INDIAN PHARMA INDUSTRY: CHANGING DYNAMICS_An essay by Yashoda M.

INTRODUCTION

The pharmaceutical industry is changing and traditional paths to innovation are no longer suitable. A drastically different reimbursement climate, the growing interest in biologic drugs, the shift from blockbusters to niche medicines, and the differing needs of emerging markets all have affected the cost structure and profitability of drug manufacturers, which is in turn affecting R&D needs and capabilities. Successful pharmaceutical companies have developed innovation networks including varying external groups—from insurance companies to academic medical centers—to support the discovery, development, and commercialization of new therapies.

“The Pharmaceutical industry does not create cures, they create customers.”

CHANGING MARKET DYNAMICS REQUIRE NEW APPROACHES TO INNOVATION

Traditional models

The historical innovation pathway for pharmaceutical companies has involved the development of small-molecule drugs following an integrated model.For many years, pharmaceutical companies leveraged organic chemistry-based research and manufacturing, and with government support for intensified R&D programs that facilitated the application of microbiology, enzymology, and biochemistry, built the capability to produce and sell prescription drugs to doctors and hospitals. As a result, pharmaceutical companies became very large, highly integrated organizations with R&D, manufacturing, marketing, and distribution capabilities that were very R&D-intensive and innovative, focusing on target-based drug discovery.

Need for change

Competition from low-priced generics, demands from consumers and other payers, changing government policies particularly with respect to reimbursement, the needs of emerging markets, spiraling R&D costs, and declining R&D productivity are all affecting the ability of drug manufacturers to innovate and deliver value.

Weak regulatory controls and intellectual property protection, a lack of health insurance programs, and the much reduced per capita drug spend in emerging markets all affect innovation to some degree.

The open innovation model

To create value under these changing market conditions, Big Pharma companies are adopting an open innovation model in which value creation is achieved by exploiting evolving scientific and technological knowledge from a vast array of sources, including academic researchers, other biotechnology and pharmaceutical companies, government institutes, independent innovation centers, consultants, and even companies in other industries.

The rise of the academic medical center

One type of external resource that pharmaceutical companies are increasingly turning to is academic medical centers that offer a range of support, from basic research to technology development to specialized services.

Academic medical centers such as the one at Wake Forest are attractive to industry because they have a large knowledge base and expertise, and often, established contacts already exist between faculty members and industry. What is changing is the extent of support that these centers can provide to a pharmaceutical company in terms of taking fundamental discoveries and converting them into commercial products that can benefit patients.

Meeting patient needs

Because the mission of both the pharmaceutical industry and academic medical centers is to cure diseases and improve patient lives, growing opportunities to work with industry in numerous areas of innovation.Academic medical centers, with their large knowledge bases and ability to convert basic findings into commercial products, will play a critical role in getting new drugs to patients.

The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent.”

-Richard Gerster

 

GROWTH SCENARIO IN 2010

India's pharmaceutical industry is now the third largest in the world in terms of volume. Its rank is 14th in terms of value. Between September 2008 and September 2009, the total turnover of India's pharmaceuticals industry was US$ 21.04 billion. The domestic market was worth US$ 12.26 billion. This was reported by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers. As per a report by IMS Health India, the Indian pharmaceutical market reached US$ 10.04 billion in size in July 2010. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually.

“It is clear that the pharmaceutical industry is not, by any stretch of the imagination, doing enough to ensure that the poor have access to adequate medical care”.

LEADING PHARMACEUTICAL COMPANIES

In the domestic market, Cipla retained its leadership position with 5.27 per cent share. Ranbaxy followed next. The highest growth was for Mankind Pharma (37.2%). Other leading companies in the Indian pharma market in 2010 are:

o   Sun Pharma (25.7%)

o   Abbott (25%)

o   Zydus Cadila (24.1%)

o   Alkem Laboratories (23.3%)

o   Pfizer (23.6 %)

o   GSK India (19%)

o   Piramal Healthcare (18.6 %)

o   Lupin (18.8 %)

FUTURE PROSPECTS

v  The Indian pharmaceuticals market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in 2009. Due to increase in the population of high income group, there is every likelihood that they will open a potential US$ 8 billion market for multinational companies selling costly drugs by 2015.Thus India would really become a lucrative destination for clinical trials for global giants. 

v  There was another report by RNCOS titled "Booming Pharma Sector in India" in which it was projectedt that thepharmaceutical formulations industry is expected to prosper in the same manner as the pharmaceutical industry. The domestic formulations market will grow at an annual rate of around 17% in 2010-11, owing to increasing middle class population and rapid urbanisation.

CHARACTERISTICS OF INDIAN PHARMAINDUSTRY

v The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units.It is an extremely fragmented market with severe price competition and government price control.

v The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units.These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulation.

v Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market. 

WHY INDIA?

Competent workforce: India has a pool of personnel with high managerial and technical competence as also skilled workforce. It has an educated work force and English is commonly used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a wide variety of bulk drugs and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracyand hence has a solid legal framework and strong financial markets. There is already an established international industry and business community.

Information & Technology: It has a good network of world-class educational institutions and established strengths in Information Technology.

Globalization: The country is committed to a free market economy and globalization. Above all, it has a 70 million middle class market, which is continuously growing.

Consolidation: For the first time in many years, the international pharmaceutical industry is finding great opportunities in India. The process of consolidation, which has become a generalized phenomenon in the world pharmaceutical industry, has started taking place in India. 

 

STEPS TO STRENGTHEN THE INDUSTRY

v  Indian companies need to attain the right product-mix for sustained future growth. Core competencies will play an important role in determining the future of many Indian pharmaceutical companies in the post product-patent regime after 2005.

v  Indian companies, in an effort to consolidate their position, will have to increasingly look at merger and acquisition options of either companies or products. This would help them to offset loss of new product options, improve their R&D efforts and improve distribution to penetrate markets. 

v  Research and development has always taken the back seat amongst Indian pharmaceutical companies. In order to stay competitive in the future, Indian companies will have to refocus and invest heavily in R&D. 

v  The Indian pharmaceutical industry also needs to take advantage of the recent advances in biotechnology and information technology. The future of the industry will be determined by how well it markets its products to several regions and distributes risks, its forward and backward integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-marketing and licensing agreements.

“India’s Pharmaceutical industry is on a good growth path, but will have to watch out for the regulatory interventions”.

  

CONCLUSION

Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world. 

The key change in today’s pharmaceutical industry is that the value of pharmaceutical innovation is no longer embodied in new drugs and new markets alone, nor is it commanded by pharmaceutical companies.  Big Pharma’s success with respect to innovation lies in finding ways to capture value based on these market opportunities and requires a shift from product-centric innovation towards market-centric innovation.