ibok pharma sector
TRANSCRIPT
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I
IBOK
IBo
PHAR
Sector
ACEU
Report |
ICAL S
IIM Koz
ECTOR
hikode
REPO
9
T
/5/200
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Junior AnalystsPraneeth Jagarapu
Sushant Chaturvedi
Ravi Rambhatla
P. Chetan Krishna
Senior Analyst
Pallav Chaturvedi
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Table of Contents Executive Summary ....................................................................................................................................... 5
PHARMA INDUSTRY OVERVIEW:‐ ................................................................................................................. 6
REGULATORY ASPECTS OF INDIA .................................................................................................................. 7
Overview ................................................................................................................................................... 7
Importing Drugs In To India .................................................................................................................. 7
Entry through joint venture/subsidiary ................................................................................................ 7
The drugs price control order (DPCO), 1995 ......................................................................................... 7
Pricing Regulations ................................................................................................................................ 7
Post‐2005
Period
...................................................................................................................................
8
Tariff Structure ...................................................................................................................................... 8
Sales Tax ................................................................................................................................................ 8
Emerging Markets: China ............................................................................................................................. 8
Segmentation: ............................................................................................................................................. 10
Market Segmentation ............................................................................................................................. 10
Macro Economic Forces: ............................................................................................................................. 11
Different Economic Population: .............................................................................................................. 11
Rural Vs Urban: ....................................................................................................................................... 11
Male Vs Female: ...................................................................................................................................... 12
GDP & GDP Growth: ................................................................................................................................ 12
Exchange Rate & Inflation: ...................................................................................................................... 13
Consumer Spending On Health: .............................................................................................................. 13
The rise of the middle class ..................................................................................................................... 14
Growth of households by disposable income level: 2005‐2009 ............................................................. 14
Indian pharmaceutical
Market
....................................................................................................................
15
Turnover Years: ....................................................................................................................................... 15
Import/Export ......................................................................................................................................... 15
Exports of Pharmaceutical Products from India (1980‐1981 to 2004‐2005) ...................................... 16
Imports .................................................................................................................................................... 16
Exports .................................................................................................................................................... 17
SWOT Analysis............................................................................................................................................. 19
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Porter’s Five Forces Model ......................................................................................................................... 20
Regulatory Environment in India ................................................................................................................ 22
Pharmaceutical Regulation ..................................................................................................................... 22
National Pharmaceuticals Policy 2006 .................................................................................................... 23
Pharmaceutical Registration ................................................................................................................... 25
Pricing...................................................................................................................................................... 26
IP Regime ................................................................................................................................................ 27
Table: History of the Indian Patent System ........................................................................................ 27
Research and Development .................................................................................................................... 28
New Millennium
Indian
Technology
Leadership
Initiative
.................................................................
30
Indian Council of Medical Research .................................................................................................... 30
Central Research Institute, Kasauli ..................................................................................................... 31
Central Drug Research Institute, Lucknow .......................................................................................... 31
Central Council for Research in Unani Medicine ................................................................................ 31
Central Council for Research in Ayurveda and Siddha ........................................................................ 31
Central Council for Research in Homeopathy ..................................................................................... 31
Traditional Indian Medicines .............................................................................................................. 31
Key Players .................................................................................................................................................. 32
Ranbaxy Laboratory Ltd .......................................................................................................................... 34
Problems ............................................................................................................................................. 35
Cipla ........................................................................................................................................................ 36
Recent Developments ................................................................................................................................. 37
Alliances ................................................................................................................................................ 37
Regulatory Norms ................................................................................................................................ 37
Recovery from Recession ...................................................................................................................
37
M & A ...................................................................................................................................................... 37
New Launch ............................................................................................................................................. 37
Company Performances in Jun 2009: ............................................................................................... 37
Budget Provision .................................................................................................................................. 38
Future Outlook: ....................................................................................................................................... 39
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Executive Summary
The Indian Pharmaceutical Industry with a market value of USD 12 billion is attracting
more foreign capital from abroad than ever before. With India being increasingly seen
as a destination for outsourcing research and development activities, Indian
Pharmaceutical Industry has come a great step forward from being a mere producer of
generics. The importance of the Indian market cannot be more emphasized than the
acquisition of Ranbaxy by the Japanese major Daiichi. The drivers for growth in the
coming years will be contract manufacturing and contract research which are expected
to reach USD 30 billion and USD 10 billion respectively. Some of the cutting edge
research is being conducted in Indian Pharmaceutical Labs the effects of which will be
seen only as time gradually passes by. With a burgeoning domestic population and
increasing healthcare infrastructure put into place by both the Government and private
players the pharmaceutical industry is set to get a big boost.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
PHARMA INDUSTRY OVERVIEW:-
Indian pharmaceutical industry has market value of US $12 billion and growing
annually at a rate of 23% in last 5 years
Source: Industry Data, Insight
Over the last two years the pharmaceutical market value has increased to about
US $ 355 million because of the launch of new products
In 2008 Indian pharmaceutical companies captured around 70% of the domestic
market.
Contract manufacturing is estimated to grow to US $30billion, whereas contract
research is estimated to reach US $6-10 billion.
Approvals given by Foods and Drugs Administration (FDA) and ANDA
(Abbreviated New Drug Application) have played an important role in making
India a cost-effective and high quality product manufacturer. Major concerns for Global Pharmaceutical Industry is translated into opportunity
for IPI
Higher healthcare costs
Competition from generics
Patent expiries of blockbuster drugs
Drying R&D pipelines & increasing R&D costs
‐
2
4
6
8
10
12
14
‐
10
20
30
40
50
60
70
80
2004 2005 2006 2007 2008 2009
O p e r a t i n g P r o f i t I n $ B i l l i o n
R e v e n u e I n $
B i l l i o n
YEAR
Pharmaceutical Industry In India
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
REGULATORY ASPECTS OF INDIA
Overview
Over three decades ago, Indian government introduced price controls with the
objective of making medicines affordable.
India is a signatory to GATT and is committed to the implementation of TRIPS.
The country introduced product patents from 2005 onwards.
Introduction of product patents without relaxing price controls will hurt the
competitiveness of the Indian companies in the long term.
FDI limit through automatic route has been raised from 51 per cent to 74 per cent
in March 2000 and further to 100 per cent in May 2001.
A foreign pharmaceutical player can enter Indian market through following ways:
Importing Drugs In To India
Imports constitute only 5 per cent of the total market.
Foreign companies cannot promote subsidiaries for marketing their products in
India.
Entry through joint venture/subsidiary
Foreign company is allowed to invest up to 100 per cent in any new or
existing pharmaceuticals company in India under automatic approval route. In
such cases, RBI needs to be informed only after the capital has been remittedinto India.
The drugs price control order (DPCO), 1995
The order lists price controlled drugs, procedures for determining drug prices,
method of implementing prices fixed by Government and penalties for
contravening provisions among other things.
Now only 74 out of 500 commonly used bulk drugs are under statutory price
control.
Prices excluding local taxes of scheduled bulk drugs are fixed to provide a post-
tax return of 14 per cent on net worth or a 22 percent return on capital employed
Pricing Regulations
Price Approval is given by NPPA.
NPPA fixes the ceiling price of scheduled drugs.
Manufacturer must file a price list of all the prices fixed with the State Drug
Controllers, dealers and Government along with NPPA official price notification
reference.
Packages of formulations (the outer container) must bear the retail price (whether
fixed by NPPA or not).
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Post-2005 Period
January 1, 2000, companies were granted Exclusive Marketing Rights (EMRs)
for their products that have been patented in any other WTO signatory country. Patents of outside companies will be protected through EMR in India. EMR will
not be given for items based on Indian system of medicine (Ayurvedic or Unani)
or if the items are already in the public domain.
Indian residents are permitted to apply for patent abroad without permission of
the Controller.
Tariff Structure
Life-saving drugs are allowed at zero tariffs.
Bulk drug, intermediaries and formulation imports attract a basic customs duty of
25 per cent To encourage research, the excise duty on drugs and materials for clinical trials
has been exempt from excise duty, which had hitherto been levied at 16 per cent.
Basic customs tariff rate now ranges from 0 to 40 per cent plus additional duty of
2 per cent.
Sales Tax
The rate of sales tax is same for both Indian and imported items.
Sales and local taxes vary from 4 to 10 per cent of the price depending on item
and location
Emerging Markets: China
Regulatory Environment in Different Periods:
1979 No compulsion to conduct systematic scientific experiments on new drugs
Easy approval to market a drug from Health Department for Chinese companies
1999 Requires adequate preclinical data to verify the drug’s safety and to justify the
commencement of clinical trials by sponsors of New Drug Applications
Providing 7.5 years of marketing exclusivity for drugs that were under patent
protection from 1986 to 1992 in the United States and other major Western
countries
2001 China gained membership in the World Trade Organization (WTO) on December
11, 2001
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Requirement of premarket testing and approval for new drugs, and prohibits drug
adulteration
New Chemical Entity (NCE) Classification
Class1 NCE NCEs that have not been marketed in the world
Class2 NCE New drugs that have been marketed abroad, but are not part of foreign
pharmacopoeia and have not been imported into China
Class3 NCE New combinations of already approved drugs
Class4 NCE NCEs that have been listed in the foreign pharmacopoeia of developed
countries/regions or have previously been imported
New dosage forms of approved compounds, or New routes of administration for
approved compounds
Class5 NCE New indications for approved NCEs
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Segmentation:
Market Segmentation
Sales of Anti Infective drugs account for 19.5% of the market.
In comparison, sales of alimentary/metabolism pharmaceuticals account for 13.8% of
the market’s revenue.
Source: Insight
Source: Insight
19%
14%
12%
10%6%
39%
Share Of different Categories
Anti Infectives
Alimentary / Metabolism
Cardiovascular
Respiratory
Central Nervous System
55%
18%
11%
8%
8%
Market Share of Counties
Japan
China
Rest Of Asia Specific
South Korea
India
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Investm
Macr
Differ
Source: E Rural
Source: E
2,0
4,0
6,0
8,0
10,0
12,0
14,0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
ment Bank o
Econoent Econ
romonitor Vs Urba
romonitor
‐
,000
,000
,000
,000
,000
,000
,000
200Source: Euromonitor
2003 2
of Kozhikod
ic Forcmic Pop
:
2004 20
004 2005
Pha
de, IIM Kozh
s: lation:
05 2006 2
2006 20
mace
hikode
007 2008
7 2008
tical S
Rural P
Urban p
Pension
Active P
Depend
ector
pulation ('00
opulation ('0
ble Populati
pulation
ble Populati
eport
0)
0)
n
n
2009
S e p t e m
b e r
5 ,
2 0 0 9
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Investm
Male
Source: E GDP
Source: E
2,0
4,0
6,0
8,0
10,0
12,0
14,0
2,00
4,00
6,00
8,00
10,00
12,00
14,00
ment Bank o
s Femal
romonitor
GDP Gr
romonitor
‐
,000.00
,000.00
,000.00
,000.00
,000.00
,000.00
,000.00
2
0.00
,000.00
,000.00
,000.00
,000.00
,000.00
,000.00
,000.00
2
of Kozhikod
:
wth:
003 2004
003 200
Pha
de, IIM Kozh
2005 2006
2005
mace
hikode
2007 200
2006 2
tical S
8
Fem
Male
007 200
ector
le populatio
population ('
0
2
4
6
8
10
12
eport
('000)
000)
GDP (US$
GDP (% R
2009
Millions)
al Growth)
S e p t e m
b e r
5 ,
2 0 0 9
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Investm
Excha
Source: E Consu
Source: E
E x c h a n g e R a t e ( P e r U S $ )
A n n u a l S p e n d i n g o n H e a l t h ( I n $ )
ment Bank o
nge Rate
romonitor Int
mer Spe
romonitor Int
8
9
0
1
2
3
4
5
6
7
2003
0
50
00
50
00
50
00
0
of Kozhikod
& Inflati
rnational
ding On
rnational
2004
1000
Pha
de, IIM Kozh
n:
Health:
2005
YEA
2000 3
Annual In
mace
hikode
2006
R
00 400
ome (In $)
tical S
2007 2
0 5000
ector
0
1
2
3
4
5
6
7
8
9
08
6000
eport
2005
2006
2007
Linear
Linear
Linear
2009
(2005)
(2006)
(2007)
S e p t e m
b e r
5 ,
2 0 0 9
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
The rise of the middle class
The rapid expansion of the Indian middle class offers great opportunities for
business, particularly those operating in the retail sector.
Consumer behavior is adapting in line with rising income
Spending on entertainment and healthcare will increase significantly
The middle class will become more tech savvy, and as young educated
consumers enter the fray, the use of internet and mobile phones will extend to
many more purposes.
Growth of
households
by
disposable
income
level:
2005
-2009
Source:Euromonitor International from national statistics
0
20,000
40,000
60,000
80,000
1,00,000
1,20,000
1995 2000 2002 2004 2006 2007
P o p u
l a t i o n I n ' 0 0 0 s
YEAR
> US $ 5000
US $ 1750 ‐ US $ 5000
US $ 500 ‐ US $ 1750
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Investm
India
Turn
Source: E Impo
The to
As ob
trade
industr
ment Bank o
pharmver Year
romonitor t/Export al import/
erved, th
urplus in
y as well
0
50
100
150
200
250
300
350
400
R e v e n u e I n R s B i l l i o n s
of Kozhikod
aceutica
:
xport tren
export is
pharmac
s the gro
004 2005
Pha
de, IIM Kozh
Market
d observe
growing
utical sec
th prospe
2006
Year 200
mace
hikode
d during t
ast the i
tor. This
cts
2007 200
4‐09
tical S
e past de
port duri
demonstr
2009
ector
ade is as
g recent
tes the p
Series
Linea
eport
follows
years lea
ositive he
1
(Series1)
2009
ing to ne
lth of th
S e p t e m
b e r
5 ,
2 0 0 9
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Investm
Source :
of India.
Expor
Impo
000 US
Raw M
Semi –
ment Bank o
Annual Repo
s of Phar
ts $
aterials
finished me
of Kozhikod
rt 2003-04,
maceutic
dicaments
Pha
de, IIM Kozh
ept. of Chem
l Produc
2003
476,727
20,200
mace
hikode
icals and Pet
s from In
2004
458,403
22,771
tical S
Imports
ochemicals,
dia (1980
2005
687,667
26,864
ector
of Pharm India
inistry of Ch
1981 to 2
2
808,50
28,935
eport
ceutical 1980-81 t
emicals & Fe
004-2005)
06
1,072,
32,7
2009
roducts b 2004-05
rtilizers, Govt
007
231
2
S e p t e m
b e r
5 ,
2 0 0 9
.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Finished medicaments 115,957 175,063 295,667 433,807 481,609
612884 656237 1010208 1271251 1586562
Exports
000 US $ 2003 2004 2005 2006 2007
Raw Materials 528,677 448,144 553,748 679,375 869,100
Semi
–
finished
medicaments
214,783
342,531
207,162
303,273
497,087
Finished medicaments 1,266,994 1,479,315 2,107,372 2,615,766 3,074,888
2,010,454 2,269,990 2,868,282 3,598,414 4,441,075
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
‐
2,00,000
4,00,000
6,00,000
8,00,000
10,00,000
12,00,000
2003 2004 2005 2006 2007
I n ' 0 0 0 U S $
YEAR
Import
Semi – finished
medicaments
Raw Materials
0
5,00,000
10,00,000
15,00,00020,00,000
25,00,000
30,00,000
35,00,000
40,00,000
45,00,000
50,00,000
2003 2004 2005 2006 2007
I n ' 0
0 0 U S $
YEAR
Exports
Finished medicaments
Semi – finished
medicaments
Raw Materials
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
SWOT Analysis
Porters Five Forces
Buyer Power Supplier Power
Porter’s Five Forces
Strength Massive pharma market growth
potential, highly reliant on
modernization and reform
Strong local manufacturing sector
with leading
domestic
players
establishing a notable international
presence
Cheap but skilled English‐speaking
labor force
Long‐established trade patterns with
Western Europe and the US
Swift market approval times
Weakness Among the least‐developed pharma
markets in Asia with extremely low
per capita consumption
Opaque and biased government drug
pricing and reimbursement policy
Underdeveloped healthcare
infrastructure
Vast regional disparities in healthcare
coverage
Lack of comprehensive drug
reimbursement
many multinationals already selling
their products at reduced prices
Opportunity
Robust generic & OTC drugmarket growth
Underdeveloped market forchronic illnesses and diagnostics
The recognition of pharmaceuticalpatents from January 2005
Increasing R &D by domestic firms Global expansion of larger local
companies Increased public funding for
disease eradication program
Political changes in the US topromote use of Indian generics
Threats
Failure to properly enforce WorldTrade Organization (WTO)compliant patent legislation fordrugs
Considerable counterfeit drugindustry
Government failure to revise itsopaque and discriminatory pricingand reimbursement policy
Need for overhaul of healthcaredelivery structures hampering
better access to medicines India’s patent laws threatened by
litigation
Positive Negative
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Investm
Porte
Buye
• Majinditakpo
• Swi
• Pric
• Patinflu
New E •
High
• High
• Strin
agen
• Maki
kno
• High
in th
• All a
Low
Switc
Tendency
Switch
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2 0 0 9
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Regulatory Environment in India
Pharmaceutical Regulation
The Indian government began to liberalize the pharmaceutical sector in 1985, since
when the scope of industrial licensing has been reduced and the reservation of certain
drugs for manufacture by the public sector has been abolished, allowing competition
from the private sector, including imports.
The regulatory body responsible for the control of drugs in India is the Drug Standard
Control Administration under the Department of Health. Control is exercised at both
national and state level through various organizations. At national level, the Central
Drugs Standard Control Organization (CDSCO) has the following main functions:
Control the quality of imported drugs
Co-ordinate activities of States/Union Territories Drug Control Authorities and
advise on uniform administration of the Drugs and Cosmetics Act
Approve new drugs
Set out drug regulations and standards
Act as Central License Approving Authority with respect to blood and blood
products, intravenous fluids, sera and vaccines.
Other central organizations under Ministry of Health control include the following:
Central Drugs Laboratory, Calcutta - responsible for testing samples of imported
drugs, acting as designated laboratory under the Drugs and Cosmetics Act, and
Government Analyst for 21 States/UTs and for samples referred by the Central
Drug Inspectors. Also supplies the reference standard of various drugs to
pharmaceutical manufacturers.
Central Indian Pharmacopoeia Laboratory, Ghaziabad - undertakes experimental
work relating to standards of drugs included in the Indian Pharmacopoeia and
functions as government analyst for eight states/UTs.
Central Drug Testing Laboratory, Chennai (Madras) - tests drug samples
received from Drug Inspectors from the Central Drugs Standard Control
Organisation, South Zone.
Central Drug Testing Laboratory, Mumbai (Bombay) - acts as Government
Analyst and assists the CDSCO in the analysis of drug formulations and
substances.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Drugs Consultative Committee - statutory advisory body under Drugs and
Cosmetics Act. Issues licences to import biologicals and other special products.
Central Licence Approving Authority (CLAA) - Drugs Controller (India) examines
applications for licences with respect to blood banks, sera, vaccine and large
volume parenterals under the Drugs and Cosmetics Act.
Drugs Technical Advisory Board .
National Pharmaceuticals Policy 2006
In 2002, the Government of India formulated a new pharmaceutical policy, which set out
its strategy with respect to industrial licensing, foreign investment, foreign technology
agreements, imports, encouragement of R&D, pricing, quality aspects and
pharmaceutical education and training.
This policy could not, however, be implemented due to litigation and the previous policy
of 1994 remained in operation. Following recent developments, a new draft policy has
been drawn up: The National Pharmaceuticals Policy 2006. Part A of the draft policy
was published for circulation on 28thDecember 2005.
The key objectives of the policy are:
To facilitate higher levels of investment for increased production of good quality
medicines;
To promote research and development through the provision of suitable
incentives;
To enable the domestic industry to become competitive on the international
market by implementing established guidelines such cGMP, GLP and GCP;
To facilitate increased growth in the export of active pharmaceutical ingredients
and formulations by reducing barriers to international trade;
To develop India as the preferred global destination for pharmaceutical research
and development;
To facilitate the implementation of India’s health policy.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Among the new initiatives of the draft policy in the strengthening of pharmaceutical
regulation, bearing in mind the comprehensive recommendations of the Mashelkar
Committee in 2003 and the government task force which was set up to ‘explore optionsother than price control’ for making life saving drugs available at a ‘reasonable level’. An
independent autonomous body known as the National Drug
Authority would be set up in place of the Central Drugs Standard Control Organization
(CDSCO). In addition, a number of the provisions of the Drugs and Cosmetics Act, 1940
would be amended to increase the penalties for various offences, particularly sub-
standard drugs. A bill has been introduced in parliament to this effect. In the longer
term, the proposal of the Task Force to merge the NPPA and the NDA would be
considered in the form of a National Authority of Drugs and Therapeutics, which would
lead to an integrated regulatory system.
Following the introduction of product patents in 2005, some modernization of India’s
Patent Office has been undertaken and further improvements are proposed, including
training, an increase in the number of patent examiners, full computerization for greater
transparency and convenience, the introduction of electronic filing and the creation of an
intellectual property cell within the Department of Chemical and Petrochemicals.
Other new initiatives outlined in the draft policy concern issues such as1:
Clinical and pre-clinical trials;
A public-private partnership programme to improve the availability of anti-cancerand anti-HIV drugs at reasonable prices;
Mandatory price negotiations for patented drugs introduced after 1st January
2005 before granting marketing approval;
Trade margins, excise duty and maximum retail prices;
A new Drug Price (Control) Order to replace the existing DPCO, 1995;
The enactment of a new Drugs and Therapeutics (Regulation) Act to exercise
more effective pricing monitoring and control;
The strengthening of the National Pharmaceutical Pricing Authority;
A bulk procurement system for the purchase of drugs by governmental agencies
along with lower prices for bulk purchases made by the government for public
health requirements;
The promotion of generic drugs;
The control of pharmaceutical brand names at national level rather than state
level to avoid the potential for incorrect prescribing and/or incorrect dispensing
due to similar brand names for different products;
The full text of the policy is available on the Department of Chemicals and Petrochemicals web site at
http://chemicals.nic.in
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Quality certification of pharmaceuticals;
Consumer awareness campaigns and various schemes to improve access to
medicines for the country’s poor including a new health scheme for families below the
poverty line;
human resources development in pharmaceutical sciences;
Fiscal incentives to encourage pharmaceutical research and development.
Pharmaceutical Registration
The import, manufacture, distribution and sale of drugs are regulated through the Drugs
and Cosmetics Act 1940, and its subsequent amendments. The Act set out the
framework for the operations of the Drugs Consultative Committee, which has members
representing the different states, and which advises central and state governments on
uniform implementation of the Act throughout India. Under the Act, the Drugs and
Cosmetics Rules were initially published in 1945 and have been amended
subsequently. The 1986 amendments to the Act enabled any person or consumer
association to arrange for the re-testing and analysis of a drug and prosecute firms for
the manufacture or sale of substandard drugs. Under the Drug Policy a National Drug
Authority was set up to monitor quality control.
Several amendments to the Drugs and Cosmetics Rules, 1945, were published by the
Ministry of Health and Family Welfare in 2001, including the following:
Drugs and Cosmetics (5th Amendment) Rules, 2001; amendments to Part IV of
the rules, under the new heading Import and Registration which came into force
on 1st January 2003. The amendment includes changes to the form and manner
of application for import licenses and registration certificates, the duration of
registration to a period of three years from the date of issue, the suspension and
cancellation of registration certificates, the standard for certain imported drugs
and rules governing the import of drugs by a government hospital or autonomousmedical institution for the treatment of patients.
Drugs and Cosmetics (8th Amendment) Rules, 2001; substitution of a new
Schedule M, Good Manufacturing Practices and Requirements of Premises,
Plant and Equipment for pharmaceutical Products, bringing GMP up to
international standards.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Drugs and Cosmetics (9th Amendment) Rules, 2001; relates to applications for
permission to import or manufacture new drugs or undertake clinical trials. The
amended rule states that no new drug may be imported without permission fromthe licensing authority, an application for which attracts a fee of Rs.50,000.
Drugs and Cosmetics (10th Amendment) Rules, 2001; insertion of new
conditions relating to human blood and its components stored for transfusion.
Companies are required to obtain a license to manufacture pharmaceuticals in India, for
either domestic sale or export. Manufacturers with capital investments exceeding Rs.7.5
million must procure a license from the central government. Smaller companies are able
to obtain licenses from the state health authorities where manufacturing facilities are
located.
In order to register a new drug in India, a New Drug Application (NDA) must be
submitted to the regulatory authority (DCGI), to include the following:
Details of the drug’s regulatory status in other countries, such as approved,
marketed, or under Phase III trials, or reasons for withdrawal if applicable;
Restrictions of use in approved countries;
A Free Sale Certificate from the country of origin;
Results of clinical data based on approved protocol; Published data of confirmatory Phase III trials undertaken abroad;
Details of bioavailability and dissolution studies;
A sample of the marketing information, including draft labels and cartons and
inserts;
A sample of the pure drug substance along with testing protocol for analysis at
the Central
Drugs Laboratory (CDL) in Kolkata.
Pricing
The National Pharmaceutical Pricing Authority (NPPA), which was set up under the
administrative control of the Bureau of Industrial Costs and Prices, has limited authority
to fix, revise and rationalize pharmaceutical prices under the Drug Prices Control Order
(DPCO), 1995. The NPPA was expected to begin working in 1996, but was caught up in
a controversy over its precise role. The NPPA has, however, been officially operational
since August 1997.
The price of drugs is strictly controlled in India, although the number of controlled drugs
was reduced under the DPCO. Under the policy, price controls remained on 76 bulk
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
drugs, although since then the database has been updated and, consequently, pricing
control remains on around 74 drugs. The profits of pharmaceutical companies were also
limited to 8-13% of pre-tax sales.Price controlled drugs are divided into two categories. Category I drugs are defined as
essential under the national health programme and are subject to more stringent rules
than those in category II. No manufacturers are exempt from price controls for category
I drugs. Category II contains all price controlled drugs which are not in category I.
Manufacturers that conduct in-house bulk drug R&D and develop a new drug delivery
system are exempt from price control for a period of ten years. In addition, new drugs
introduced into India for the first time, either by domestic or foreign firms, are exempt for
a period of five years.
IP Regime
A leading representative of WTO states that India must update its patent laws to
international standards to encourage and reward innovation. The change is virtually
inevitable as the reform will benefit domestic drug makers that are involved in R&D, as
well as foreign players. If changes are not undertaken, investment in the country will fall,
severely hampering economic development.
Table: History of the Indian Patent System
History of Indian Patent System
1856 The Act VI of 1856 on Protection of Inventions based on the British patentlaw of 1852. Certain exclusive privileges granted to inventors of newmanufacturers for a period of 14 years
1859 The Act modified as Act XV; patent monopolies called exclusive privileges(making, selling and using inventions in India and authorizing others to doso for 14 years from date of filing specification)
1872 The Patents & Designs Protection Act1883 The Protection of Inventions Act1888 Consolidated as the Inventions & Designs Act1911 The Indian Patents & Designs Act1972 The Patents Act (Act 39 of 1970) came into force on April 201999 On March 26, Patents (Amendment) Act (1999) came into force from
January 1 19952002 The Patents (Amendment) Act 2002 came into force From May 20 20032005 The Patents (Amendment) Act 2005
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
At the heart of the issue is India’s controversial patent law, or Clause 3d. The
legislation is incompatible with Article 27 of the TRIPS agreement, which allows
the patentability of all kinds of inventions, including chemical and pharmaceuticalproducts, stating that ‘patents shall be available for any inventions, whether
products or processes, in all fields of technology patents shall be available and
patent rights enjoyable without discrimination as to the field of technology.’
However, under Clause 3d, ‘Salts, esters, ethers, polymorphs, metabolites, pure
form, particle size, isomers, mixtures of isomers, complexes, combinations and
other derivatives of known substances shall be considered to be the same
substance, unless they differ significantly in properties with regard to efficacy.’
The problem lies in the fact that assessment of ‘efficacy’ is almost impossible to
perform at the time when patent applications are filed, according to the
Association of the British Pharmaceutical Industry (ABPI).Therefore, innovation
through incremental steps, which is the way the vast majority of advances in
medical science have occurred, is stifled. Without protection for ‘tinkered’
compounds, further research will not happen.
Both domestic and overseas companies are campaigning for data protection;
Indian pharmaceutical companies, such as Ranbaxy and Dr Reddy’s, are
increasingly investing in R&D, and would also welcome better patent protection.
The proposal that is currently under review by the government has a number of
conditions, which essentially means that protection will start from the time a new
product is first registered in any country, whereas in other markets, dataprotection starts from the date that a specific country licenses the product. The
three-to-five-year term that is under review compares with five years in the US
and six to 10 years in European Union (EU) member states.
Research and Development
Research and development in India has traditionally differed significantly from that in
developed countries. Indian researchers have had to consider what will make a
difference ‘now’, rather than several years in the future. The immediate healthcare
needs of the people, combined with India’s lack of patent protection for pharmaceutical
products, resulted in R&D mainly being concentrated on new processes for producing
‘copy-cat’ versions of pharmaceutical products.
India is often cited as an attractive base for pharmaceutical R&D for a number of
reasons, not least of which its pool of highly skilled doctors and scientists, comparatively
low costs and large patient base.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
A recent study by the Confederation of Indian Industry (CII) concluded that India is well
placed to develop new drugs at a fraction of the cost of those in the developed world.
The CII study highlights the huge population and the prevalence of a wide range ofdiseases that offer potential for wide ranging clinical trials at around US$25 million,
compared to US$300-US$350 million in the USA.
In the Tenth Plan (2002-2007), the government estimated that Indian industry was
investing around 5% of turnover on R&D but that this may need to be augmented for the
industry to achieve its full potential.
The OPPI estimated industry R&D investment to be around Rs.6.6 billion (US$145
million) in 2003, equivalent to around 2% of sales, with some research-based
manufacturers investing a higher proportion. The major domestic manufacturers are
currently investing between 6% and 10% of turnover in R&D, some of which is on new
chemical entities as they strive to compete in the research-driven global marketplace.
Indian companies are beginning to conduct basic research and the biotech industry is
growing. Between 2002 and 2004, 13 Investigational New Drugs were cleared for
clinical trials. Domestic companies involved in novel drug discovery research include
Ranbaxy, Dr Reddy’s Research Foundation, Lupin, Nicholas Piramal, Orchid,
Wockhardt and Zydus Cadilla. It is still early days, however. As yet there is a shortage
of trained researchers and the facilities for early stage pre-clinical trials are not widely
available. Indian companies involved in novel drug discovery research are currentlyconducting Phase I and II trials abroad.
India’s real R&D strength lies in generics. India has a large pool of chemists
experienced in process R&D with strengths in lead optimization and chemical synthesis
capabilities. These skills, combined with expertise in mathematics and information
technology, and strong data management capabilities at significantly lower cost than in
the USA or EU make India an ideal base for Phase III clinical trials.
India’s large and diverse patient base allows faster recruitment, reducing the possibility
of costly delays. The country also has an established base of international contract
research organizations (CROs) and additional infrastructure resources such as the
central research laboratories.
Multinational companies are already beginning to make use of India’s R&D resources.
GlaxoSmithKline and Novartis have collaborative agreements with Indian
pharmaceutical companies, Ranbaxy and Dr Reddy’s Laboratories, respectively. Others
are using CROs and conducting wide scale clinical trials in India.
Over the next few years, the number of multinationals with major research centres in
India is likely to increase alongside extensive joint research collaborations.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
New Millennium Indian Technology Leadership Initiative
The New Millennium Indian Technology Leadership Initiative (NMITLI) was launched by
the Council of Scientific and Industrial Research (CSIR) in March 2001. The NMITLI
currently has 222 partners, of which 167 are public and 55 private, involved in 33
projects with an outlay of around Rs.2.2 billion(US$47 million). Projects are targeted at
diseases of the poor, traditional Indian medicines and niches based on Indian strengths.
One early success of note was the discovery of a new anti-tuberculosis molecule by
Lupin Laboratories and a team of 12 institutional partners, the first for forty years since
the discovery of rifampicin in 1963.
The discovery was made under the Latent M Tuberculosis: New targets, drug delivery
systems, bio-enhancers and therapeutics project, the objectives of which include the
improvement of the current treatment of tuberculosis, the provision of effective
treatment of latent tuberculosis infection and the improvement of the treatment of
patients with multi-drug resistance.
Indian Council of Medical Research
The Indian Council of Medical Research (ICMR), based in New Delhi, is the centralbody in India for the formulation, coordination and promotion of biomedical research and
is one of the oldest medical research bodies in the world.
In 1911, the Government of India set up the Indian Research Fund Association (IRFA)
to sponsor and coordinate medical research in India. Following independence, the IRFA
was expanded and renamed the Indian Council of Medical Research. The ICMR is
funded through the Ministry of Health & Family Welfare.
The ICMR’s research priorities coincide with the national health priorities: control and
management of communicable diseases, fertility control, maternal and child health,
control of nutritional disorders, developing alternative strategies for healthcare delivery,
containment within safety limits of environmental and occupational health problems;
research on major non-communicable diseases like cancer, cardiovascular diseases,
blindness, diabetes and other metabolic and haematological disorders; mental health
research and drug research (including traditional remedies).
The ICMR undertakes research through 21 permanent research institutes and centres
in various
locations around India and six regional medical research centres located in
Bhubaneswar, Dibrugarh,Port Blair, Jabalput, Jodhpur and Belgaum. In addition, the
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
ICMR promotes research through a number of Centres for Advanced Research in
medical colleges, universities and institutes.
Central Research Institute, Kasauli
Established in 1905, the Institute’s principal R&D activities are in immunobiology.
Research into rabies vaccine in particular is conducted due to the need to phase out
sheep brain ARV. Other activities undertaken by the institute include large sale
production of vaccines and sera, quality control of immunobiologicals, and training.
Stability studies are also undertaken on products produced at the Institute and expert
advice is provided on the treatment and management of snake and dog bites.
Central Drug Research Institute, Lucknow
The Central Drug Research Institute has been the base for the government’s Anti-
fertility Research Scheme since 1968. The programme has led to the development of
several contraceptive products, including the world’s first weekly non-steroid oral
contraceptive, Centchroman . This is marketed as Saheli by Hindustan Latex Ltd and as
Centron by Torrent Pharmaceuticals.
Central Council for Research in Unani Medicine
Central Council for Research in Ayurveda and Siddha
Central Council for Research in Homeopathy
Traditional Indian Medicines
Indian Ayurvedic medicine is the oldest herbal medicine system in the world, founded
around 3000 BC,and is claimed to have influenced other major systems in China,
Greece, Egypt and Arabia. Although the oldest and most dominant, Ayurveda is not the
only system currently in use in India, with several systems competing in the same
market including Siddha (Hindu, like Ayurveda), Unani (Islamic) and local systems. The
market for Ayurvedic medicine is estimated to be US$500 million annually, making India
the third largest world market after western herbal markets and traditional Chinese
medicines, and growth is variously estimated between 10% and 30% per annum. In
2000, the government established a National Board for Medicinal Plants under the
auspices of the Ministry of Health and Family Welfare’s Department of Indian Systems
of Medicine (since renamed the Department of AYUSH), with responsibilities for policy
formulation and other relevant issues.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Key Players
The key players in Indian pharmaceutical industry can be divided depending upon their
turnover and market capital. Though for Ranbaxy there is huge presence in both market
cap and turnover among top Indian companies, it doesn’t infer that it has a better
financial position. This you can see from the financial analysis done on the Ranbaxy for
the year 2008-09.
Source: Industry Data, Insight
Sun
Pharmaceutical
30%
Cipla Ltd.
26%
Dr. Reddy's
Laboratories
Ltd.
16%
Ranbaxy
14%
Glaxo
SmithKline
14%
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Source: Industry Data, Insight The Ranbaxy’s poor financial performance is due to its operating profit margin (OPM)
and net profit margin (NPM) which are 5.39% and -22.45% respectively. These values
are less than the industry average of 20.77% and 14.74% respectively. Also Dr.
Reddy’s labs also faced some loss during the 3-year period. This can be inferred from
the Compound Annual Gross Revenue (CAGR) of -30.96%, though they got profit of
Rs 560.9 Cr in this year.
Source: http://insight.religaretechnova.com/home.htm
Cipla Ltd.
27%
Ranbaxy
Laboratories
Ltd.
24%
Dr. Reddy's
Laboratories
Ltd.
21%
Lupin Ltd.
15%
Jubilant
Organosys Ltd.
13%
Revenues 3- Year PBDIT 3-Year PAT 3-Year
(Rs Cr.) CAGR(% ) (Rs Cr.) CAGR (% ) (Rs Cr.) CAGR (% )
Ranbaxy Labs. 4,652.04 5.68 342.41 -28.1 -1,044.80
Cipla 5,234.29 21.22 1,334.89 22.63 776.81 7.83
Dr. Reddy's Labs 3,999.50 2.82 1,007.70 -20.65 560.9 -30.96
Lupin Ltd. 2,954.70 21.98 577.86 23.99 416.97 17.49
Jubilant Organosys 2,428.53 22.86 565.58 34.33 260.74 6.13
Financial Comparison
Company Name
Company Name OPM(% ) Average 3-Years NPM Average 3-Years
Ranbaxy Labs. 5.39% 9.95% -22.45% 0.35%
Cipla 23.78% 22.37% 14.84% 16.75%
Dr. Reddy's Labs 18.95% 23.81% 14.02% 19.77%
Lupin Ltd. 19.43% 19.07% 14.11% 15.51%
Jubilant Organosys 22.03% 20.63% 10.73% 14.98%
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Ranbaxy Laboratory
Ltd
History
Ranbaxy has grown to become one of the largest pharmaceutical companies in
India.
It is one of the top ten generics companies in the world.
Ranbaxy Laboratories Ltd was established in 1961
It became public company in 1973.
In October 2008, Ranbaxy became a subsidiary of Daiichi Sankyo.
Ranbaxy will, however, continue to operate as an independent and autonomous
company.
Mission
Ranbaxy’s ambition is to be among the world’s top five generic companies by
2012.
Ranbaxy aims to achieve a significant income from proprietary prescription
products by 2012. To become a research based international pharmaceutical company.
Growth strategy
Global presence and constantly improving domestic portfolio
Ranbaxy has a presence in 49 countries
Have subsidiaries in US, UK, Germany, France, Italy, China, Brazil and South
Africa. The company exports its products to over 120 countries worldwide.
Ranbaxy has manufacturing facilities in 11 countries: India, Brazil, China, Ireland,
Japan, Malaysia, Nigeria, Romania, South Africa, the USA and Vietnam.
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Divisions Blue R 250 products branded generics.
Ranbaxy’s Pharma division focuses on the anti-infectives, nutritionals, pain
management, gastrointestinal and anti-allergy markets
Stancare division operates in the anti-bacterial markets, specifically quinolones
and cough preparations. Other divisions in India include
Crosslands (dermatology and orthopaedic products)
Rexcel (antibiotics, antihistamines and coldpreparations)
Solus (CNS)
Rextar (19 products in various therapeutic categories including antibiotics, painmanagement and anti-allergics)
Ranbaxy CV, launched in 2002, (cardiovascular and antidiabetics)and Super
specialty (anti-HIV, nephrology and oncology critical care).
Problems
Though it has huge revenues and market capital and stands among the top Indian
pharmaceutical companies. In the recent financial year 2008-09 it faced huge losses,
because of low OPM and NPM.
The US FDA has banned few drugs due to poor quality.
Year Type Company
2005 50:50 Joint Venture Nippon Chemiphar Co Ltd, Japan
2005 Acquisition Terapai, South Africa2006 Acquisition Mundagen S.p.A
2006 Alliance Zenotech Laboratories Ltd, Hyderabad, India
2006 Collabration Department of Science & Technology (DST), Govt of India
2006 68.4% Joint Venture Sonke PharmAcquisitioneuticAlliances(Proprietary) Ltd
2006 Acquisition Be‐Tabs, South Africa
2007 Acquisitionquired 13 Dermatology Products Bristol Myers Squibb, USA
2007 Collabration Avesthaegen, NDDR
2008 Acquisitionuired 38.4% stake in RANBAXY by Daiichi Sankyo, Japan
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Cipla
Cipla was established in 1935 as the Chemical, Industrial &
Pharmaceutical Laboratories and famously known as CIPLA
The company started exporting its products in 1964 and today, has
presence in about 180 countries across the globe
Exports grew by 30 per cent, exceeding Rs l0, 500 million
The modern company deals with ethical pharmaceuticals, OTCs, bulk
pharmaceuticals, technology (which generates around INR 4bn in annual
revenue) and animal health products.
Financial In 2007, the company posted US$836mn in total income, with net profit reaching
US$152mn. In the previous year, net profit was US$137mn, on total income ofover US$707mn
Financial Summary Y/E Mar Sales
Source: * Consensus broker estimates, Company, ENAM estimates
Sales PAT Consensus EPS Change P/E RoE RoCE EV/EBITDA DPS
Y/E Mar (Rs .mn) (Rs. mn) EPS* (Rs.) (Rs.) YoY (%) (x) (%) (%) (x) (Rs.)
2007 34,383 6,680 8.6 6 25.7 28 2
2008 40,103 7,010 9 5 20.3 20.1 22.1 17.3 2
2009E 49,672 9,058 9.5 11.7 29 15.7 22.5 22.3 13.1 2.2
2010E 58,440 10,689 12.7 13.8 18 13.3 22.7 22.5 11.1 2.4
0
2,000
4,000
6,000
8,000
10,000
12,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2007 2008 2009E 2010E P r o f i t A f t e r T a x ( P
A T ) I n R s M i l l i o n
S a l e s I n R s M i l l i o n
Year
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
Recent Developments
Alliances
Aurobindo Pharma and Dr Reddy Laboratories tied strategic alliances with
Multinational players Pfizer and GlaxoSmithKline.
Under the agreement, Indian companies will manufacture generic drugs and
MNC companies would market these drugs in emerging markets.
Regulatory Norms
On flip side, Lupin received warning letter from US FDA on CGMP compliant andSun Pharma US arm Caraco products were seized by US FDA.
Recovery from Recession
According to ORG IMS, the value growth of IPI as per secondary sales for the
month of the June 2009 was higher at 18.3% as compared to 10.1% in month of
May 2009
M & A
Mega merger proposals like Pfizer acquiring Wyeth, Merck & Co –Plough deal
followed by Roche-Genetech deal etc.
New Launch
Biogen launched Insugen, a new generation bio-insulin, which the company
claims is the world's first recombinant human (r-DNA) insulin using a unique
technique, Pichia Expression
Company Performances in Jun 2009:
Sun Pharmaceutical industries, a leading Pharma company reported drastic fall
of 67% in net profits to Rs 163.84 crore on 24% fall in net sales to Rs 787.59crore on consolidated for the quarter ended June'09.
The fall in profits and revenues is due to price erosion of at risk products Protonix
and Ethyol in the current quarter compared to corresponding previous period,
and product recalls. Due to fall in prices, the operating profit margins crashed by
3530 bps to 16.0% led operating profit to decline by 76% to Rs 128.59 crore.
Ranbaxy laboratories posted huge net profit of Rs 675.45 crore in the quarter
under review compared to Rs 23.73 crore in the corresponding previous period
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Pharmaceutical Sector Report 2009
Investment Bank of Kozhikode, IIM Kozhikode
S e p t e m
b e r
5 ,
2 0 0 9
despite of 15% fall in total income from Operation to Rs 1093.78 crore. The huge
profits are on the back of forex gain of Rs 231.30 crore, and EO income on the
account of gains on fair valuation on derivatives (MTM) of Rs 806.69 crore,respectively.
Dr Reddy's Laboratories came out strong results for the quarter ended June'09.
Income from operation posted moderated growth of 21% to Rs 1820.80 crore on
the back of healthy revenues from authorized generic Sumatriptan. Excluding the
sales from Sumatriptan, the income from operation went up by 7%
GlaxoSmithKline Pharmaceuticals, the biggest MNC Pharmaceutical Company in
India registered marginal growth of 10% in total income from operation to Rs
461.95 crore. Operating profit margins contracted by 70 bps to 36.2% and
restricted growth in operating profit to 8% at Rs 167.44 crore.
Over the global, MNC Pharmaceutical companies are looking increase their
stake in developing markets subsidiaries, especially India. The companies like
Pfizer & Novartis came out with open offer.
MP Laboratories, a majority shareholder of Matrix Laboratories proposed to
acquire the remaining public shareholding in Matrix Laboratories and delist the
equity share from BSE and NSE.
Budget Provision
Excise duty on nine life saving drugs like Abatacept, Daptomycin, Entacevir,
Fondaparinux Sodium, Ixabepilone, Lapatinib, Pegaptanib sodium injection,
Suntinib Malate & Tocilizumab and Influenza Vaccine is totally exempted.
Excise duty on bulk drugs, which are used for manufacture these drugs are also
completely exempted.
Custom duty on these drugs and bulk drugs, which are used to manufacture, are
reduced from 10% to 5%.
Custom duty on two specified life saving devices Artificial Heart (left ventricular
assist device) and Patent Ductus Arteriosus/ Atrial Septal Defect occlusion
devices reduced from 7.5% to 5%.
Excise duty on these devices is totally exempted.
Introduced GST in Pharmaceutical industry will reduce transaction cost.
Extended weighted deduction of 150% on expenditure incurred on in-house R &
D.
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Pharmaceutical Sector Report 2009
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Completely abolished FBT.
Indian Pharmaceuticals industry has received major relief in the Stimulus Packagesannounced between December 2008 and February 2009. As a result of these stimulus
packages, excise duty on formulation was cut from 8% to 4% and on bulk drugs from
14% to 8%.
Future Outlook:
The Indian pharmaceutical market has enormous potential for growth. India has a
growing middle-class of around than 300 million people with disposable income
and increasing healthcare expectations. Around one third of these can afford to pay for good quality private healthcare
and this number is growing.
The number of cases of vaccine preventable diseases has also been greatly
reduced. Along with life expectancy, however, the prevalence of western style
diseases has been increasing.
There are around 700,000 new cases of cancer each year and a total of around
2.5 million cases. Around two thirds of cases are in an advanced stage at the
time of detection. The majority of these are smoking related cancers.
Estimated 40 million people in India with diabetes and in urban areas, the
prevalence is around 9% of the population.
An estimated 500,000 patients are receiving insulin treatment and reports
suggest the Danish company, Novo Nordisk, supplies insulin to just over half of
these. The market for insulin is expected to continue growing for many years.
The compulsory licensing clause in the new patents bill may also prove to be
problematic for foreign companies.
Not only are Indian companies allowed to produce drugs for export under
compulsory license as per the WTO’s Doha Declaration, an additional clause
was added to the Patents (Amendments) Bill 2005 to allow production of drugs
under compulsory license for sale on the domestic market.