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					Health Administrator Vol : XX Number 1&2 : 109-113 Pg.

         Abhinav Agrawal*, Kamal Dua*, Vaibhav Garg*, U.V.S. Sara* and Akash Taneja#

     Pharma industry in India is playing a vital role           Another Startling fact reveals that almost 80%
in the healthcare area of the nation. With the             of the country’s medical workforce is employed in
implementation of product patent from the year             the private sector.
2005, there will be a tough competition for the global
marketshare. Pharma companies will have to focus           Glimpses of Global Pharma Industry:
more intensively on R&D activity to survive the                 The Pharma industry of the Western World
competition. As we are moving towards                      are the leading manufacturers of medicines. North
globalization, there is a need for strategic planning      America, Europe, Japan and Latin American
to meet the challenges posed by the product patent         countries account for 85% of the worldwide pharma
era. In the present context with the available             production (Table 1). These countries control
expertise, manpower and skill, the Indian Pharma           almost 77% of the global pharma market (Figure
Industry will fight successfully for the global            1). The US invest 13.7% of its GDP on health.
marketshare.                                               Annual drug expenditure (per capita) for Japan
     In the present article, we have reviewed the          amounts to $ 412, while for India it is a low $ 3
status of Indian pharma industry vis-a-vis Global          (Figure 2).
pharma industry. The probable opportunities and                 The US and The UK had a combined 62%
challenges for the Indian Pharmac Industry in the          (46%+16% respectively) share of global pharma
post 2005 era have also been discussed.                    exports in 2005. The US and the UK together sell
Snapshots Indicating Dire Straits of India’s               2 out of 3 pharma product in the world. According
Health:                                                    to WHO survey, US pharma industry market was
                                                           $ 512 billion in 2005. Of this, $ 318 billion came
     India ranks very low in the global health             from products free from patent protection, Drug
scenario, both in terms of status and expenditure.         prices in Europe are about 60% of the prices in US
Over 50% of young children in the country are              and yet European firms spend larger share of their
malnourished. Only 35% of the country’s population         revenues on R&D rather than their American
has access to essential drugs. Reason attributed           counterparts.
to this is that India invests only 5.@% of its GDP
on health (Table 2).                                       Table 1: Pharmaceutical Drug Production
     Various reports published by WHO and other
health organizations indicated that India has the
highest number of Tuberculosis and Hepatitis-B                      Region         %Share of Drug   % Share of
patients in the world. India also accounts for most                                 Production      Population
number of blind patients globally. Mortality in India,
                                                                North America          30.9%           4%
due to Malaria, Peaks highest amount all the
nations. Health indicators also show that there will
be highest number of AIDS patients in the country                  Europe              30.4%           7%
by 2020. Inspite of sustained efforts by the
Government and NGOs, Polio has not been                             Japan              20.9%           2%
completely eradicated and is still prevalent in certain
pockets of the country.                                        Rest of the World       17.8%          87%

D.J. College of Pharmacy, Modinagar, Uttar Pradesh #Director, National Intellectual Property Organization,
New Delhi, The Indian Pharmacist, August, 2006.
      Table 2: Global Health Expenditures                        Table 4: India’s Trade n Pharmaceutical Products

                                                                                    Trade in Medicinal and       Pharmaceutical
          Country             % Share of GDP Spent                                  Pharmaceutical Plants        Exports as % of
                               on Health ( in 2005)                    Year             (in Rs Crore)             India’s Total
      United States                      13.7%                                                          Trade
                                                                                 Exports    Imports
         Germany                         11.6%                                                         Balance

     United Kingdom                       6.1%                       1970-1971      8.5      24.3        -15.8      0.55%

                                                                     1975-1976     22.2      36.3        -14.1      0.55%
           China                          3.4%
                                                                     1980-1981     67.4      84.6        -17.2      1.00%
            India                         5.2%
                                                                     1985-1986    159.9     177.2        -19.3      1.45%
           Brazil                         6.5%
                                                                     1990-1991   1,014.1    468.4       547.5       3.11%
         Pakistan                        4.4%                        1991-1992   1,550.1    558.5       991.6       3.52%

           Mexico                         5.6%                       1992-1993   1,553.0    813.2       719.8       2.86%

                                          7.1%                       1993-1994   2,059.7    808.8     1,200.9       2.88%
       South Africa
                                                                     1994-1995   2,512.3    937.2     1,575.1       3.04%
         Sri Lanka                        3.9%
                                                                     1995-1996   3,408.7 1,358.0      2,050.7        3.21%
     More than 90% of the worldwide pharma
production and 97% of the R&D activities occur in                    1996-1997   4,342.8 1,089.2      3,252.6       3.65%
developed countries. Also, more than 80% of the                      1997-1998   5,419.3 1,447.1      3,972.2       4.17%
patents granted in developing countries belong to
the residents of industrialized nations. Developed                   1998-1999 6,265.07 1,615.2       4,640.87      4.48%
nations hold 97% patents worldwide. An estimated                     1999-2000 6,631.45 1,502.3       5,129.15      4.07%
$ 8.5 billion worth of products went off patent during
1996-2005, in the US alone. Marketshare of 20                        2004-2005 10,530.0    1,713.4    8,816.6        5.10%
global pharma companies increased from 36% in
1990 to an approximated of 69% in 2000 and 78%
in 2006. Combined worth of top 5 pharma giants is                    According to the data obtained from the leading
twice the combined GCP of Sub-Saharan Africa.                    global pharma R&D giants, the development of a
Table 3: Indian Pharmaceutical Exports                           new drug is estimated to take 10-15 years and costs
           Country             Indian Pharmaceutical Exports     around $ 400 million, on an average.
                                  (in Rs Crores) (2004-2005)
        United States                    703                     Glimpses of the Indian Pharma Industry:

           Russia                        501                          The Indian pharma industry ranks fourth in
                                                                 volume terms and thirteenth in value terms
         Germany                          329
                                                                 worldwide. It contributed 2% of the global share in
        Hong Kong                         331                    2005, which is valued approximately at $ 5.2 billion.
                                                                 The imports are of the order of 4% of the total value
          Nigeria                        244
                                                                 of the industry. Per capita annual drug consumption
      United Kingdom                     318                     in India is as low as $ 3, which when multiplied by
                                                                 one billion population, roughly corresponds to the
         Singapore                       294
                                                                 profit made by Novartis Inc. in 2000.
        Netherlands                      300
                                                                      As per IDMA, the estimated number of pharma
            Iran                         180                     firms in India are more than 23,000. Of these, only
           Brazil                         174                    300 are in organized sector and account for the
manufacture of almost 70% of the produce. India          Developed countries see stronger international
recorded almost 1,000% growth in the number of           patent regimes as a vehicle for opening worldwide
manufacturers since 1970. Market share of MNCs           markets for their products, or to further enhance
incorporated in India is 40%, while the rest 60% is      their commercial benefits. Along with this, high
held by domestic companies. Indian pharma                labour costs in developed world will lead them to
industry had produced 60,000 formulations and 400        relocated their labour intensive manufacturing and
bulk drugs in 2004. Of the estimated market size         R&D activities to the developing world, if stronger
of Rs. 34,000 crore currently, bulk drugs accounted      patent regimes are in place in such developing
for 24%, while the formulations accounted for the        countries.
rest. Starting from the early 1990’s, the formulation                    West
market in India overshadowed the bulk drug sector                       Europe
(Figure 3). There are almost 6,500 brands in 77                          25%                                  1%
major therapeutic areas being sold in India                                                                  Latin
presently.                                                                                                  America
Table 5: Performances of Leading Indian
Pharmaceutical Companies
Company          % Market Share         % Growth                                                                7%
  Glaxo                 6.44%            5.60%                North
  Cipla                 5.10%            6.10%                41%                                          E europe &
  HMR                   3.00%            2.10%                                                                CIS
                                                                                       Other                  3%
Ranbaxy                 2.91%           11.40%                                          4%

  Lupin                 2.55%            4.10%
                                                         Table 6: Major Indian Pharmaceutical Exporters
  Pfizer                2.90%            6.90%
                                                                            1999-2000          2000-2001      2004-2005
     Indian pharma exports to various countries in                        Exports as % Exports as % of Exports as % of
the year 2004-05 are listed in Table 3. India’s                            ofNet Worth   Net Worth       Net Worth
pharma export have risen from Rs. 8.5 crore in
1970-71 to Rs. 10,530 crore in 2004-05, which is
5.1% of India’s total export in all merchandise (Table      Ranbaxy              47%               46%            50%
4). Certain growth indicators for the Indian Pharma        Aurobindo             50%                5%            54%
industry are depicted in Figure 4. Performances
by leading Indian pharma companies are listed in           Dr Reddy’s            29%               55%            51%
Tables 5 and 6.                                             Torrent              28%                7%            28%
     Of the 250 essential drugs listed by WHO, only          Cipla               19%               25%            29%
10-15% are under patent protection in India. Of
the 28 major patented drugs, which contribute 80%          Wockhardt             16%               22%            22%
of India’s drug production, 22 got off patent in 2005.
3,923 patents were granted in India during 1970-
71 (629 Indian and 3,294 foreign applicants) while             Developing countries, initially were very
only 1,019 patents were granted in 1980-81 (349          apprehensive about stronger patent laws (till 1989,
Indian and 670 foreign applicants).                      at least 40 developing countries did not grant either
                                                         product or process patent or both for pharma
   Asymmetrical View on IPRs and Patents
                                                         products), but now they have also recognized the
Between Developed and Developing
                                                         fact that strong Intellectual Property Rights (IPRs)

are key to scientific, technological and economic                                            industry became strong enough to challenge
progress. Without such protection, far fewer drugs                                           international competition and this is why, they
will be developed and flow of standard medicines                                             see ulterior motive in the pressure by the
to the public would be greatly slowed, to the                                                western world on developing countries for
detriment of patient, public health and economic                                             stronger patent regimes, when the pharma
development throughout the world.                                                            industry in certain developing countries is in
                                                                                             their budding stage.
     Moreover, stronger patent laws would attract
favourable western investment into the developing                                            MNCs undertake “Evergreening strategies” to
countries and, thus, export driven industrialization                                         maintain and extend patents and thereby
shall gather momentum. Even after this realization,                                          control the flow of medicines, by,
the developing world has following reservations
                                                                                                Introduction of new formulations of pat-
against stronger patent laws:
                                                                                             ented drugs by combining it with already
                                                                                             available drugs.
                                                                                                Increasing the length of patent while
                                                                                             applying for second medical use of the
 450     412
                                                                                             same drug.
 400                                                                                            Repeated and frivolous patent infringe-
 350                                                                                         ment suits, which trigger an automatic 24-30
                                                                                             months freezing or delay in the processing
               222                                                                           of patent application.
 250                                                                                         Developing world has poor population and they
 200                                                                                         fear that the prices of drug and formulations
 150                       124                                                               shall go 5-20 times higher, after implementation
                                                                                             of stronger patent laws.
 100                                  89
                                           37 30
                                                 28                                          Supply of essential medicines will get affected,
                                                      21 1716
                                                                11 10 7 7
                                                                            5 43 2 2         as supply of such patented medicines would
  0                                                                                          then depend on their imports.
         United States

          Costa Rica










                                                                                         Pharmaceutical Value Curve:


                                                                                              Sumantra Ghoshal et. al. have correlated the
                                                                                         technological/marketing complexities of pharma
Figure 2 : Annual Drug Expenditure Per Capita (US$)                                      with their gross margins, as shown in Figure 5. This
                                                                                         pharmaceutical value curve clearly shows that
                                                                                         margins as well as complexities are greatest in
                                                                                         drug discovery, while are lowest in case of bulk
       20000                                                                             substances.
                                                                                         Inherent Stengths of Indian Pharma Industry:
                                                                                         •   Self reliance
       5000                                                                              •   Low R&D cost
         0                                                                               •   Innovative scientific manpower

                                                                                         •   Excellent private and public laboratories
                                                                                             specializing in process development and
         Bulk Drugs                    Formulations                                          development of cost effective technologies.
                                                                                         •   Excellent centre for clinical trials, in view of
                                                                                             huge diversity in population
      Western countries had started to grant product
                                                                                         •   Low cost of production
      patents for pharma, only when their pharma

Opportunities for the Indian Pharma Industry                                    High                                          New Chemical
in the Post Product Patent Era:                                                                                               Entity & Drug
                                                                                       Technological/                         Discovery
     India can emerge as a centre for development                                      Marketing
                                                                                                                          OTC &
of low cost bulk drugs and formulations, since R&D                                                              Value-    New Drug
and clinical studies are easier and cheaper. Indian                                                             Added and Delivery
                                                                                         Commodity Conventional Branded Systems
pharma firms can emerge as R&D outsourcing hub                                           Generics  Dosage       Generics
for the MNCs in the shorter run. Indian pharma                                                     Forms
industry can also lay its focus on the rapid                                     Intermediate
development of innovative and non-infringing                                     & Bulk
processes for products going off-patent
      Indian pharma industry should lay its emphasis
in the development of infrastructure for conducting
R&D activities of international standards. Money                                Low     2-12% 12-20%    20-30%   30-40%   40-60%     60-100%
for such ventures can come up from foreign MNCs,                            Sources: Sumantra Ghoshal et al
who can enter the system as global marketing                                Figure 5: Pharmaceutical Value Curve
partners. If countries with limited or no
manufacturing capacity invoke the principal of                              Indian pharma companies will have to learn to keep
compulsory license, the Indian pharma companies                             patience, since investment in R&D activity will begin
will be in an advantageous position for the grant of                        to pay off only after a decade or so. They will have
compulsory license, as the production costs are                             to go in for industry-institute interactions/linkages
low in India.                                                               for their R&D activities. Institutes will have to carry
                                                                            out initial work in the development of a new drug or
     Indian pharma industry can focus on herbal                             formulation, which can then be expanded at the
research, since India can boast of its huge tropical                        Industry to suit market needs.
Challenges for the Indian Pharma Industry in
the Post Product Patent Era:                                                1.         Jha S.K.; Pharma Times; 2003:35: 13-22.
                                                                            2.         Kumar Shailender; Pharma Times; 2004:3: 109-111.
     Indian pharma firms will have to develop
international levels of R&D standards. For this, they                       3.         Parakh S.R., Chabukswam A.R., Jagdale S.C.;
will have to pump in their financial resources                                         Pharma Times; 2005; 37; 14-28
towards R&D. Current Indian pharma companies’                               4.         Ramachandran Uma, Sharma Manavi; Pharma
R&D expenditure is 2% as compared to 8-9% of                                           Review; 2004; 19-27.
foreign MNCs.                                                               5.         Indian Pharma Reference Guide; 2004; Section I;
                        15960                                                          3-6
                                                  GROWTH INDICATORS         6.         Indian Pharma Reference Guide; 2000; 3-7
   14000                                             (Rs. in Crores)
                                                                            7.         India Today; January 10, 2005; 56-57
   12000                                                        1965-66
                                                                            8.         Business World; January 17, 2005; 22-28
   10000                                                        1999-00
                                                                            9.         World Heatlh Report; 200.
   8000                                                  6631
                                                                            10. UNDP Reports.
                                     3777     3441                          11. IMS Health; 1997
   4000          2500
                                                                            12. India’s Economic Survey; 2000-2001
           140     150          18          8.2   3.05           320
                                                            3               13. UN International Trade Stastics yearbook; 1998.
      Capital    Production Production Imports Exports R&D                  14. RBI’s handbook of Statistics on Indian Economy;
      Investment (Formulation) (Bulk Drugs)            Expenditure
Figure 4 : Growth Indicators for Indian Pharma Industry                     15. Company’s Reports.


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