The Indian Pharmaceutical industry is in the transitional phase today. With the product patent regime round the corner, the dynamics of the industry is rapidly changing. To meet the global challenges that the post-2005 era can possibly bring in, the pharmaceutical industry in this country is preparing itself through restructuring and consolidation, giving emphasis to basic research, strengthening product portfolios and leveraging process skills to enter the highly regulated markets.
Currently, India contributes a little more than 8 per cent in volume terms to global pharmaceutical sales. However, it comes only 1 per cent in terms of value. The Indian pharmaceutical industry ranks 4th in terms of volume but 13th in terms of value globally. And it is one of the largest among developing countries.
India has a large domestic market with a vast base of a little more than 1 billion population. The size of the domestic market for formulation was estimated at Rs. 154 billion (2001). The overall production by the domestic pharmaceutical industry in FY2001 stood at Rs 228 billion, of which formulations accounted for 80 per cent and bulk drugs for the balance 20 per cent. Of the total market, the share of Indian companies has increased from around 20 per cent in 1970 to 70 per cent now.
As per figures quoted by Organisation of Pharmaceutical Producers' of India (OPPI) industry consists of over 20,000 units. It is highly fragmented with no player, by itself, controlling more than 7 per cent of the total retail formulations market. The top 10 formulation players including Ranbaxy, Dr Reddy's, Cipla, Nicholas Piramal, Wockhardt, Zydus Cadila, Sun, Lupin, Torrent account for only 35 per cent of the retail formulations market as against 42 per cent enjoyed by the top 10 worldwide.
The domestic pharmaceutical industry meets about 90 per cent of the country's total bulk drugs requirement and almost the entire demand for formulations. There are over 20,000 players in the industry, with a large number of them involved in the production of unbranded products. Most of the small-scale units are formulators.
There are both active pharmaceutical ingredient (API) and formulations segments. Indian companies manufacture bulk drugs (APIs) in several important therapeutic categories and the industry has facilities to make all dosage forms, namely, capsules, injectables, tablets, oral and liquids. There are over 20,800 brands in over 200 therapeutic segments available in India. Anti-infectives comprise the largest therapeutic segment in India, accounting for about 26 per cent of the market.
High and consistent margins make many companies in the organized sector to shift focus to formulations for both domestic sales and exports. India is virtually self-sufficient in the production of drugs and formulation as far as domestic demand is concerned.
Export of pharmaceutical products has been identified as another growth engine of the future. It exports to different regions/countries, including Europe and North America.
Total exports from the Indian pharmaceutical industry during the financial year 2001 is amounted to Rs 87 billion of which formulations contributed about 55 per cent and the balance 45 per cent came from APIs. Indian producers leverage their low cost and technology base to tap the global generic market.
Indian exporters find a bigger opportunity as drugs worth nearly USD 100 bn go off patent by the year 2005. The total market for generics between 2000 and 2005 is estimated to be USD 27 bn. With the sharp expansion of the generics market exports are poised to grow in the region at the rate of 25 per cent. Also, the insurance sector which is currently being opened up to private players, will give an additional impetus to the growth of the domestic industry.
The consistent performance of the industry is attributed to many factors including Government encouragement in the initial stages resulting in the entry of multinational companies; Indian patent law supporting the development of domestic manufacturers; cheap manpower making Indian exports cost-effective; fully developed domestic chemical industry encouraging the development of the bulk drugs segment; relatively lenient pollution control norms making the cost of production in India lower than in developed countries etc. Apart from strong R&D skills in reverse engineering and process chemistry large pool of scientific manpower, bio diversity of population, large patient population, lower operating costs etc., gives India a superior edge and a better future outlook. Analysis of the sector reveals that certain policy changes and up gradation of clinical testing infrastructure can help India emerge as one of the leading contract research bases for multinational pharmaceutical companies.
Recent initiatives by several domestic contract research organizations (CROs) like Chembiotek Research International, Syngene Inter- national, Strand Genomics, Neeman Medical, Siro Clinpharm, Clingene, Wellquest, Lambda, Lotus Labs, Synchrone are clear signal on how the situation can emerge advantage India. The CROs here have conducted clinical trials and the products are in the process of being registered in Europe and the US. Moreover, the presence of large global CROs like Quintiles and interests shown by MNCs such as Novartis, Eli Lilly, Pfizer towards this provide clues to the direction which the industry may take on, in future.