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Executive Summary
The pharmaceutical industry is a knowledge driven industry and is heavily dependent on Research and Development for new products and growth. However, basic research (discovering new molecules) is a time consuming and expensive process and is thus, dominated by large global multinationals. Indian companies have recently entered the area and initial results have been encouraging.
Patents play an important role in encouraging Research and Development. The new WTO rules imply that India will have to switch to a product patent regime post 2005 from its current process patent regime. This would alter the scenario in the Indian market over the next 10-15 years.
In the global pharmaceutical market, western markets are the largest and fastest growing due to introduction of newer molecules at high prices. A well-established reimbursement and insurance system implies that per capita drug expenditure is abnormally high in Western Countries as compared to the developing nations.
The Indian pharmaceutical industry is highly fragmented, but has grown rapidly due to the friendly patent regime and low cost manufacturing structure. Intense competition, high volumes and low prices characterize the Indian domestic market. Exports have been rising at around 30% CAGR over last five years. There is a shift in export profile towards value added formulations from low value bulk drugs.
The Drug Pricing Control Order (DPCO) has been the millstone around the neck of Indian industry as it has severely restricted profitability and hence innovation. However, the government has been relaxing controls in a slow but progressive manner. The span of control of DPCO has come down from 90% in 1980s to 50% in 1995 and is likely to be further reduced as per the latest proposed changes.
In the domestic market, old and mature categories like anti- infective, vitamins, analgesics are degrading or stagnating while new lifestyle categories like cardiovascular, CNS, anti diabetic are growing at double-digit rates. The growth of a company in the domestic market is thus critically dependent on its therapeutic presence.
The pharmaceutical industry is a knowledge driven industry and is heavily dependent on Research and Development for new products and growth. However, basic research (discovering new molecules) is a time consuming and expensive process and is thus, dominated by large global multinationals. Indian companies have recently entered the area and initial results have been encouraging.
Patents play an important role in encouraging Research and Development. The new WTO rules imply that India will have to switch to a product patent regime post 2005 from its current process patent regime. This would alter the scenario in the Indian market over the next 10-15 years.
In the global pharmaceutical market, western markets are the largest and fastest growing due to introduction of newer molecules at high prices. A well-established reimbursement and insurance system implies that per capita drug expenditure is abnormally high in Western Countries as compared to the developing nations.
The Indian pharmaceutical industry is highly fragmented, but has grown rapidly due to the friendly patent regime and low cost manufacturing structure. Intense competition, high volumes and low prices characterize the Indian domestic market. Exports have been rising at around 30% CAGR over last five years. There is a shift in export profile towards value added formulations from low value bulk drugs.
The Drug Pricing Control Order (DPCO) has been the millstone around the neck of Indian industry as it has severely restricted profitability and hence innovation. However, the government has been relaxing controls in a slow but progressive manner. The span of control of DPCO has come down from 90% in 1980s to 50% in 1995 and is likely to be further reduced as per the latest proposed changes.
In the domestic market, old and mature categories like anti- infective, vitamins, analgesics are degrading or stagnating while new lifestyle categories like cardiovascular, CNS, anti diabetic are growing at double-digit rates. The growth of a company in the domestic market is thus critically dependent on its therapeutic presence.