PORTERS

FIVE
PHARCEUTICAL INDUSTRY

FORCES-INDIAN

Porters five forces make an in depth analysis of the particular industry in which
he determined the five forces which determines the market advantage and
growth of the industry in this case the Indian pharmaceutical industry.
SUPPLY
When it comes to the pharmaceutical supply side of the industry there is a high
demand for therapeutic segments ,which is typical of developing markets in the
industry whereas lower for the lifestyle segment.
DAMAND
On the demand side the Indian pharmaceutical industry as a higher demand in
certain therapeutic segments because it is an emerging market and is certainly
set to change as life expectancy and literacy increases in the country.
BARRIERS TO ENTRY
The Indian pharmaceutical industry present certain barriers to entry such as
Licensing, distribution network, patents, plant approval by regulatory authority
such as CDSCO - Central Drugs Standard Control Organization in India.

BARGAING POWER OF SUPPLIERS

There is an increasing trend with distributers who are increasingly pushing
generic products in order to earn higher margins of profits.

BARGAING POWER OF BUYERS

The Indian pharmaceutical industry is highly fragmented with more than 24,000
manufacturing unites which as insured widespread competition in all product
segments. Currently there are various regulations and policies regard pricing and
marketing which protect the domestic market.

COMPETITON
Competition is also widespread due to a high number of manufacturing units
which is highly fragmented with the top 300 (of 24,000 plus manufacturing
unites) which accounts for a large chunk of sales in the market .The top 20
companies account for up to 60% IPM sale.

GEARING UP FOR 2020

The government of Indian has come up with the Pharma vison 2020 in which the
government has set up targets which it has to reach by 2020 known as the
Indian Pharma Vision 2020.The Indian Pharma industry is on the threshold of
becoming a major global market by 2020.And many experts believe that the
Industry has the potential to grow at an accelerated 15 to 20% CAGR for the next
10 years to reach between US$49 billion to US$74 billion in 2020.
The Indian pharmaceuticals market is witnessing dynamic changing trends such
as large acquisitions by multinational companies in India, increasing investment
by domestic and international players in India, deeper penetration into the rural
markets, growth and availability of healthcare and incentives for setting up
special economic zones. We believe these trends combined with increased
purchasing power and access to good quality medical care will continue to propel
the domestic pharmaceutical industry to new heights. Indian Pharma companies
are already major outsourcing partners of global Pharma companies. Research &
Development in India is getting more innovative. Domestic companies have
strengthened their position in the world for supplying solutions across the
pharmaceutical value chain. They are likely to become a competitor of global
Pharma in the areas of manufacturing and R&D, and a potential partner in
others. Some of the targets which have been set by the government are as
follows;
Pharma Vision 2020 by the governments Department of Pharmaceuticals
aims to make India a major hub for end-to-end drug discovery
Government expenditure on health has increased from USD14 billion in
2008 to USD23 billion in 2011
The share of private sector spending has increased from USD36 billion in
2008 to USD49 billion in 2011
Penetration of health insurance is expected to more than double by 2020
Government-sponsored programmers expected to provide coverage to
nearly 380 million people by 2020
SOURCE(Mckinsey estimates, Aranca Research )

The current trends of business models being followed by Indian pharmaceutical

industry indicates that the current pharmaceutical business model is both
economically unsustainable and operationally incapable of acting quickly to
enough to produce the type of innovative treatments demanded by the Global
markets.
In order to make most of these growth future opportunities the Indian
pharmaceutical industry must fundamentally change the way it operates. Some
changes have been suggested which the Indian pharmaceutical industry can take

up to ensure growth of the industry and sustaining it was given by

powerhousecooper (pwc).
Some of the major changes anticipated by Pwc are as follows;
>Health care will shift in focus from treatment to prevention.

Pharmaceutical companies will provide total healthcare packages.

The current linear phase of research and development process will give way to in life testing
and .live licensing, in collaboration with regulators and health care providers.
The traditional blockbuster sales will disappear.
The supply chain function will become revenue generating as it becomes integral to the health
care package which will enable access to new channels.
More sophisticated direct-to- consumer distribution channels will diminish the wholesalers
role.
THE INDIAN PHARMACEUTICAL MARKET

Market value and growth scenario

The IPM is valued at 72069 crore INR in 2013 as against 65654 crore INR in 2012
with an incremental value of 6416 crore INR, which is down from the 9363 crore
INR for 2011- 201215. The IPM has experienced a slowdown this year with its
growth at going down to 9.8% from 16.6% in 201216. From 2010 to 2012, the
IPM had a CAGR of approximately 15%17. The IPM growth rate has declined after
November 2012 from an average of 16% to 8%18. This slowdown can be
attributed to the following:
The National Pharmaceutical Pricing Policy (NPPP) being announced towards
the end of 2012
Higher growths for the corresponding quarters and months in the previous year
The NPPP implementation and the subsequent price corrections leading to a low
uptake among the stockists in the second quarter of 2013.
Key therapy areas; The top 10 therapy areas of the Indian pharmaceutical
market or IPM contribute to approximately 90% of the IPM sales19. Chronic
therapies (cardio, gastro, CNS and anti-diabetic) have been outperforming the
market for the past four years and have grown at a rate of 14%, faster than
acute therapies (anti- invectives, respiratory, pain and gynaec) which grew at
9.6%. This is what effectively resulted in an overall slowdown in 2013. The
contribution of chronic therapies to the IPM has gone up from 27% in 2010 to
30% in 2013.

Company performance: The top 10 companies contributed to 41% of total IPM

sales up from 39% in 2010. These companies had a collective growth of 9%
(lower than the IPM) . Companies that ranked from 11 to 20 contributed to 22%
of IPM sales and had a cumulative growth of 12% (higher than the IPM) 25. The

remaining companies contributed to 37% of the IPM sales with a growth rate of
9%.

Growth trends in Indian companies and MNCs; There has been a

slowdown in the growth of the top Indian as well as multinational
companies. However, the slowdown is more prominent in the MNCs than in
the Indian companies. In 2012, the top five MNCs had a growth rate of
16% which dropped down to 7% in 2013. Similarly, in 2012, the top five
Indian companies had a growth rate of 16% that KEY FACTOR: National
Pharmaceutical Pricing Policy (NPPP)dropped down to 12% in 2013.

figur1.1
Brand performance; The top 100 brands in the IPM cumulatively contributed to
approximately 18%29 of the total market value with a growth rate of
approximately 11%30. This value has marginally gone up from 17% in 201031.
Of the top 100 brands, 44 brands were more than 100 crore INR in value32.
Indian companies and the MNCs had an equal share in the top 100 with 50
products each33. 76 of the top 100 products were acute therapy products while
24 were chronic therapy products34. In terms of therapy, there were 21 antiinfective products, 12 gastro, 11 anti-diabetic, 10 respiratory and nine cardiac
therapies35.

New introductions ; Contribution of the new introductions (NIs) to the IPM has gone down from
6.3% in 2010 to 4.1% in 201336. The number of new products launched has gone down from
approximately 1900 in 2010 to approximately 1700 in 201237. Of all the new launches as of MAT
Apr 2013, the maximum were in anti-infectives (468), pain- analgesics (435) and gastro (389)
therapies38. The average value per NI was 0.89 crore INR for the overall market and was.

New Product Launches

There were a of :- 1700 in 2013

A Fall of 4.1% in number compared to 2012

Maximum were in anti-invectives (468), pain-analgesics (435) and gastro

(389) therapies

The average value per new product was 0.89 crore INR for the overall
market and was the highest for vaccines (4.32 crore INR)

ACUTE TO CHRONIC THERAPIES

The share of chronic therapies (cardio, gastro, CNS and anti-diabetic) is increasing.
Companies
are
hence
shifting
their
focus
to
chronic
medicines.

figur1.
2

Indian pharmaceutical market segments by value

Anti-infective drugs command the largest share (17.8 per cent) in the Indian pharma market.

figure,1.3

figure 1.4
The Indian pharmaceutical industry experienced a cold phase in the FY13 feb as seen from
the above chart.
OTHER NOTABLE TRENEDS

RESEACH AND DEVELOPMENT

Most Indian Companies have started spending ~7% of their total revenue for R& D purposes
from ~2% spend.

INCRESAE IN EXPORTS

Due to increase of presence in generic segment, export market in India is thriving .

PATENTS ACT IN 2005

The R&D spend has increased to find new products and Patent act 2005 has played a major
role in it.
MERGERS AND ACQUISITIONS

Strategic alliances/joint ventures by companies to strengthen their domestic/international

presence.

INCREASE IN CLINICLE TRIALS

Lower cost high quality labor is making India a hub for clinical trials.

Growth Drivers
Some of the growth drivers which are set to propel the Indian pharmaceutical
industry are as follows.

Country's growing Economy.

Investments by Multinational Companies (MNCs).
Rise of Pharmaceutical outsourcing.
Increase in sale of Generics.
Continued growth in Chronic Therapies.
Greater penetration in rural markets.

KEY FACTOR: National Pharmaceutical Pricing Policy (NPPP)

MARKET DYNAMICS
According to IMS health, domestic pharmaceutical market reported total sales of
US$ 1.12 billion in July 2013. This was at a growth % of 13.5%.
India currently exports drug intermediates, Active Pharmaceutical Ingredients
(APIs), Finished Dosage Formulations (FDFs), Bio-Pharmaceuticals, and Clinical
Services to the world. The exports of pharmaceuticals from India saw an upward
trend in the year 2012-13. Currently it stands at US$ 14.6 billion. Target set by
Ministry of Commerce is US$ 25 billion by end of 2014. India looks to be on track
to achieve this target with the Indian pharma vision 2020.

INDIAN PHARMACEUTICAL MARKET

Pharmaceutical companies in India both Indian and foreign, manufacture bulk
drugs in several therapeutic categories and the industry has facilities to
manufacture various types of dosage namely capsule, tablets, injectables, orals,
and liquids. Of the 400 bulk drugs in the Indian market, it is estimated that 300
are domestically produced.
Moreover, India is emerging as the most favored destinations for collaborative
Research & Development bioinformatics, contract research and manufacturing
and clinical research as a result of growing compliance with internationally
harmonized standards such as Good Laboratory Practices (GLP), current Good
Manufacturing Practices (cGMP) and Good Clinical Practices (GCP).
Factors contributing to the growth of the Pharmaceutical Market:

India today has the distinction of producing high quality generic medicines that
are sold around the world. Further, India is poised to be one of the fastest
growing pharmaceutical markets in the world. The following factors have fuelled
the growth for the drugs and pharmaceutical market:
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.
As a result, a number of multinationals have entered the Indian Pharmaceutical
market. Already 15 of the 20 largest pharmaceutical companies in the world
have a presence in India. In fact, during April 2000 to October 2007, drugs and
pharmaceuticals are the tenth largest FDI-attracting sectors in India.
The following challenges faced by the global pharmaceutical industry also open
up a number of opportunities for the Indian Pharmaceutical Industry:
Higher healthcare cost
Competition from generics;
Patent expiries of blockbuster drugs;
drying R&D pipelines; and
increasing R&D costs.
This offers immense growth opportunity for the Indian Pharmaceutical Industry in
the following segments:
Bulk-drugs;
Domestic formulations;
Exports to non regulated markets;
CRAMS; Exports of generics to regulated markets;

 NCE research for global pharmaceutical companies.

EXPORT DATA OF INDIAN PHARMACEUTICAL INDUSTRY

figure1.5
In terms of value, pharmaceutical products exports have increased at a CAGR of 26.1 per cent to US$
10.1 billion during FY0613. In terms of value, pharmaceutical products exports have increased at a
CAGR of 26.1 per cent to US$ 10.1 billion during FY0613. Last Updated: April, 2014
Indias pharma industry accounts for about 1.4 per cent of the global pharma industry in value terms
and 10 per cent in volume terms. Among the fastest growing pharma industries in the world, Indias
pharmaceutical sector is expected to expand at a compound annual growth rate (CAGR) of 13.1 per
cent during 20122020 and reach US$ 45 billion.

figure1.6
The Indian pharmaceuticals market grew at a CAGR of 17 per cent in 2012. By 2020, the country is
expected to be within the top three pharmaceutical market by incremental growth and sixth largest
market globally in absolute size. Currently, Indian drugs are exported to more than 200 countries in
the world, with the US as the key market.
The Government of Indias expenditure on health increased from US$ 14 billion in 2008 to US$ 23
billion in 2011. The expenditure is projected to expand at a CAGR of 18 per cent during 200816 to
touch US$ 53 billion, thereby increasing the share of government expenditure towards total healthcare
spending from 27.6 per cent to 39.9 per cent during the same period.

With 70 per cent of Indias population residing in rural areas, pharma companies have immense
opportunities to tap this market. Demand for generic medicines in these regions has seen a sharp
growth, and various companies are investing in the distribution network in rural areas. The share of
generic drugs is expected to continue increasing; it could represent about 90 per cent of the
prescription drug market by 2016.

Along with GDUFA fees, the increasing manufacturing costs, salaries, and environmental
requirements in India are adding to the pressure on Indian companies. As a result, a growing
number of Indian companies are purchasing active ingredients from China for their own
market. The amount of Indias pharmaceutical market supplied by Chinese API has increased
significantly over time, as seen in figure 3. The list of active ingredients with the most Indian
import registrations held by Chinese companies highlights the type of products in which
China has overtaken India in manufacturing. This includes antibiotics, such as erythromycin,
doxycycline and cephalosporins, as well as commodity products such as acetaminophen.
The Indian patent act of 1970 was amended in 2005 in order to gain admittance to the World Trade
Organization (WTO) and become compliant with TRIPs (Trade-Related Aspects of Intellectual
Property rights), an important WTO regulation. The Amendment established patent protection for
pharmaceutical products in India. The recognition of product patent has provided global companies
with better IPR protection and as a result has opened up a new segment for the Indian Pharmaceutical
ndustry in Contract Research and Manufacturing Services (CRAMS).
The Indian pharmaceutical market at present is highly fragmented, with the top
three companies having a market share of around 5% each. However,
introduction of the product patent regime is likely to result in heavy consolidation
in future.
End Users:
Around three quarters of the pharmaceuticals are for the retail market, rest for
direct sales to the hospitals and nursing homes. The End users of

pharmaceuticals are the government and private healthcare service providers,

and retailers.
In India, healthcare service is provided both by the government (public) and
private sector. The size of the Indian healthcare delivery market is estimated at
$18.7 billion. The private sector provides for 63 percent of the healthcare
market.
Key Characteristics of the Indian Pharma Sector:
The Indian pharmaceutical market is marked by the following significant
features:
Self-reliance displayed by the production of 70% of bulk drugs and almost the
entire requirement of formulations within the country;
Low cost of production;
Low R&D costs;
Innovative Scientific Manpower;
Excellent and world-class national laboratories specializing in process
development and development of cost effective technologies;
Increasing balance of trade in pharma sector;
An efficient and cost effective source for procuring generic drugs especially
the drugs going off patent in the next few years;
An excellent centre for clinical trials in view of the diversity in population.
Laws and Regulations governing Indian Pharmaceuticals:
The Drugs and Cosmetics Act, 1940: This Act regulates the import,
manufacture, distribution and sale of drugs in India.
Schedule M of the Drugs and Cosmetics Act specifies the general and specific
requirements for factory premises and materials, plant and equipment and
minimum recommended areas for basic installation for certain categories of
drugs.
Schedule T of the Drugs and Cosmetics Act prescribes Good Manufacturing
Practices (GMP) specifications for manufacture of Ayurvedic, Siddha and Unani
medicines.
Schedule Y of the Drugs and Cosmetics Act governs the clinical trials legislative
requirements of the Drugs and Cosmetics Act.
The Pharmacy Act, 1948: This legislation regulates the profession of Pharmacy
in India. Under the provisions of this act the Central Government constitutes a
Central Pharmacy Council of India and the State Governments constitute State
Pharmacy Council.

The Drugs and Magic Remedies (Objectionable Advertisement) Act,

1954: This Act provides to control the advertisements regarding drugs and
prohibits the advertising of remedies alleged to possess magic qualities.
The Narcotic Drugs and Psychotropic Substances Act, 1985: This is an act
concerned with control and regulation of operations relating to Narcotic Drugs
and Psychotropic Substances.
The Medicinal and Toilet Preparations (Excise Duties) Act, 1956: An Act to
provide for the levy and collection of duties of excise on medicinal and toilet
preparations
The Drugs Price Control Order (DPCO), 1995: This is an order issued by the
Government of India under the Essential Commodities Act, 1955 to regulate the
prices of drugs. The Order 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.
For the purpose of implementing provisions of DPCO, powers of the Government
have been vested in the National Pharmaceutical Pricing Authority (NPPA).
Good Clinical Practice (GCP) Guidelines: The Ministry of Health, along with
Drugs Controller General of India (DCGI) and Indian Council for Medical Research
(ICMR) has come out with draft guidelines for research in human subjects. These
GCP guidelines are essentially based on Declaration of Helsinki, World Health
Organization (WHO) guidelines and International Conference on Harmonization
(ICH) requirements for good clinical practice.
The following are some of the other laws which have a bearing on
pharmaceutical manufacture, distribution and sale in India:
The Industries (Development and Regulation) Act, 1951
The Trade and Merchandise Marks Act, 1958
The Indian Patent and Design Act, 1970
Factories Act
Regulatory Bodies:
The Ministry of Health & Family Welfare (MoHFW) and the Ministry of Chemicals
and Fertilizers (MoC&F) of the Government of India play a major role in regulating
the pharmaceutical sector in the country.
Ministry of Health & Family Welfare (MoHFW):
Department of Health: The following are the main agencies of the department
which deal with key issues including drug approvals:
Central Drugs Standard Control Organization (CDSCO): As an agency of the
Department of Health, the CDSCO works both at the Central and the State level
and is responsible for ensuring safety, efficacy and quality of drugs supplied to

the public. The agency performs the above mentioned functions with the Drugs
Controller General of India (DCGI) as the executive head.
Drugs Controller General of India (DCGI): The DCGI is an apex body in the
pharmaceutical industry governing issues such as product approval and
standards, clinical trials, introduction of new drugs, import licenses for new drugs
and enforcing new drug legislation.
The following are the major acts which the Department of Health administers:
The Drugs & Cosmetics Act, 1940
The Prevention of Food Adulteration Act
The IMA Act
The Tobacco Control Act
Ministry of Chemicals and Fertilizers (MoC&F):
The Ministry of Chemicals & Fertilizers constitutes bodies such as the
Department of Chemicals & Petrochemicals and the National Pharmaceutical
Pricing Authority (NPPA). These departments are entrusted with the responsibility
of policy making, planning, development and regulations relating to Chemicals,
Petrochemicals and Pharmaceuticals.
Department of Chemicals & Petro-Chemicals: This department is the
concerned authority for formulating and implementing policies and programmes
for achieving growth and development of pharmaceuticals in the country. In
order to attract investment into the sector, the Department has undertaken
several initiatives, the major being the Pharmaceutical Policy with the objective
to strengthen the production, export & R&D.
The first comprehensive pharmaceutical policy in India was formulated in 1978.
The national pharmaceutical policy has seen a number of changes through new
policy guidelines issued in 1986, 1994 and recently in 2002.
Pharmaceutical Policy 2002 - The main objectives of the policy are:
To ensure availability of good quality essential pharmaceuticals at reasonable
prices for mass consumption.
To strengthen the indigenous capability for cost effective quality production
and export of pharmaceuticals by reducing trade barriers in the pharmaceutical
sector.
Quality control system for pharmaceutical production and distribution to make
quality an essential attribute of the domestic industry.
Encouraging pharmaceutical R&D that is compatible with the country's needs.

 To encourage new investment in the pharmaceutical industry and the

introduction of new technologies and new drugs.
Draft Pharmaceutical Policy 2006 - The Department of Chemicals has released
the draft of the New Pharmaceutical Policy 2006 which is waiting for approval by
the Indian Government.
The draft National Pharmaceutical Policy, 2006 seeks to strengthen the Drug
Regulatory System and Patent offices in the country. It focuses on research and
drug development with clinical trials. The policy aims at providing a better
access to anti-cancer and anti-HIV/AIDS drugs to the patients. It seeks to
rationalize the excise duty on pharmaceuticals and to streamline the system of
bulk procurement of drugs by the Government besides promoting the generic
medicines.
National Pharmaceutical Pricing Authority (NPPA): It has been entrusted
with the task of fixation / revision of prices of bulk drugs and formulations,
enforcement of provisions of the Drugs (Prices Control) Order and monitoring the
prices of controlled and decontrolled drugs in the country.
Drugs Price Control Order (DPCO), 1995: The Drugs Price Control Order
(DPCO), 1995 is an order issued by the Government of India under the Essential
Commodities Act, 1955 to regulate the prices of drugs. DPCO controls the
domestic prices of major bulk drugs and their formulations with an aim to
provide patients with medicines at affordable prices. DPCO ascertains, as per
Drug.
Policy guidelines, the bulk drugs (and their formulations) to be kept under price
control. At the State level, the State Food and Drug Administrations (FDAs)
monitor the drug manufacture, sale, and testing by companies in their
jurisdiction. There are also two main statutory bodies formed by Parliament:
The Drugs Technical Advisory Board, whose technical experts advise the
Central and State Governments on special technical matters involving drug
regulation, an
The Drugs Consultative Committee, where central and State drug officials
ensure that drug control measures are enforced uniformly in all states.
The domestic pharmaceutical industry is represented by the following three main
pharmaceutical associations:
Organization of Pharmaceutical Producers of India (OPPI): This is a premier
association of research based international and large pharmaceutical companies
in India and is also a scientific and professional body.
Indian Drug Manufacturers' Association (IDMA): The IDMA represents the
interests of domestic manufacturers and plays a vital role in the growth and
development of the pharmaceutical industry, by taking up with the Government

major issues such as Price Control, Patents and Trade Marks Laws, Quality &
GMP, R&D, Exports and so on.
Indian Pharmaceutical Association (IPA): This is the premier professional
association of pharmacists in India. Drug Application Procedures:
Foreign pharmaceutical firms looking to export drugs to India must first obtain a
license from the Drugs Controller of India (DCI) which is granted upon assurance
that the firm's manufacturer abroad complies with Indian production and safety
standards.
Prior to the release of any drugs for import into India, the importer must submit
the following documents to the Central Drug Control Organization:
Documents of import (Bills of Entry),
Protocols test and analysis,

A sample of the product(s) label, and

A drug sample.
The drug sample is tested by the government, which in turn releases a
consignment to the importer if the test results approve the drug as meeting
"standard quality." Importers are also permitted to import drugs for experiment,
test research or clinical trial under a test license.
Companies looking to manufacture drugs locally must go through a "preparatory"
or Pre-Licensing Phase to show that their manufacturing facilities are up to
standard. After being granted a license, the manufacturer must also produce a
test batch of drugs that is approved by the government for safety. All companies
must also follow specific labeling requirements.
Both importers and local manufacturers must label every product with the
following information:
Name of the drug;
A correct statement of the net content of the drug;
Content of active ingredients;
Name and address of the manufacturer;
Batch or lot number; manufacturing license number (if applicable);
Number of the license under which the drug is imported (if applicable);
Date of manufacture and expiration date, which must not exceed 60 months.

Pharmaceutical companies must have their label and pack insert approved by
the DCI before the drug is marketed.
Pharmaceutical Registration:
To register a new drug in India, a New Drug Application must be submitted to the
regulatory authority Drugs Controller General of India, along with the documents
such as details of the drug's regulatory status in other countries; restrictions of
use in approved countries; a free sale certificate from the country of origin;
results of clinical data based on approved protocol; published data of
confirmatory Phase III trials undertaken abroad; details of bio-availability and
dissolution studies; a sample of the marketing information, including draft labels
and cartons and inserts; a sample of the pure drug substance along with testing.
Protocol for analysis at the Central Drugs Laboratory (CDL) in Calcutta. Generally,
local Phase III clinical trials are required for the registration and marketing
approval of all new drugs in India.
According to the industry, drug registration can take 12-18 months, longer time if
delays are encountered. Decisions on fast track approvals for drugs are on the
basis of demand for the drug and in public interest.
Pharmaceutical Pricing: The Department of Chemicals and Petrochemicals of
the Ministry of Chemical and Fertilizer develops the pricing policy for the
pharmaceutical industry In India, the prices of some drugs are controlled through
the Drug Price Control Order (DPCO) 1995.
Price controlled drugs are divided into two categories, the first category includes
drugs considered as essential and is subject to more stringent rules than those in
the second category. Concessions exist for manufacturers who conduct in-house
bulk drug research and development, and for new drugs introduced into India,
either by domestic or foreign firms.
Tax Regime: The following major initiatives have been taken by the Indian
Government for the pharmaceutical industry in the Budget 2008-09:
A reduction in excise duty from 16 percent to 8 percent on all goods produced
in the pharmaceutical sector.
Amounts spent on R&D eligible for a 125 percent weighted deduction.
A reduction in customs duty from 10 to 5 percent and a total exemption of
excise duty on certain specified life-saving drugs and bulk drugs used in the
manufacture of Anti-AIDS drugs.
Central sales tax on specified life saving drugs has been reduced to two
percent from three percent.
Value Added Tax:
Drugs and medicines are taxed at 4% except Assam where the rate is 6%.

 Medical devices are taxed at 12.5% in three states Maharashtra, Gujarat and
Kerala, whereas in all other states, the tax rate is 4%.
Some states have introduced a system of levying tax on MRP at a single point
i.e. first sale in the state is subject to VAT on the basis of MRP and subsequent
sales, in general, are exempt. The MRP system is optional in some states. States
such as Madhya Pradesh, Chattisgarh and Orissa levy entry tax on entry of
medicines and devices in to these states.
Other Initiatives:
An allocation of Rs 16, 534 crore for the healthcare sector.
An increased allocation for the National Rural Health Mission (NRHM)
amounting to Rs 12, 050 crore.
An amount of Rs 993 crore provided for the National Aids Control Programme
(NACP) and Rs 1, 042 crore provided for the eradication of polio.
A 5 year tax holiday for hospitals in the Tier II and Tier III cities.
Foreign Direct Investment:
FDI up to 100% is permitted through the automatic route for the manufacture of
drugs and pharmaceuticals provided the activity does not attract compulsory
licensing or involves the use of recombinant DNA technology and specific cell /
tissue targeted formulations. FDI proposals for the manufacture of licensable
drugs, pharmaceuticals and bulk drugs produced by recombinant DNA
technology and specific cell / tissue targeted formulations will require prior
approval of the Foreign Investment Promotion Board (FIPB) of the Government of
India.
Pharmaceutical Clusters:
Andhra Pradesh, Gujarat, Maharashtra and Goa are the major pharmaceutical
manufacturing clusters in the country.
The bulk drug clusters are located primarily in the following regions:
Gujarat- Ahmedabad, Ankleshwar, Vapi, Vadodara
Maharashtra - Mumbai, Tarapur, Aurangabad, Pune
Andhra Pradesh - Hyderabad, Medak
Tamil Nadu Chennai, Pondicherry
Karnataka - Mysore, Bangalore, Goa
Visakhapatnam (Vizag) in Andhra Pradesh is the upcoming bulk drug cluster that
has generated significant interest in the APIs players.

Goa, Mumbai, Pune and Hyderabad have been the preferred destinations for
formulation players in the past. However, Baddi in Himachal Pradesh and
Pantnagar and Haridwar in the state of Uttarakhand are the upcoming
formulation clusters, attracting formulation manufacturers from across the
country due to fiscal incentives offered by the Government. Traditional bulk The
R&D clusters have followed a similar development pattern. Apart from the
National Capital Region (NCR), other R&D clusters have been limited to the
established pharmaceutical regions in the country.

figure1.8
The captive R&D Units are located in the following regions:
National Capital Region
Ahmedabad
Mumbai
Aurangabad
Hyderabad
Bangalore
Chennai
The contract R&D Units are located in the following regions:
Mumbai
Hyderabad
Bangalore
Chennai
Ahmedabad
Key Research Institutes:
Central Drug Research Institute (CDRI), Lucknow.

 National Institute of Pharmaceutical Education & Research (NIPER), Mohali.

Indian Institute of Chemical Technology (IICT), Hyderabad.
Centre for Cell & Molecular Biology (CCMB), Hyderabad.
Indian Institute of Chemical Biology (IICB), Kolkata.
Indian Toxicology Research Institute (ITRI), Lucknow.
Institute of Genomic and Integrated Biology (IGIB), New Delhi.
Institute of Microbial Technology (IMTECH), Chandigarh.
National Chemical Laboratory (NCL), Pune.
National Centre for Biological Sciences (NCBS), Bangalore.
Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR),
Bangalore.
Centre for DNA Fingerprinting and Diagnostics (CDFD), Hyderabad
Indian Institute of Science (IISc), Bangalore.
National Institute of Immunology (NII), New Delhi.
Key Pharmaceutical players:
The following are the top pharmaceutical companies of the country:
Ranbaxy Laboratories
Sun Pharmaceuticals
Dr. Reddy's Laboratories Cipla
Ashwin Dalvi India
Aurobindo Pharma
Nicholas Piramal
GlaxoSmithKline
Lupin Laboratories
Cadila Healthcare
Wockhardt
Other important domestic companies:
Biocon
Serum Institute of India

 Intas Biopharmaceuticals
Bharat Serums
Orchid Pharmaceuticals
Panacea Biotech
Torrent Pharmaceuticals
Apart from the above, there are five government-owned companies in the Indian
public sector. These companies are:
Indian Drugs and Pharmaceuticals,
Hindustan Antibiotics Limited,
Bengal Chemicals and Pharmaceuticals Limited,
Bengal Immunity Limited, and
Smith Stanistreet Pharmaceuticals Limited.
The foreign companies in India include the following:
Abott India,
Astra Zeneca India,
Aventis Pharma India,
Burrough-Wellcome,
Glaxo SmithKline,
Merck India,
Novartis,
Pfizer Limited, and
Wyeth Ledele India.
Counterfeit drugs in the Indian pharmaceutical industry
A counterfeit medication or a counterfeit drug is a medication or pharmaceutical product
which is produced and sold with the intent to deceptively represent its origin, authenticity or
effectiveness. A counterfeit drug may contain inappropriate quantities of active ingredients,
or none, may be improperly processed within the body (e.g., absorption by the body), may
contain ingredients that are not on the label (which may or may not be harmful), or may be
supplied with inaccurate or fake packaging and labeling. Medicines which are deliberately
mislabeled to deceive consumersincluding mislabeled but otherwise genuine generic
drugsare counterfeit. Counterfeit drugs are related to pharma fraud. Drug manufacturers

and distributors are increasingly investing in countermeasures, such as traceability and

authentication technologies, to try to minimize the impact of counterfeit drugs.
Making pills that could save lives both in India and abroad, Indian pharmaceutical
companies are growing faster than ever before. Worth over $12bn, the industry
is expected to grow more than four-fold in the coming decade.
But even as global attention is focused on the healthy growth in India, it is
threatened by serious malaise-counterfeiting drugs. Fake drugs in the system risk
not just live of patients, but also the reputation of the drug maker. Counterfeit
drugs affected people in 124 countries in 2011. Among them was India, where
20% of the drugs on the market are fake, according to the World Health
organization.
Its a global war, hitting the developing world hard, says pharmaceutical, a notfor-profit network of security division of 25 big pharma companies. Counterfeit
drugs, which are also referred to as substitute or falsified drugs, are a market
according to estimates by estimates by Deloitte.