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A preview of the pharmaceutical industry, its emergence since independence to post 2005 in India, a SWOT analysis on the industry and future trends
Pharmaceutical Industry
Before Independence
Indian pharmaceutical industry has grown over a period of time and has seen many ups and down during its evolution.
The architect of the Indian pharmaceutical industry would be Acharya P.C.Ray. In the year 1901 Acharya P.C.Ray founded Bengal Chemicals and Pharmaceuticals Works Ltd. It started by making drugs from indigenous materials and then went on to manufacture quality chemicals, drugs, pharmaceuticals and employed local technology, skills and resources.
But prior to independence bulk of the drugs were imported and very negligible quantity was manufactured in India.
After Independence
Just after Independence many Multinational Companies set base in India as trading companies and later moved to repacking of finished formulations within the country. They then progressed to manufacture of bulk drugs.
The turnover of Indian pharmaceutical industry was around 10 crores then and the over reliance on imports continued. The Multinational Corporations controlled 70 to 80 per cent of the market. The prices of the medicines were very high, quiet out of reach for the Indian population.
Indian pharmaceutical industry was still regulated by product patent regime, a legacy of the British colonial era.
The government of India took a historic decision by introducing the Patent Act 1970 that allowed only process patent and put an end to product patent in the field of food, agrochemicals and pharmaceuticals.
This development came as a major boost to the Indian entrepreneurs to establish manufacturing units. The Patent Act 1970 legalized "reverse engineering" and Indian companies started manufacturing medicines at a cheaper rate than Multinational Companies. It helped the country break free from the curbs imposed by monopoly
Post 2005
As part of India's commitment to WTO, India issued the patent ordinance, to recognize foreign product patents from January 1, 2005, the conclusion of a 10 year process. Under these circumstances Indian pharmaceutical manufacturers would not be able to manufacture patented drugs.
To meet the challenges of this new initiative, the industry started probing new business models.
Some of the features of the new model included
- Contract research (drug discovery and clinical trials).
- Contract manufacturing.
The focus of the industry shifted from process improvisation to drug discovery and research and development.
Contract Research
By 2002 the market for clinical trials in India was $70 million and this market is increasing at a rate of 20% per annum. Companies specialized in this line of business offered services which include product development, formulation and manufacturing, clinical trial management, toxicology and clinical, medical and safety monitoring.
Contract Manufacturing
Many pharmaceutical multi nationals are looking to outsource manufacturing to Indian companies, which have a cost advantage in comparison to companies in the developed countries.
With regard to this, the pharmaceutical companies are undertaking compliance with reputed International regulatory agencies like USFDA, MCC for their manufacturing units.
SWOT Analysis
Strengths
- Cost Effective
- Strong Manufacturing Base
- Availability of high quality skilled workforce.
- Excellent marketing and distribution network
- Diverse ecosystem
Weaknesses
- Less investment in research and development
- Lack of coordination between industry and academia.
- Negligible expenditure on healthcare in the country.
- Manufacture of fake and low quality medicines bring
Opportunities
- Increased export potential
- Marketing ties ups with multinational companies to sell their products in domestic market.
- Immense scope to position India as a centre for international clinical trials.
- Key player in global pharmaceutical R&D.
- Export of generic drugs to developed markets.
Threats
- Product patent regime is a major threat to domestic industry unless the industry takes up R&D initiative aggressively.
- Drug Price Control Order puts undue pressure on product prices, affecting the profitability of the pharmaceutical companies.
- The new MRP based excise duty regime threatens the business of smaller pharmaceutical companies.
Future Trends
- The Pharmaceutical industry is expected to grow at a rate of 10.8 per cent and reach $168 billion in the year 2009.
- India and China are expected to account for nearly 40 per cent of the outsourced market for dynamic pharmaceutical constituents, finished dosage formulations and intermediates.
- Experts believe the combined effect of increase in business due to many premium drugs coming of patent and the increased confidence of international companies on India due to the product patent regime would mean a boom for the pharmaceutical industry.
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