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Course Name: IHSS
Assignment Title: Term-Paper Submitted by: (Student name or group name)
Group Member Name Asawari Sathaye Prateek Trivedi Pushkin Jaitly
PG ID 61310409 61310088 61310376
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The last decade has seen significant consolidation in the Indian Pharmaceutical Industry driven by acquisition of large Indian generic manufacturers by top global pharmaceutical firms (such as Piramal’s and Ranbaxy’s takeover by Abbott and Daiichi Sankyo respectively). The Indian pharmaceutical industry is worth $4.5bn today and is growing at 15%+.It presents several attractive opportunities for global pharmaceutical companies. First, it gives them access to the developing world. Given the fragmented nature of the industry it is an enormous task for a company to set-up operations from scratch. An acquisition gives them customer base and distribution network. Second, it gives them cheap manufacturing facility/ labour. A third reason could be product integration – it gives the acquirers a basket of generics that they can promote in the global market. This paper also looks at the issue of patent expiration. There are a couple of companies working on the M&A format either to take over a R&D division of another company or looking at expanding their global footprint by leveraging the distribution, supplier, and intellect network of the acquired company. We will also be analyzing some instances of Indian companies acquiring foreign pharma companies. Again, the main driver of such acquisitions seems to be the desire to expand domestic generic business to international markets by leveraging the distribution networks of established companies. This paper will try to uncover some of these motivations and discuss how the companies have been faring post acquisition as also what were some of the key growth drivers for the same.
OVERVIEW OF INDIAN PHARMA INDUSTRY
The Pharmaceutical industry in India is the world's third-largest in terms of volume and stands 14th in terms of value. Sale of all types of medicines in the country is expected to reach around US$19.22 billion by 2012. According to PricewaterhouseCoopers (PWC) in 2010, India is poised to be among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. The Indian pharmaceutical industry is growing at about 8 to 9 percent annually according to “A Brief Report Pharmaceutical Industry in India,” published in January 2011. The Pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectables. There are approximately 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units).
Figure 1: Stages in Growth of the Indian Pharmaceutical Industry
GOVERNMENT INITIATIVES AND REGULATIONS
The government started to encourage the growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970. This patent act removed composition patents from food and drugs, and though it kept process patents, these were shortened to a period of five to seven years. Further, the economic 3
liberalization in 90s by the former Prime Minister P.V. Narasimha Rao and the then Finance Minister, Dr. Manmohan Singh enabled the industry to become what it is today. Earlier, the lack of patent protection made the Indian market undesirable to the multinational companies that had dominated the market in the developed countries. However, Indian companies carved a niche in both the Indian and world markets with their expertise in reverse-engineering new processes for manufacturing drugs at low costs. Although some of the larger companies...