deals across the globe. In 2006, the domestic pharmasector executed more than 40 deals with 32 cross border transaction worth US$ 2000mn and it includes deals like Dr Reddy’s acquisition of Betapharm of Germany forEuro 480 mn (Rs 2550 cr) and Ranbaxy Terapia buy in Romania for US$ 324 mn (Rs1250 cr approx). In 2007, Indian pharma sector witnessed 25 Mergers & acquisitiondeals, with 15 cross border transaction worth US$ 600-700 mn. Mergers and acquisitions have proven tool to seize growth opportunities and iswidely resorted to by players by either moving up the value chain or by integratingdownstream production. More mergers & acquisitions and consolidation activity innear future is expected which is driven in the medium term by implementation of the

new patent regime and generic companies looking to establish a low-cost base out ofthe country.

2. Attracting and retaining a skilled workforceThe pharmaceutical business is knowledge and experience business and people havealways been one of the most important resources for any pharmaceutical or biotechcompany. We can talk about brand but the people in a company, in particular in theirbehaviour, represent a living brand. We can focus on intellectual property but that isthe creation of the people, and people joining or leaving a company will add to orreduce the sustainable intellectual property. We can talk about markets, but to accessany market you need people with a good understanding of that market and the cultureand values of customers and suppliers. Increasingly we talk about regulation and103compliance as thought they are some abstract function of a company. In practice weare describing the collective values and integrity of the individual members of staff,and the way they are motivated to behave in particular situations. So people are keybut how any organisation ensure that it can attract, recruit, develop, and motivatethose individuals with the competencies that will set that business apart from those ofcompetitors. The first challenge is that there are increasing signs that the labourmarket is moving in favour of the employee rather than the employer. There isgrowing demand for skilled people but traditional labour markets are providing fewernew people with the right qualifications and experience; and companies are stilltrying to recruit people with ever-more-specialised knowledge. It is possible torecruit from new markets, but this is a new competence for many companies.

3. Controlling operating costsIt is accepted knowledge that the pressure to control and reduce costs is one of thenext major challenges to be faced by the pharmaceutical industry. But how is thisdone and what is the best approach? Understanding and controlling operating costs isa critical first step to developing or sustaining competitive advantage. Increasinggeneric competition, imminent patent expiries (revenue can decrease by up to 60% atpatent expiry), shorter pipelines and the emergence of China as a low costmanufacturing base all contribute to constantly eroding margins. To maintain orincrease margins in the future, leading pharmaceutical companies have to start takinga proactive approach immediately to understanding costs. As the pharmaceuticalindustry embraces these new challenges, the companies that emerge at the forefrontwill be those who address the issues now and are able to account for all the coststhroughout their organisation. To achieve this advantage, companies have to startrecognising and targeting costs today. Research & Development (R&D) costs arespiraling as companies race to discover the next blockbuster, but where is the moneyto fund this research going to come from? These questions are important as the costsof operations are concerned.• How are costs distributed throughout your company?• Where should you focus your cost reduction efforts for greatest benefit?• How are you going to use to tackle these costs?• Have you identified all the hidden costs?• How do you compare to the best-in-class?104• What is your baseline and what can you achieve?

• Where are you going to start?Cost is complicated, ranging from back office through manufacturing and quality tosales. To gain real benefits a structured programme of cost identification andimprovement has to be in place.

4. InfrastructureCompared with western industrial nations, energy prices are low but companies mustexpect repeated power cuts and offset fluctuations in the electricity network with thehelp of emergency power generators. In many areas, the hot and humid climate makeshigh demands on climate technology at production plants and on the refrigeration offinished products. Insufficient energy supply also leads to a situation whereproduction hours must be handled very flexibly. This shortage can only be eliminatedin the medium term and will require maximum effort. However, India’s governmentintends to expand power generation capacities to roughly 240 GW by the end of the11th five-year plan in 2012. This would mean a more than 100 GW, or nearly 90%,increase on today's total. Moreover, the country’s lacking transport infrastructure isincreasingly turning into a major obstacle. The pharmaceuticals industry is especiallydependent on road transport. However, the major transport links are chronicallycongested and many are in a poor state of repair. Of the total road network coveringjust over 3.3 million kilometres, only about 6% are relatively well built National andState Highways. In many cases, there are no paved surfaces or there is only one lanefor all traffic. But the government has launched an extensive investment programmeentitled the National Highway Development Programme, to be implemented by themiddle of the next decade.

5. Impact of new patent lawLegal changes in India in 2005 made it considerably more difficult to produce “new”generics. Foreign pharmaceuticals, which enjoy 20 years of patent protection, can nolonger be copied by means of alternative production procedures and sold in thedomestic market. Hence, a reorientation was required in India’s pharmaceuticalindustry. It now focuses on drugs developed in-house and contract research or contract105production for western drug makers. Thus this transition phase of reorientation is achallenge for the industry.

CONCLUSIONIndia has the capability to become a global pharma hub by exporting domestically produced generic products and positioning itself as an off shoring destination for clinical and pre-clinical research and other support services. There is tremendous potential in the Indian pharma market itself. Consumer spending on healthcare went up from 4 per cent of GDP in 1995 to 7 per cent in 2007. That number is expected to rise to 13 per cent of GDP by 2015. The Indian market has some unique advantages. India has a 60-year-old thrivingdemocracy. It has an educated work force and English is business language. It has asolid legal framework and strong financial markets. More than 9,000 companies arepublicly listed. Professional services are easily available. There is already anestablished international industry and business community. It has a good network of

world-class educational institutions and established strengths in informationtechnology. The country is now committed to an open economy and globalisation.Above all, it has about 200 million middle class markets, which is continuouslygrowing. Over time the international pharmaceutical industry has been finding greatopportunities in India.The Indian pharmaceutical industry players in the future can continue to look forward108with confidence. There are immense opportunities for pharmaceutical players both atthe domestic as well as the global level, but along with opportunities are challengeswhich need to be overcome in order to achieve sustainable growth in the future. Thefuture will be extremely promising with many more milestones to come in the journeyof the Indian pharmaceutical industry

BIBLIOGRAPHY

1-Research paper on “Critical Challenges & Issuesin Patent Documentation”by Ashutosh Nigam

(Asst Professor, Dept of ManagementStudies,Vaish College of Engineering, Rohtak)

2-www.oppi.com

3-www.capitaline.com

4- www.google.com

5-. www.wikipedia.com

6-. www.altavista.com

7-www.pharmainfo.com