Description
The presentation includes the economic analysis of pharma sector in India.
Economic analysis of pharma sector
Pharmaceutical industry
? Develops, produces, and markets drugs licensed for use as medications
? These companies are allowed to deal in generic and /or brand medications and medical devices
? They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs
Unique features of the sector
? Research and development
? Cost of innovation
? Drug testing & development
? Me-too drugs
? Orphan drugs
? Patents
Indian pharma industry
? January 1, 2005, of a system of product patents was introduced ? World's third-largest by volume and is likely to lead the manufacturing sector of India ? India's bio-tech industry clocked a 17 percent growth with revenues of rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal
Factors influencing the sector
? ? ? ? ? The growing population of over a billion A huge patient base Increasing incomes Improving healthcare infrastructure An increase in lifestyle-related diseases such as diabetes, cardiovascular diseases, and central nervous system ? Penetration of health insurance ? Adoption of patented products ? Patent expiries and aging population in the US, Europe, and Japan
Indian pharmaceutical evolution
Phase V
Phase IV
Phase III Development Phase Phase I Early Years •Market share domination by foreign companies •Relative absence of organized Indian companies •Process Government Control development Phase II •Indian Patent Act – 1970 •Drug prices capped •Local companies begin to make an impact •Production infrastructure creation •Export initiatives Growth Phase
Innovation and Research
•Rapid expansion of •New IP law domestic market •Discovery Research •International •Convergence market development •Research orientation
1970
1980
1990
2000
2010
Economic features of indian pharmaceutical industry
? Demand is price inelastic(largely) ? Supply is elastic ? There is constant returns to scale ? Capitalization requirements and return times rival ? Product life cycle(dependent on patent norms)
Types of competition
? Highly competitive ? Top 5 players have mere 18% of market share ? Lower fixed cost and high working capital ? Concentration ratio is very low ? High growth prospects ? Entry barriers are very low
Types of competition
? End user different from influencer ? Govt. Plays important role in price regulation through NPPA ? Low bargaining power of suppliers ? Advances in biotechnology – threat to synthetic pharma industry
Top 10 Pharmaceuticals in India (as of 2010)
Rank
1 2 3
Company
Cipla Ranbaxy(Taken over by Daiichi Sankyo in 2008) Dr. Reddy's Laboratories
Revenue 2010 (Rs Revenue 2010 (Rs crore) billion) 4,198.96 4,162.25 3,763.72 41.989 41.622 37.637
4
5 6 7 8 9
Sun Pharmaceutical
Lupin Ltd Aurobindo Pharma GlaxoSmithKline(British company) Cadila Healthcare Aventis Pharma(Swedish company)
2,463.59
2,215.52 2,081.19 1,773.41 1,613 983.80
24.635
22.155 20.801 17.734 16.13 9.838
The future trend of the market
Currently the market seems like a perfectly competitive market
Markets big players start to leverage on R&D and form cartels or merge
As large players begin to dominate, the competition takes the face of oligopoly with high entry barriers
Indian perspective
BIG BRANDS FORM CARTELS OR MERGE MARKET IS DIVIDED BY ENTRY BARRIERS AND R&D SMALL FIRMS
Imports
? The imports of pharmaceuticals are estimated at 10 to 12 percent of the total market. ? The major suppliers are Switzerland, China, USA, Germany, Italy, Denmark, France, and UK ? USA accounts for 14% of total world imports, followed by Switzerland (4.8%), Japan and Canada (3%) ? Imports include raw materials and finished products.
? Some major pharmaceuticals which are imported include provitamins and vitamins, cortisones, hydrocortisone, insulin, penicillin, oesetrogen, progesterone and other hormones, erythromycin and other antibiotics, antisera other blood fraction, and glycosides. ? The imports from Switzerland, US and Germany primarily consist of finished medicament in dosage forms for retail sales
Exports
? Indian pharmaceutical industry ranks 17th with respect to exports value of actives and dosage
? Exports constitute nearly 40 per cent of the production, with formulations contributing 55 per cent and bulk drugs 45 per cent
? The overall pharmaceutical exports are estimated to increase at a CAGR of 30-32 % and reach us$ 18.3 billion in 2011-2012
Patents amendment act-2005
? This act is the third of three amendments to the patents act of 1970, to bring India’s patent regime into compliance with the WTO TRIPS agreement.
? The patents (amendment) act, 2005 extends the product patent protection to the areas of pharmaceuticals and agricultural chemicals.
FDI in Pharma
? ? ? ? Sought out destination for foreign players Industrial licensing has been abolished Ministry of Chemicals and Fertilizers permits 100% FDI Exemption from DPCO if product is patented under the Indian Patent Act and developed through indigenous R&D in India
Trend of acquisition of indian companies by mnc’s
Indian Company Matrix Lab Dabur Pharma MNC Mylan Inc Fresenius
Ranbaxy
Shanta Biotech Orchid Chemicals Piramal Health Care
Daiichi Sankyo
Sanofi Aventis Hospira Abott
Negatives of acquisition
? ? ? ? ? Reducing domestic availability of drugs Reduce competition Oligopolistic market and cartelization Cases of emergency Sustainable growth of economy
DPCO
? The drugs price control order (DPCO), 1995 is an order issued by the government of India under section 3 of the essential commodities act, 1955 to regulate the prices of drugs.
? The order inter alia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by government and penalties for contravention of provisions among other things.
? Drugs and formulations have been subjected to price control for more than three decades now.
doc_519736796.pptx
The presentation includes the economic analysis of pharma sector in India.
Economic analysis of pharma sector
Pharmaceutical industry
? Develops, produces, and markets drugs licensed for use as medications
? These companies are allowed to deal in generic and /or brand medications and medical devices
? They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs
Unique features of the sector
? Research and development
? Cost of innovation
? Drug testing & development
? Me-too drugs
? Orphan drugs
? Patents
Indian pharma industry
? January 1, 2005, of a system of product patents was introduced ? World's third-largest by volume and is likely to lead the manufacturing sector of India ? India's bio-tech industry clocked a 17 percent growth with revenues of rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal
Factors influencing the sector
? ? ? ? ? The growing population of over a billion A huge patient base Increasing incomes Improving healthcare infrastructure An increase in lifestyle-related diseases such as diabetes, cardiovascular diseases, and central nervous system ? Penetration of health insurance ? Adoption of patented products ? Patent expiries and aging population in the US, Europe, and Japan
Indian pharmaceutical evolution
Phase V
Phase IV
Phase III Development Phase Phase I Early Years •Market share domination by foreign companies •Relative absence of organized Indian companies •Process Government Control development Phase II •Indian Patent Act – 1970 •Drug prices capped •Local companies begin to make an impact •Production infrastructure creation •Export initiatives Growth Phase
Innovation and Research
•Rapid expansion of •New IP law domestic market •Discovery Research •International •Convergence market development •Research orientation
1970
1980
1990
2000
2010
Economic features of indian pharmaceutical industry
? Demand is price inelastic(largely) ? Supply is elastic ? There is constant returns to scale ? Capitalization requirements and return times rival ? Product life cycle(dependent on patent norms)
Types of competition
? Highly competitive ? Top 5 players have mere 18% of market share ? Lower fixed cost and high working capital ? Concentration ratio is very low ? High growth prospects ? Entry barriers are very low
Types of competition
? End user different from influencer ? Govt. Plays important role in price regulation through NPPA ? Low bargaining power of suppliers ? Advances in biotechnology – threat to synthetic pharma industry
Top 10 Pharmaceuticals in India (as of 2010)
Rank
1 2 3
Company
Cipla Ranbaxy(Taken over by Daiichi Sankyo in 2008) Dr. Reddy's Laboratories
Revenue 2010 (Rs Revenue 2010 (Rs crore) billion) 4,198.96 4,162.25 3,763.72 41.989 41.622 37.637
4
5 6 7 8 9
Sun Pharmaceutical
Lupin Ltd Aurobindo Pharma GlaxoSmithKline(British company) Cadila Healthcare Aventis Pharma(Swedish company)
2,463.59
2,215.52 2,081.19 1,773.41 1,613 983.80
24.635
22.155 20.801 17.734 16.13 9.838
The future trend of the market
Currently the market seems like a perfectly competitive market
Markets big players start to leverage on R&D and form cartels or merge
As large players begin to dominate, the competition takes the face of oligopoly with high entry barriers
Indian perspective
BIG BRANDS FORM CARTELS OR MERGE MARKET IS DIVIDED BY ENTRY BARRIERS AND R&D SMALL FIRMS
Imports
? The imports of pharmaceuticals are estimated at 10 to 12 percent of the total market. ? The major suppliers are Switzerland, China, USA, Germany, Italy, Denmark, France, and UK ? USA accounts for 14% of total world imports, followed by Switzerland (4.8%), Japan and Canada (3%) ? Imports include raw materials and finished products.
? Some major pharmaceuticals which are imported include provitamins and vitamins, cortisones, hydrocortisone, insulin, penicillin, oesetrogen, progesterone and other hormones, erythromycin and other antibiotics, antisera other blood fraction, and glycosides. ? The imports from Switzerland, US and Germany primarily consist of finished medicament in dosage forms for retail sales
Exports
? Indian pharmaceutical industry ranks 17th with respect to exports value of actives and dosage
? Exports constitute nearly 40 per cent of the production, with formulations contributing 55 per cent and bulk drugs 45 per cent
? The overall pharmaceutical exports are estimated to increase at a CAGR of 30-32 % and reach us$ 18.3 billion in 2011-2012
Patents amendment act-2005
? This act is the third of three amendments to the patents act of 1970, to bring India’s patent regime into compliance with the WTO TRIPS agreement.
? The patents (amendment) act, 2005 extends the product patent protection to the areas of pharmaceuticals and agricultural chemicals.
FDI in Pharma
? ? ? ? Sought out destination for foreign players Industrial licensing has been abolished Ministry of Chemicals and Fertilizers permits 100% FDI Exemption from DPCO if product is patented under the Indian Patent Act and developed through indigenous R&D in India
Trend of acquisition of indian companies by mnc’s
Indian Company Matrix Lab Dabur Pharma MNC Mylan Inc Fresenius
Ranbaxy
Shanta Biotech Orchid Chemicals Piramal Health Care
Daiichi Sankyo
Sanofi Aventis Hospira Abott
Negatives of acquisition
? ? ? ? ? Reducing domestic availability of drugs Reduce competition Oligopolistic market and cartelization Cases of emergency Sustainable growth of economy
DPCO
? The drugs price control order (DPCO), 1995 is an order issued by the government of India under section 3 of the essential commodities act, 1955 to regulate the prices of drugs.
? The order inter alia provides the list of price controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by government and penalties for contravention of provisions among other things.
? Drugs and formulations have been subjected to price control for more than three decades now.
doc_519736796.pptx