Overview of Healthcare Industry in India

8/3/2019 Overview of Healthcare Industry in India

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Growth of Life science sector inIndia

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The Life science Industry -- Global View

y The modern life science industry is a highly competitive non -assembled

global industry

y A host of modern life science companies all started out as Rhine-based

family dyestuff and chemical companies e.g. Hoffman-La Roche, Sandoz,Ciba-Geigy (the product of a merger between Ciba and Geigy),Novartis etc.

Most are still going strong today.

y Over time many of these chemical companies moved into the production

of pharmaceuticals and other synthetic chemicals and they graduallyevolved into global players

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The Pharmaceutical Industry -- Global View

1940s -- The introduction and success of penicillin and other innovative

drugs institutionalized research and development (R&D) efforts in

the industry.

1960s -- The industry expanded rapidly being benefitted by the success of

penicillin and other innovations from new discoveries. During this

period healthcare spending boomed as global economies

prospered

1970s -- The industry witnessed major developments with the introductionof tighter regulatory controls, especially with the introduction of

regulations governing the manufacture of generics.

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The Pharmaceutical Industry -- Global View

Governed by Govt. regulationslike IPP with product patentrecognition

Result-Greater stability involume & prices like UnitedStates

Regulated

Lower entry barriers in terms ofregulatory requirements

Unregulated market highly

competitive

Un-regulated /

Semi-regulated

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The Future Trends in Global Pharmaceutical Industry

y The global pharmaceutical companies till 2012 will be closely regulated by

emerging issues like patent safety, side effects, adverse action reporting,

strengthening harmonization and regulations and stronger clinical

evidence.

y

There will be shift in growth from top ten markets to the emergingeconomies. Also the global pharmaceutical market will change its shape

from primary care driven to specialty care driven that is oncology and

biotech.

y The global pharmaceutical industry will take a shape of virtually integrated

pharmaceutical company.

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Top Ten Pharmaceutical Companies by Worldwide Sales (2008-2009)

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Sales (US$ billion)


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The Indian Pharmaceutical Industry Classification

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SECTORS

ORGANIZED

INDIANCOMPANIES

MNCs

UNORGANIZED

330 organized playerscontribute to 70% of totalsales.


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The Indian Pharmaceutical Industry Facts & Figures

Globally, India is

y 4th in terms of volume (8% of world's production)

y 13th in terms of value

y Manufactures over 400 bulk drugs & 60,000 formulations

y Highly fragmented with 30,000 players

y 330 companies holds 70% of the market share

y Witnessing a growth rate of about 10% over the last few years.

y Domestic consumption 57% Export revenues 43%.

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The Indian Pharmaceutical Industry

y The Indian pharmaceutical industry traditionally relied on reverse

engineering i.e. product copying, through which vast profits were

made.

y In recent years, however, the larger domestic companies have

realised the need to undertake original research and / or penetrate

into the regulated generics markets in the USA/EU in order to

survive in the global market.

y At the same time, the Indian pharmaceutical industry is renowned

for supplying affordable generic versions of patented drugs for

illnesses like HIV/AIDS to some of the worlds poorest countries

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Classification - II

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PRODUCTMANUFACTURED

BULK DRUGS

Ingredients forming raw

material for formulations

Share-19%

FORMULATIONS

Mixture or combination

of bulk drugs

Share-81%

PRESCRIPTION MEDICINES

(ethical formulations)

OVERTHE

COUNTERMEDICINES


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Top Ten Indian Pharmaceutical Companies by Sales 2008-2009

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Company Sales (INR / Billions)

Ranbaxy Rs 251.96 billion

Dr.Reddys Laboratories Rs 41.622 billion

Cipla Rs 37.637 billion

Sun Pharmaceuticals Rs 24.635 billion

Lupin Labs Rs 22.155 billion

Aurobindo Rs 20.801 billion

GlaxoSmithKline Rs 17.734 billion

Cadila Healthcare Rs 16.13 billionAventis Pharma (Rs 9.838 billion)

Ipca Laboratories (Rs 9.804 billion),


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Indian Pharmaceutical Industry

A SWOT ANALYSIS

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STRENGHTS

India with a population of over a billion is a largely untapped market. In

fact the penetration of modern medicine is less than 30% in India. To put

things in perspective, per capita expenditure on health care in India is US$

93 while the same for countries like Brazil is US$ 453 and Malaysia US$189.

The growth of middle class in the country has resulted in fast changinglifestyles in urban and to some extent rural centres. This opens a huge

market for lifestyle drugs, which has a very low contribution in the Indian

markets .Indian manufacturers are one of the lowest cost producers of

drugs in the world. With a scalable labour force, Indian manufactures can

produce drugs at 40% to 50% of the cost to the rest of the world. In some

cases, this cost is as low as 90%.

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STRENGHTS

y The fact that despite the low level of unit labour costs India boasts a highly

skilled workforce has enabled the country's pharmaceutical industry at a

relatively early stage to offer quality products at competitive prices. Each

year, roughly 115,000 chemists graduate from Indian universities with a

masters degree and roughly 12,000 with a PhD.4 The corresponding

figures for Germany just fewer than 3,000 and 1,500, respectively are

considerably lower.

y Indian pharmaceutical industry possesses excellent chemistry and process

reengineering skills. This adds to the competitive advantage of the Indian

companies. The strength in chemistry skill helps Indian companies to

develop processes, which are cost effective.

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WEAKNESS

y The Indian pharmaceutical companies are marred by the price regulation.

Over a period of time, this regulation has reduced the pricing ability of

companies. The NPPA (National Pharmaceutical Pricing Authority), which is

the authority to decide the various pricing parameters, sets prices of

different drugs, which leads to lower profitability for the companies. The

companies, which are lowest cost producers, are at advantage while those

who cannot produce have either to stop production or bear losses.

y Indian pharma market is one of the least penetrated in the world.

However, growth has been slow to come by. As a result, Indian majors are

relying on exports for growth. To put things in to perspective, Indiaaccounts for almost 16% of the world population while the total size of

industry is just 1% of the global pharma industry.

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OPPORTUNITIES

y Large number of drugs going off-patent in Europe and in the US between2005 to 2009 offers a big opportunity for the Indian companies to capture

this market. Since generic drugs are commodities by nature, Indian

producers have the competitive advantage, as they are the lowest cost

producers of drugs in the world.

y Opening up of health insurance sector and the expected growth in per

capita income are key growth drivers from a long-term perspective. This

leads to the expansion of healthcare industry of which pharma industry is

an integral part.

y Being the lowest cost producer combined with FDA approved plants; Indian

companies can become a global outsourcing hub for pharmaceuticalproducts.

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THREATS

y Threats from other low cost countries like China and Israel exist. However,on the quality front, India is better placed relative to China. So,

differentiation in the contract manufacturing side may wane

y The short-term threat for the pharma industry is the uncertainty regarding

the implementation of VAT. Though this is likely to have a negative impactin the short-term, the implications over the long-term are positive for the

industry.

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THANK YOU

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Overview of Healthcare Industry in India

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