The latest ICRA analysis of Indian pharmaceutical sector considers the threat from new players in the wake of product patent regime as moderate. Instead, there is a possibility of heightened competition between the existing players due to the intensive rivalry within the industry, ICRA notes.

The ICRA sector analysis of February 2005 says the introduction of product patents in the country might act as an entry barrier for companies, which do not have access to a portfolio of patented products. "There is price-based competition in quite a few segments, which reduces the industry's attractiveness. There are also a large number of small scale units overcrowding the market," ICRA has noted.

Instead of competition, pharmaceutical companies would like to cooperate with the well-established players of the country to facilitate introduction of new products, the report said. "Existing players, with established marketing &distribution networks and good relations with doctors and healthcare organizations, are potential partners for companies that do not have a presence or have a limited presence in the country. Such partnerships can facilitate introduction of new products," it says.

Another interesting point highlighted by ICRA is the low bargaining power of supplier companies. There are a large number of suppliers and the supplier market is competitive resulting in low bargaining power, it said.

The analysis also noted that the rivalry within the industry is high. "The industry has large number of players and the competitive intensity is high. Since most of the companies have a large number of brands in portfolio, marketing is aggressive and the fight for market share keen. The importance of in-licensing arrangements (for marketing or manufacture) is one the rise," it said.

The analysis also revealed the existence of high brand loyalty in many segments. However, customer strength is high in the case of OTC products, it added.