The Indian Pharmaceutical Industry is a highly

The Indian Pharmaceutical Industry is
a highly fragmented industry with around 24000 players out of which only 330 in
the organized sector and over 15000 units falling in the small scale sector. It
accounts for 1.4% of the world’s pharmaceutical industry in terms of value and
10% in terms of volume ranking globally 10th in terms of value and 3rd
in terms of volumes. The Indian Bio – pharmaceutical industry stood at a 17%
growth rate with revenues reaching around US $ 12.2 billion in FY 2009 –
10.  In 2013, the Indian Pharmaceutical
Market was valued at US $ 16.4 billion as against US $ 14.9 billion in 2012 and
is set to become the 8th largest pharma market globally by 2015. There are 167
pharmaceutical companies listed on the BSE, out of which the top 10 companies
make up for more than 1/3rd of the market.

The Pharmaceutical industry has
facilitated the increase in the life expectancy; along with the reduction of
infant mortality rates, death rate and birth rate which is significant because
sanitation and environmental hygiene had not improved during the period of 1951
to 2003. While previously identified for the manufacture of generic drugs; the
Indian pharmaceutical industry has spread into research and development (R
& D); manufacture of APIs and branded generic drugs and clinical research.
India is now becoming a preferred location for manufacture of APIs and branded,
generic and branded generic medicines and the export scene is booming too; with
the US being the highest consumer (about 40%). The industry is now spending
almost 18% of revenue on research and development.

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The involvement of the Indian
government in the pharmaceutical industry has been wrought with controversy and
conflicts; as it tries to organize the sector and to encourage the growth thus.
With the unveiling of Pharma Vision 2020; the Indian government has provided
for reduction in the time cycle of approval process for setting up new
facilities; along with implementation of the Drug (Prices Control) Orders and
National Pharmaceutical Pricing Authority (NPPA) to deal with affordability and
availability of drugs.

The IPR issue which has raised its
head since the 1970s also has become belligerent in the country. Because of the
huge population of the country and the inability of a large part of it to meet
the expense of medicines; the authorities in India were not active in pushing regulations.
The scene has changed though, with regulators becoming more informed and open
to the vitality of IPR for the greater good of the industry. Crucial changes in
the patent laws came with the enactment of the Patent Act of 2005, making the
laws TRIPS compliant. Before the amendment came the product was not patentable
and the companies could only patent the process. So a different company could
manufacture the product with a different process. This became a cause of
concern for the branded companies as their innovations were left protection
less. The act removed the composition patents from food and drugs and the
process patents were shortened to a period of 5 to 7 years. This resulted in
the foreign players losing their interest in a market which did not have patent
protection, thus opening an opportunity for the Indian companies to create a
favorable position for themselves in both National and global markets with
their expertise in reverse engineering new processes of manufacturing drugs at
low costs. The amendment also made it possible for the product to be patented
with the process for a period of 20 years along with special provisions for
preventing patents becoming ever green. The amendment is a milestone in the
intellectual rights protection in India. One more noticeable tendency in the
IPR scene is the enforcement of trademark contraventions; which is reassuring
as they would otherwise lead to wrong use of drugs. Although trademark disputes
are a common occurrence in India, clarity is emerging due to amendments in the
laws of India.

The replacing of the
Monopolies and Restrictive Trade Practices Act, 1969 with the Competition Act
in 2002 helped establish the Competition Commission of India (CCI), which has
since promoted transparency in the prevalent working practices of the Indian
Pharmaceutical Industry. The market in India was ruled by a number of national
and state level chemist and druggist associations; and whenever a company
wanted to develop a distribution channel to appoint stockists or distributors;
an NOC from these associations was essential. The CCI held such practices as
anti – competitive and thus passed several orders against this; an act welcomed
by numerous Pharmaceutical companies; paving way for transparent and accountable
actions. The CCI has wedged a crucial impact on the root of market mechanics in
distribution of drugs in our country. The channel partners are now steering
away from any out of way arrangements which would have anti-competitive
consequences and are becoming transparent in the distribution system.

Moving forward towards the
FDI in pharmaceutical industry; some major concerns in allowing FDI include the
assurance of a non-interrupted supply of medicines, non – discontinuance of
essential medicines and the increase in volume of drugs over time. The policy
thus has to strike the exact balance between meeting the needs of our over
populated country and the capital requirements of the industry to help it grow.
Currently, FDI up to 100% is allowed in the Brownfield investments with the
Foreign Investment Promotion Board; while 100% is permitted without the
approval FIPB in Greenfield investments.

The Indian Pharmaceutical industry
has gained huge FDI inflows but has also sparked debates on the effects of
these investments. The Brownfield investments have invited the antagonism from
many quarters stating the need of growth in the industry not only on basis of
investments but also in terms of sharing technology, production capacity and
generating employment opportunities which would boost sustainability of such
relationships. But the issue faced commonly is due to the non-compete clauses
which restrain the selling promoters from getting into similar business. The
validations of these clauses are argumentative and effects thus are both
positive and negative. The CCI has tried to bring about changes to a certain
extent and the FIPB too has sought to bring some clarity into it; where
non-compete clauses are not permitted unless in exceptional situations. There
still are a lot of grey areas in the interpretation of these exceptional
situations and it would be intriguing to see the FIPB’s treatment of these
situations in the future.

Another conflict arises
from the pricing issues faced by Pharmaceutical companies in India. Unlike
other countries, the market in India is dominated by prices and the companies
usually find themselves pitched opposite the regulators on these issues very
often. The 1970s brought along with them the raging pricing wars for the
pharmaceutical companies with the government restricting the profitability
through the Drug Price Control Order (DPCO). There are three tiers of
regulations – on bulk drugs, on formulations and on overall profitability. This
has made the profitability of the sector susceptible to the whims and fancies
of the pricing authority. In connotation, with pricing policy of 354 drugs,
NLEM (National list of essential medicines) was released, including the list of
the drugs which the authority intends to put under price control. The policy is
being firmly opposed by the pharmaceutical industry. The NPPA was established
in 1997, to decide and review the prices of controlled drugs and formulations
and to administer the same in India. The NPPA’s directives extend to monitoring
the prices of essential drugs along with keeping them at reasonable costs. The
initiatives of the NPPA are welcomed by the people of India, as it has made
health care affordable but the pharmaceutical companies view it as a setback
due to the revenue losses. It is expected that with NPPA as an alert regulator
in this fast growing industry, price control is going to be a belligerent
issue.

As for the SMEs in the
industry; the weather doesn’t seem sunny as for the larger players. The change
in the excuse structure has resulted in the large companies reducing the outsourcing
and shifting operations to Tax Free States. But the resultant reduction in the
excise from 16% to 8% and then to 4%; had the factories start third party
manufacturing; which left the SMEs struggling with the taxes and unable to
upgrade their plants, bringing closure of many such SMEs.

To promote research and
development activities in the pharmaceutical industry; the privatization and
globalization policy of the mid 1990s gave exemption to the industry from price
control, while financial schemes were also introduced for promoting research
and technology collaborations. But all these have not had the desired impact it
seems. Even the large players; after pumping in more funds have spent only 5 –
10% of their revenues on R & D, lagging behind Western companies like
Pfizer, whose research budget in 2013 was greater than the combined revenues of
the entire Indian pharmaceutical industry. The R&D spends of the top five
Indian companies comes to about 5% to 10% of revenues. This ratio is still way
below the global average of 15% to 20% of sales. Indian companies have adopted
various strategies for their R&D efforts. Some have entered into
collaboration and partnership agreements with innovator companies; others have
out-licensed their molecules for milestone payments. Hiving off R&D units
into separate companies has also become a preferred option for many Indian
pharma players. This gap becomes wider due to the advances in genomics which
have made research equipment more expensive. Due to this disconnect between the
curriculum and the industry, the pharmaceutical companies in India lack the
knowledge bank that is required for the advancement of research in the sector.
That said, given that the research pipelines of Big Pharma are drying up, they
have now begun to experiment in generics. In this regard, these innovator
companies are either buying out Indian firms or are forging alliances with
them. A paradigm shift has been brought about in the country where now more
than 870 multinationals have set up R & D operations.

The investors in India
appreciate the cost effectiveness of setting up research facilities here as
compared to the western countries. The clinical trials and other research
expenses cost up to 1/10th and 1/8th of the cost in the
West. That apart, the skill sets available in India are high in intellectual
quality and low in costs while the existing R & D facilities provide state
of the art infrastructure to use these skill sets. The fast growing disposable
incomes in the middle class households has also acted as a catalyst to the
growth of non-essential drugs market. Also, India’s rich biodiversity provides
the required gene structure for R & D and clinical trials. All these
advantages have catapulted the pharmaceutical industry in India towards its
growth thus making the industry economically important.

The Indian Pharmaceutical Industry is
a highly fragmented industry with around 24000 players out of which only 330 in
the organized sector and over 15000 units falling in the small scale sector. It
accounts for 1.4% of the world’s pharmaceutical industry in terms of value and
10% in terms of volume ranking globally 10th in terms of value and 3rd
in terms of volumes. The Indian Bio – pharmaceutical industry stood at a 17%
growth rate with revenues reaching around US $ 12.2 billion in FY 2009 –
10.  In 2013, the Indian Pharmaceutical
Market was valued at US $ 16.4 billion as against US $ 14.9 billion in 2012 and
is set to become the 8th largest pharma market globally by 2015. There are 167
pharmaceutical companies listed on the BSE, out of which the top 10 companies
make up for more than 1/3rd of the market.

The Pharmaceutical industry has
facilitated the increase in the life expectancy; along with the reduction of
infant mortality rates, death rate and birth rate which is significant because
sanitation and environmental hygiene had not improved during the period of 1951
to 2003. While previously identified for the manufacture of generic drugs; the
Indian pharmaceutical industry has spread into research and development (R
& D); manufacture of APIs and branded generic drugs and clinical research.
India is now becoming a preferred location for manufacture of APIs and branded,
generic and branded generic medicines and the export scene is booming too; with
the US being the highest consumer (about 40%). The industry is now spending
almost 18% of revenue on research and development.

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For You For Only $13.90/page!


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The involvement of the Indian
government in the pharmaceutical industry has been wrought with controversy and
conflicts; as it tries to organize the sector and to encourage the growth thus.
With the unveiling of Pharma Vision 2020; the Indian government has provided
for reduction in the time cycle of approval process for setting up new
facilities; along with implementation of the Drug (Prices Control) Orders and
National Pharmaceutical Pricing Authority (NPPA) to deal with affordability and
availability of drugs.

The IPR issue which has raised its
head since the 1970s also has become belligerent in the country. Because of the
huge population of the country and the inability of a large part of it to meet
the expense of medicines; the authorities in India were not active in pushing regulations.
The scene has changed though, with regulators becoming more informed and open
to the vitality of IPR for the greater good of the industry. Crucial changes in
the patent laws came with the enactment of the Patent Act of 2005, making the
laws TRIPS compliant. Before the amendment came the product was not patentable
and the companies could only patent the process. So a different company could
manufacture the product with a different process. This became a cause of
concern for the branded companies as their innovations were left protection
less. The act removed the composition patents from food and drugs and the
process patents were shortened to a period of 5 to 7 years. This resulted in
the foreign players losing their interest in a market which did not have patent
protection, thus opening an opportunity for the Indian companies to create a
favorable position for themselves in both National and global markets with
their expertise in reverse engineering new processes of manufacturing drugs at
low costs. The amendment also made it possible for the product to be patented
with the process for a period of 20 years along with special provisions for
preventing patents becoming ever green. The amendment is a milestone in the
intellectual rights protection in India. One more noticeable tendency in the
IPR scene is the enforcement of trademark contraventions; which is reassuring
as they would otherwise lead to wrong use of drugs. Although trademark disputes
are a common occurrence in India, clarity is emerging due to amendments in the
laws of India.

The replacing of the
Monopolies and Restrictive Trade Practices Act, 1969 with the Competition Act
in 2002 helped establish the Competition Commission of India (CCI), which has
since promoted transparency in the prevalent working practices of the Indian
Pharmaceutical Industry. The market in India was ruled by a number of national
and state level chemist and druggist associations; and whenever a company
wanted to develop a distribution channel to appoint stockists or distributors;
an NOC from these associations was essential. The CCI held such practices as
anti – competitive and thus passed several orders against this; an act welcomed
by numerous Pharmaceutical companies; paving way for transparent and accountable
actions. The CCI has wedged a crucial impact on the root of market mechanics in
distribution of drugs in our country. The channel partners are now steering
away from any out of way arrangements which would have anti-competitive
consequences and are becoming transparent in the distribution system.

Moving forward towards the
FDI in pharmaceutical industry; some major concerns in allowing FDI include the
assurance of a non-interrupted supply of medicines, non – discontinuance of
essential medicines and the increase in volume of drugs over time. The policy
thus has to strike the exact balance between meeting the needs of our over
populated country and the capital requirements of the industry to help it grow.
Currently, FDI up to 100% is allowed in the Brownfield investments with the
Foreign Investment Promotion Board; while 100% is permitted without the
approval FIPB in Greenfield investments.

The Indian Pharmaceutical industry
has gained huge FDI inflows but has also sparked debates on the effects of
these investments. The Brownfield investments have invited the antagonism from
many quarters stating the need of growth in the industry not only on basis of
investments but also in terms of sharing technology, production capacity and
generating employment opportunities which would boost sustainability of such
relationships. But the issue faced commonly is due to the non-compete clauses
which restrain the selling promoters from getting into similar business. The
validations of these clauses are argumentative and effects thus are both
positive and negative. The CCI has tried to bring about changes to a certain
extent and the FIPB too has sought to bring some clarity into it; where
non-compete clauses are not permitted unless in exceptional situations. There
still are a lot of grey areas in the interpretation of these exceptional
situations and it would be intriguing to see the FIPB’s treatment of these
situations in the future.

Another conflict arises
from the pricing issues faced by Pharmaceutical companies in India. Unlike
other countries, the market in India is dominated by prices and the companies
usually find themselves pitched opposite the regulators on these issues very
often. The 1970s brought along with them the raging pricing wars for the
pharmaceutical companies with the government restricting the profitability
through the Drug Price Control Order (DPCO). There are three tiers of
regulations – on bulk drugs, on formulations and on overall profitability. This
has made the profitability of the sector susceptible to the whims and fancies
of the pricing authority. In connotation, with pricing policy of 354 drugs,
NLEM (National list of essential medicines) was released, including the list of
the drugs which the authority intends to put under price control. The policy is
being firmly opposed by the pharmaceutical industry. The NPPA was established
in 1997, to decide and review the prices of controlled drugs and formulations
and to administer the same in India. The NPPA’s directives extend to monitoring
the prices of essential drugs along with keeping them at reasonable costs. The
initiatives of the NPPA are welcomed by the people of India, as it has made
health care affordable but the pharmaceutical companies view it as a setback
due to the revenue losses. It is expected that with NPPA as an alert regulator
in this fast growing industry, price control is going to be a belligerent
issue.

As for the SMEs in the
industry; the weather doesn’t seem sunny as for the larger players. The change
in the excuse structure has resulted in the large companies reducing the outsourcing
and shifting operations to Tax Free States. But the resultant reduction in the
excise from 16% to 8% and then to 4%; had the factories start third party
manufacturing; which left the SMEs struggling with the taxes and unable to
upgrade their plants, bringing closure of many such SMEs.

To promote research and
development activities in the pharmaceutical industry; the privatization and
globalization policy of the mid 1990s gave exemption to the industry from price
control, while financial schemes were also introduced for promoting research
and technology collaborations. But all these have not had the desired impact it
seems. Even the large players; after pumping in more funds have spent only 5 –
10% of their revenues on R & D, lagging behind Western companies like
Pfizer, whose research budget in 2013 was greater than the combined revenues of
the entire Indian pharmaceutical industry. The R&D spends of the top five
Indian companies comes to about 5% to 10% of revenues. This ratio is still way
below the global average of 15% to 20% of sales. Indian companies have adopted
various strategies for their R&D efforts. Some have entered into
collaboration and partnership agreements with innovator companies; others have
out-licensed their molecules for milestone payments. Hiving off R&D units
into separate companies has also become a preferred option for many Indian
pharma players. This gap becomes wider due to the advances in genomics which
have made research equipment more expensive. Due to this disconnect between the
curriculum and the industry, the pharmaceutical companies in India lack the
knowledge bank that is required for the advancement of research in the sector.
That said, given that the research pipelines of Big Pharma are drying up, they
have now begun to experiment in generics. In this regard, these innovator
companies are either buying out Indian firms or are forging alliances with
them. A paradigm shift has been brought about in the country where now more
than 870 multinationals have set up R & D operations.

The investors in India
appreciate the cost effectiveness of setting up research facilities here as
compared to the western countries. The clinical trials and other research
expenses cost up to 1/10th and 1/8th of the cost in the
West. That apart, the skill sets available in India are high in intellectual
quality and low in costs while the existing R & D facilities provide state
of the art infrastructure to use these skill sets. The fast growing disposable
incomes in the middle class households has also acted as a catalyst to the
growth of non-essential drugs market. Also, India’s rich biodiversity provides
the required gene structure for R & D and clinical trials. All these
advantages have catapulted the pharmaceutical industry in India towards its
growth thus making the industry economically important.

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