Pharmaceutical Industry
Incumbent Company:
Dr. Reddy’s Laboratories
¬¬¬
Indian Pharmaceutical Industry can be valued at around $20billion (2009). By Volume, India is world’s second largest producer of pharmaceuticals, while by value it is world’s thirteenth largest. It is expected to grow at CAGR of 12% for 2010-2012 (global average 6%).Around 95% of Domestic demand is catered by Indian Pharmaceutical companies. In Indian Pharmaceuticals Market, Formulations accounted for 65% while Bulk Drugs accounted for 35% by Value. Formulations consist of Generic as well as patented drugs though traditionally Indian Formulations industry has been strongly a Generics Industry.
Industry Boundaries:
• Vertical Scope: Value chain of Pharmaceutical Industry can be represented as Chemicals / Intermediaries >> API/Bulk Drugs >> Formulations. Since most of the Indian companies are into API as well as Formulations both the segments are considered.
• Geographical Scope: Indian Pharmaceutical companies are considered for the purpose of this report.
Barriers to Entry:-
Following factors determine the level of barriers of entry for a new player in the Indian pharmaceutical industry:-
• Low Capital Requirement: An organization has an option of setting up a plant either approved or not approved by US FDA. The initial capital required to set up a manufacturing unit is pretty low in case of Non-US approved FDA plants. It goes up in case approval is sought from US FDA. The advantage of not getting the plant approved is that the company can’t sell its products in the US market, which is the biggest market in the world for drugs.
• Product patent instead of Process Patents earlier: Earlier, prior to 2005, India followed a process-patent regime in which the manufacturers could change the manufacturing process and technique of any of the patented drugs and start manufacturing. It was easy to copy any drug under this mechanism. But in 2005, in order to adhere to WTO norms, India had to shift to the
Dr. Reddy’s Laboratories
¬¬¬
Indian Pharmaceutical Industry can be valued at around $20billion (2009). By Volume, India is world’s second largest producer of pharmaceuticals, while by value it is world’s thirteenth largest. It is expected to grow at CAGR of 12% for 2010-2012 (global average 6%).Around 95% of Domestic demand is catered by Indian Pharmaceutical companies. In Indian Pharmaceuticals Market, Formulations accounted for 65% while Bulk Drugs accounted for 35% by Value. Formulations consist of Generic as well as patented drugs though traditionally Indian Formulations industry has been strongly a Generics Industry.
Industry Boundaries:
• Vertical Scope: Value chain of Pharmaceutical Industry can be represented as Chemicals / Intermediaries >> API/Bulk Drugs >> Formulations. Since most of the Indian companies are into API as well as Formulations both the segments are considered.
• Geographical Scope: Indian Pharmaceutical companies are considered for the purpose of this report.
Barriers to Entry:-
Following factors determine the level of barriers of entry for a new player in the Indian pharmaceutical industry:-
• Low Capital Requirement: An organization has an option of setting up a plant either approved or not approved by US FDA. The initial capital required to set up a manufacturing unit is pretty low in case of Non-US approved FDA plants. It goes up in case approval is sought from US FDA. The advantage of not getting the plant approved is that the company can’t sell its products in the US market, which is the biggest market in the world for drugs.
• Product patent instead of Process Patents earlier: Earlier, prior to 2005, India followed a process-patent regime in which the manufacturers could change the manufacturing process and technique of any of the patented drugs and start manufacturing. It was easy to copy any drug under this mechanism. But in 2005, in order to adhere to WTO norms, India had to shift to the
References: 1. CRISIL Industry Research Report 2. DRL Annual Report 2009-10 3. The Five Competitive forces that shape strategy- Michael E. Porter, January 2008, HBR 4. Capital line database 5. http://www.ibef.org/industry/pharmaceuticals.aspx 6. http://www.dancewithshadows.com/pillscribe/ 7. http://www.indiainbusiness.nic.in/indian-economy.pdf