1. OVERVIEW OF INDIAN PAHARMACEUTICAL INDUSTRY (IPI) AND AN INTRODUCTION OF ITS EVOLUATION
IPI is the lifeline of Indian Health Sector. The study and historical background of IPI would show that it achieved a big success.
To day in the era of globalization its success is remarkable.
It has been able to maintain a growth rate of 7% during last few years.
Presently IPI is exposed to meet the challenge of new opportunity and also some risk as well.
The playing field of domestic pharmaceutical companies changed completely with the start of Product - patent regime from January, 2005. 1

2. The factors responsible for the change of dynamic in regulated market of USA and Europe are :
Higher health cost.
Increasing competition for generics.
Patent expiration of block buster drugs
Increasing R & D costs.
These factors translate into significant growth
opportunity for IPI
(a) In the form of exports of generics to the regulated markets

3. (b) Contract manufacturing / research for
global pharmaceutical companies.
Further, off patent of drugs in the
regulated market is estimated at US $
70-80 billion in next 5 yrs.
For IPI this is a huge opportunity in next 5
yrs. to establish their presence in the markets
Six growth segments could identified as a
growth path for IPI.
The segments identified are : (a) Bulk drugs
(b) Domestic formulations
(c) Export to non regulated market
(d) Export to regulated market (e) NCE (New Chemical Entity) research and (f) clinical research

4. The recognition of Product patent has
provided more confidence and protection of
global pharmaceutical industries.
Utilizing the large pool of skilled manpower
and lower cost of product the IPI can take
advantage once it adopts various regulatory
standards.
In order to ensure long term sustainable
growth the Indian Pharmaceutical companies have
invested in New Clinical Entity (NCE) research and
are looking for global partners for perusing
Collaborative research

5. skilled manpower and lower costs for carrying
The availability of large patient base,
skilled manpower and lower costs for carrying
out clinical trails has made India a favorable
destination for R&D out-sourcing.
In addition diverse disease profile and
abundance of patients, India provides better
ground for clinical trails.
India has leveraged this advantage to attract clinical trails, process out sourced by the companies involved in innovation. 5

6. 6 Evolution of India Pharma Industry
The foundation of Indian Pharmaceutical Industry was laid down when Bengal Chemical & Pharmaceutical Works ltd. was established in 1901 in Calcutta by Acharya P.C Roy.
Earlier to this there were two drug manufacturing government companies in Darjeeling (1897) and Nilgiri Dist. (1897). 6

7. Further, 3 Institutes that helped Indian
Pharma Industry to develop were
Haffkine Institute, Bombay (1901)
King Institute Madras (1904)
Pasteur Institute, Coonur (1907)
The Indian Pharmaceutical Industry was
It its infancy at the time of independence (in
1947) and few companies were engaged in
manufacturing and packaging

8. During 1950’s companies such as Merk, Geigy and Squibb entered into collaboration with Indian Companies and brought new medicines and associated technology transfer. A further boost in Indian Pharmaceutical Industries (in1960’s) came when Govt. sponsored companies like Hindustan Antibiotics and Indian Drugs & Pharmaceutical Ltd. started functioning and making available many life saving antibiotics and other life saving formulations as well. 8

9. In 1970, the product patent was revoked under the new Indian patent act. 1PA (1970).
This was followed in 1978 by the Govt. New Drug Policy (NDP) to promote technological self reliance and liberal drug supply to the market.
Drug Price control Order (1979) was introduced to control prices and reduce project margin

10. Post 1995 period - Key Reform Phase
The major transformation in the development of Indian Pharmaceutical Industry happened in post 1995 when in 1995 Govt. of India signed General Agreement of Tariffs and Trade (GATT) which was succeeded by WTO (World Trade Organization).
As a signatory of GATT India was expected to introduce product patents and provide legal protection to Trade Related Intellectual Property

11. Lot of liberalization in the economic as well
as in the industrial front took place in India
during 90s onward
A) Liberalization Measures some of the key measures are :
Industrial Licensing of all kinds of Drugs
and Pharmaceuticals was abolished.
Foreign investment upto 51% of equity was allowed Further subsequently it was enhanced to 74% and then to 100%
Import tariffs were reduced from 85% to 30%
Automatic approval for foreign technology agreement was granted except few rare drugs

12. Price Control Progressive Relaxation In 1970 when DPCO was introduced then there were 347 bulk drugs and its formulation under Price Control. DPCO was amended in 1970, 1987 and 1995 bringing down the number of drug under Price Control. In August 1997 an independent body was set up to achieve the Drug Policy and to implement Price Control i.e. national Pharmaceutical Pricing Authority (NAPPA), thereby eliminating direct involvement in Price Control Order. 12

13. In 2002,m the Government formulated a
Pharmaceutical Policy which further
relaxed the criteria for determining the
drug whose prices should controlled and
has reduced the number of drugs under
Price Control to approximately 30.
ii) As the market prices of most controlled drugs are much below the stipulated prices, due` to sever competitive forces in the industry, the govt. price control mechanism has become almost redundant 13

14. c) Change in the Patent Regime In 1995, Govt
c) Change in the Patent Regime In 1995, Govt. of India, signed the General Agreement of Tariffs and Trade (GATT) which was succeeded by World Trade organization (WTO). As a signatory, India is supposed to introduce Product patent and provide legal protection to Trade Related intellectual Property Rights (TRIPS). India thus introduced Product Patent from 2005 and shifted from process based patent to product based patent. 14

15. Reverting to product patent regime now would provide protections sought by International Pharmaceutical firms to bring in there best products to India and would result in a steep increase in competition. 15

16. Restructuring Old laws
The restructuring of old 1970 patent law
and also Drugs Cosmetics Act 1940 made
India an attractive destination for global
drug industry.
New patent regime (2005) is in compliance
with Trade Related Intellectual Property Rights
(TRIPS) under World Trade organization (WTO). 16

17. the process for production of the drug but not the drug moiety.
The patent Act prior to (2005) protected
the process for production of the drug but
not the drug moiety.
Indian Drug Companies modified the
process also known as reverse engineering
to produce generic version of the branded
drug.
Further, amendment of Drug Act in
2005 allows concurrent global Phase II &
clinical trials to take place in India also. 17

18. In respect of molecules not developed and discovered India Phase I clinical study is discouraged. However, some relaxations may be given to those molecule which has got therapeutic value to Indian population. Change of National Pharmaceutical Policy newly introduced would ensure data protection of the valuable data collected. This is generating more global confidence in drug research environment. 18

19. It is estimated that India could enroll 20% of all clinical trail participants World Wide. From being a reverse engineering focused to domestic market, the Industry has moved to basic research with export oriented global presence. A surge of growth between 2006 to 2008 is attributable because of the opportunities presented by Contract Research and Manufacturing Sourcing (CRAMS). 19

20. Evolution in Indian Industry
Year Phase Status
1970 Phase I Market share dominated
(Early years) by foreign companies
Relative absence of
organized Indian companies
1980 Phase II Indian Patent Act (1970)
Governmental Drug Prices capped
Control) Local companies begin to
make an impact 20

21. Year Phase Status 21 1990 Phase III Process development
(Development Phase) Production infrastructure creation
Export initiatives
Phase IV (Growth Phase) Rapid expansion of
domestic market
International market
development
Research orientation
2010 Phase V (Innovation New IP Law
& Research) Discovery Research
Convergence 21

22. Indian Pharmaceutical Industry (Current Status)
The Indian Pharmaceutical Industry has four broadly definable sectors viz.
Multinational Companies (MNCS)
Public (Government) undertaking
Organized India Sector
Small scale Industry
The Indian Drug manufactures Association
represents the interest of Organized Indian Sector.
Small scale industries have really increased its
number with 20,000 licensed owners which include
loan license and also contract manufactures. 22

23. The factors responsible for the phenomenal growth of Indian Pharmaceutical Industry (IPI) are
i) Increase in the consumption levels in the country &
ii) Strong demand from export markets.
The IPI is estimated to be worth as about us $ 10 bn growing at an annual rate of 9%
In the world rankings, this industry stands 4th in terms of volume and 13th in terms of value.
The ranking in value terms may also be a relaxation of low price at which medicines are sold in the country. 23

24. In this industry there has been tremendous infrastructure development with sound technical base along with wide range of product manufactured.
Demand for export market is steadily increasing as Indian players with GMP manufacturing facilities are capable of manufacturing cost effective drugs of different dosage form including Bulk Drugs in all major therapeutic group 24

25. Apart from GMP several Indian companies have also been getting plant approved from international regulatory authorities like. TGA (Therapeutic Goods Administration) Australia MCC (Medicines control Council) South Africa.
Outside USA, it is India where the highest number of USAFDA approved manufacturing units are located.
Also currently India top in filing DMF (Drug Master File) with USFDA.
This could attract contract manufacturing opportunity in rapidly growing generic drug market

26. The paradigm shift in Indian Pharmaceutical Industry is possible because it is a signatory of WTO, ushering in the product Patent Regime.
Earlier, with the enactment of the Patent Act, 1970 only process patent was applicable for pharmaceuticals

27. With the introduction of product patent from 1st Jan 05, which has now made India TRIPS compliant, the Indian market has become an alternative option for the introduction of research based products.
As a result the Indian companies are now opting new business model in contract research (drug discovery research and development) including contract manufacturing.
However, the new challenge is the payment of royalty for the production of generics of the new patented molecular to the innovator company

28. The Indian Pharmaceutical Industry consists of manufacturers of bulk drug (API) and formulations. According to estimates, the proportion of formulation and API is in the orders of 75:15. It is believed that there are over 60,000 formulations manufactured in India in more than 60 therapeutic segments. More than 85% of the formulations produced in the country are sold in the domestic market. India is largely self sufficient in case of formulations, though some life saving new generation technology barrier formulations continue to be imported. 28

29. anti-infections top the domestic products in volumes.
Among the therapeutic segments the
anti-infections top the domestic products in
volumes.
In 2005, the chronic therapy segment
accounted for around 26% of the domestic
formulation business growing at a rate of 10%
faster than the acute therapy segment.
The chronic therapy segment includes
antibiotics, cardiac and neuro psychiatric, diabetic drug formulations

30. Bulk drug manufacturing (i. e
Bulk drug manufacturing (i.e. Active Pharmaceutical Ingredient API) is largely concentrated in Andhra Pradesh which accounts for more than one third of the country total bulk drug production followed by Gujrat. The Indian Bulk Drug Industry has lately been gaining significant presence in global market as foreign and multinational companies are looking to sourcing API and drug inter intermediates from Indian manufacturer. 30

31. vast resource of technical people, state of
Factors favoruing the industry are a
vast resource of technical people, state of
the art manufacturing facilities, low cost
and a advantage of English Language.
As part of government’s support to
increase exports, duty free zones have
been set up and several manufacturers of
bulk drugs have shifted their facilities to
these areas. 31

32. India’s significant share in global generic market is well known and is ranked third.
However, this segment has been facing stiff competition for which these is need to increase scale of production of improve profitability .
India has the potentiality to remain as a key player in the global market because of the following key developments

33. Multiple branded drugs are getting off patent
shortly.
The generic drug manufacturing may get entry in the off patented segment.
Increasing confidence of customers
A pro-generic sentiments from health care
authority and rising health care cost.
An ageing population across the world with
increase dependence for low cost therapy.
Global health care crisis like AIDS in developing
world highly depending on affordable medicine
for the masses.
Generic companies in India are aware of the off patent drugs and are making significant investment. 33

34. The significant increase in domestic demand
has been attributed for the following reasons :
Rise in population
Increase in income level (good economic growth)
Increasing health awareness among people
High burden of diseases
New products launched by India and multinational companies have also catalysed market demand.
To conclude the increase expenditure on R&D
and improved technical skills in the field of chemical
synthesis have also played important role

35. Growing exports :
Exports have been the major growth enabler of India Pharmaceutical Industry in recent years.
India exports Pharmaceutical products, ie., APIs and intermediates to more than 200 countries across the World.
Traditionally, Russia, Germany, Nigeria
and India’s neighboring countries like Sri Lanka, Nepal and the Middle East were the major market for Indian Pharmaceutical exports Most of these markets are considered to be low value market

36. Rise in new product launching
In the pharmaceutical industry new product launching create new demand.
After the introduction 0f product patent in India, the domestic industry has witnessed a fresh spell of new product launching.
New products launched since 2005 accounted for around 12% of the overall market growth. These launching have been done by both domestic and international players and some of then are first time launcher of new chemical entity (NCE)

37. The original Indian patent law, which recognized only process patent, gave Indian companies the opportunity to produce products under patent in overseas markets, by adopting new processes. Consequently, companies were in advantageous position to produce drugs through reverse engineering at relatively very low cost that helped the domestic industry to grow faster during the initial stages of development

38. On the other hand this discouraged multinational companies from launching their new products in India, fearing duplication of their new drug discovery through reverse engineering. As a result MNC’s market share declined from 70% prior to 1972 to 20% at present. 38

39. The global pharmaceutical industry is increasing facing cost pre a verses counts, and R&D, productivity of these players has gone down significantly in recent years under rising manpower costs and higher regulatory risk. This factor is forcing MNCS to outsource part of their R&D and manufacturing activities to low cost destinations like India & China. 39

40. India is emerging as the global hub for contract research and manufacturing services (CRAMS due to low cost advantage and work class quality standards.
The Indian pharma industry possess world standard manufacturing faculties as per GMP norms which are approved by various regulatory agencies across the globe.
The diverse disease profit and abundant of patients in India provides better ground clinical trail

41. Make in India - Pharmaceuticals
Reasons to Invest
India is expected to rank amongst the top
three pharmaceutical markets in terms of
incremental growth by 2020.
India will become the sixth largest market
globally in terms of absolute size by zero.
India’s generic drugs account for 20% of
global exports in terms of volume, making
the country the largest provider of generic
medicines globally

42. India’s cost of production is significantly
lower than that of the USA and almost half
of that of Europe.
A skilled workforce as well as high
managerial and technical competence are in
abundance.
Economic prosperity is likely to improve
affordability for generic drugs in the
market.
Approval time for new facilities has been
drastically reduced. 42

43. Between 20010 and 2016, patent drugs worth USD
Growth Drivers
Between and 2016, patent drugs worth USD
255 Billion are estimated to go off patent leading to
a huge surge in generic product and tremendous
opportunities for companies.
With increasing penetration of chemists, especially
in rural India, OTC drugs will be readily available.
Pharma companies have increased spending to tap
rural markets and develop better infrastructure.
The market share of hospitals is expected to
increase from 13.1% in 2009 to 26% in 2020.
Following the introduction of product patents, several
multinational companies re expected to launch
patented drugs in India

44. The purported rise of lifestyle disease in
India is expected to boost industry sales
figures.
Over USD 200 Billion is to be spent on
medical infrastructure in the next decade.
Rising levels of education are set to
increase the acceptability of
Pharmaceuticals.
India’s patient pool is expected to increase to
over 20% in the next 10 years, mainly due to
the rise in population

45. 45 Pharmaceutical Policy Quality Control Price Control IPR Protection
Drug Policy 1986
Pharmaceutical Policy 2002
National Pharmaceuticals Policy 2006
Quality Control
Price Control
IPR
Protection
On Prices
On Margin
GMP/cGMP
Amended Plate
Bulk Drugs
Formulation
Governing
Policy
Schedule M
Drug and Cosmetics
Act 1940
Essential Commodities
Act 1955 Drug
(Price Control)
Order 1995
Patent Act
Product Pattern 45