industry will continue to flourish after 2005, according to an
exclusive research conducted by Facts For You. There has been a
lot of uncertainty that has been prevalent about the state of
the industry after 2005. Facts For You’s research has
dispelled these notions and have suggested directions for Indian
pharma industry to do well globally.
industry is currently doing very well. The share of
multinational pharma companies, which dominated with a market
share of 90% in 1970, came down to 28% in 2002. The production
of bulk drugs and formulations was Rupees 65.29bn and Rs 242.85bn,
respectively. At present, around 24,000 small, medium, and
large-scale industries are producing drugs in India. The exports
stood at Rs104.75bn in 2002.
Currently the Pharma
sector is governed by the Indian Patent Act (IPA), 1970
(enforced in 1972), which did not allow product patent on
medicines, agricultural products, and atomic energy. India
became a signatory of the GATT (now WTO) in 1994 and therefore a
signatory to the TRIPS under the TRIPS agreement. The country is
now under compulsion to introduce a product patent regime by
2005 after a transition period of ten years. India should shift
process patent to product patent from January 1, 2005 onwards.
pharmaceutical industry operates in two categories, namely,
innovative and generic companies. Generic companies are adoptive
in nature and permit copying of medicines only after the patent
expires or for unpatented drugs. Due to lack of any patent
regulations, Indian pharma industry has remained largely a
generic market with the share of patented products being quite
After 2005, there
will be a wide scope for the Indian pharmaceutical industries in
the world market. The players who have their own strong R&D
activities as well as significant domestic and international
business will have an edge over others. A few companies such as
Ranbaxy, Dr Reddy's Laboratories, Orchid Chemicals, and Lupin
Chemicals have already shifted their focus and taken active
measures for innovation of medicines since 1994, when India
signed in WTO.
The growth of
generic companies will depend upon the growth rate of the
pharmaceutical market, which, in turn, will be driven by the
rate of urbanization, pace of economic development, income
level, and per capita GDP. In India, only 40%of the population
relies on allopathic medicines. With every 1% rise in GDP, there
should be a corresponding 1.4% increase in healthcare. The
Indian pharmaceutical industry produced drugs valued at Rs
308.14bn (both bulk drugs and formulations) as of March 2003,
and has been growing at a rate of 15% per annum.
The US generic
market is considered to provide golden opportunities for the
Indian companies. The market is very large. The size of the
market will be US$16bn by 2004. However, the investments
required are also large. It takes US$0.5mn for one Abbreviated
New Drugs Application (ANDA) and it takes 22 months before a
product is approved. Assuming that one files ten ANDAs a year,
US$5mn are to be locked at any point of time. Moreover, the
competition is stiff.
The largest change
in the post-2005 scenario will be the unprecedented number of
drugs going off-patent. Between 2005-2010, the patent will
expire of many widely used drugs. In 2005, the drugs going
off-patent include Glimepiride, Ondansetron, Clarithromycin,
Fluconazole, Pamiotronate disodium, Zidovudin, Provastatin
Sodium, Pranlukasf, Azithomycin, Paroxetine, Simvastalin and
Sortaline. This basically implies a huge potential in national
and international generic markets.
Indian players have
strong infrastructure facilities to manufacture generic drugs,
such as bulk drug manufacture base, low manufacturing and
capital costs, skilled man-power, optimal use of process
research skills, focus on exports and niche therapeutic area.
Above all, many Indian players have good manufacturing practices
approved by US-FDA. Hence, the Indian pharmaceutical companies
will definitely flourish in the national and international
generic markets even after the introduction of the product
For the last three
decades, generic drugs consistently account for 70 to 80% of the
total sales. The remaining 20 to 30% of drugs are based on
research. The generic market will increase to 90% in the period
2005-10 after the introduction of product patent in 2005 and it
will fall from 90% to 75% of the pharmaceutical market in 2015.
Ultimately, the rates may settle at around 65% of generics
versus 35% of patent drugs by the year 2020.
Speaking about the
research, Ramesh Chopra, M. D., EFY Enterprises Pvt. Ltd. said,
"The next few years will see a variety of changes in the
Indian pharma industry. The industry will need to adopt itself
to do well in India and in global market. Research by Facts For
You has set directions for the Indian pharma industry. I hope
that our efforts will be useful for anyone that has an interest
in this sector."