June 15th 2010
£995 / $1740 / €1245
The days when the Indian pharmaceutical industry was synonymous with cheap generic drug production are passing. While generics continue to play a major part in the industry’s success, many companies have started down the long road of drug discovery, novel product development and pharma services.
With high-quality research, low-cost manufacturing facilities and educated personnel, the Indian pharmaceutical industry presents both a competitive threat and partnering opportunities.
A significant international industry
India is the world’s fourth largest producer of pharmaceuticals by volume, accounting for around 8% of global production. In value terms, production accounts for around 1.5% of the world total. The Indian pharmaceutical industry directly employs around 500,000 people and is highly fragmented. While there are around 270 large R&D based pharmaceutical companies in India, including multinationals, government-owned and private companies, there are also around 5,600 smaller licensed generics manufacturers, although in reality only around 3,000 companies are involved in pharmaceutical production. Most small firms do not have their own production facilities, but operate using the spare capacity of other drug manufacturers.
A new approach
The advent of pharmaceutical product patent recognition in January 2005 changed the ground rules for Indian companies. In the run up to the new post-patent era and since, the Indian industry has been evolving. R&D departments are moving away from reverse-engineering in favour of developing novel drug delivery systems and discovery research. It is anticipated that the experience of selling generics in the international market will hold Indian companies in good stead for selling their own branded products to these markets in the future.
Focus on...current and future markets
The dynamics of the domestic Indian market have always encouraged Indian industry to pursue overseas lines of business. Expansion comes at a cost and some companies have had to restructure. In June 2009, Wockhardt divested its German business, esparma and more recently, in March 2010, Orchid sold its generic injectable formulations business to Hospira but came out of the deal with a long term supply agreement for its APIs.
India remains an important market for the vast majority of Indian companies. The indigenous industry supplies around 70% of the country’s pharmaceuticals. The proportion of revenue derived from India depends largely on the strategy of the individual company and its penetration into overseas markets. For example, while Zydus Cadila aims to grow rapidly overseas, India remains its most important market, accounting for 55.8% of revenue in fiscal 2008/09. India is also Cipla’s key market, generating almost half of the company’s revenue in 2008/09, although this percentage has been declining in recent years as the company has increasingly targeted overseas markets. Other companies, such as Dr. Reddy’s, are less reliant on the Indian market; in 2008/09, India contributed just 17% of the company’s global revenue.
The attractive opportunities offered by the loss of patent protection on several major products in the coming period, and resolution of the biosimilar regulatory issue in the US, has to be offset against price reduction pressures driven by the ongoing economic downturn and aggressive competition for the business that is on offer.
USA: The largest generic market and the most sought after target for Indian companies involved in the generic business, is the US. As more companies gained the expertise to file for FDA approval, the number of ANDAs approved increased dramatically. In 2005, the number increased to 52 and subsequently increased year-on-year, to reach 132 in 2008. In 2009, the total number of ANDA approvals was 125. In the first quarter of 2010, a further 20 were approved.
UK: Over 80% of prescriptions in the mature UK market are written generically. The UK has always been a focus for Indian companies with 9 companies running 11 manufacturing sites. Between January 2009 and January 2010, Indian companies had more than 260 marketing authorisations approved by the UK’s Medicines and Healthcare Regulatory Agency (MHRA) for a wide range of products. During this period, Ranbaxy received 55 approvals; Dr. Reddy’s received 54; Aurobindo received 39; and, Lupin received 25.
Europe: Beyond the UK and Germany, significant European markets have been slow to adopt a vigorous generics drugs policy. However, pressure on governments to cut costs in the face of burgeoning drugs bills and economic recession, are seeing countries such as France, Italy and Spain exploring the increased use of generics. A number of Indian companies are either monitoring them from the sidelines or have already identified growth potential; Ranbaxy, for example is established in France, Germany, Italy and Spain.
Brazil: Brazil is perhaps the most notable emerging generic market in recent years. According to the Brazilian generic industry association, Pró-Genéricos, prices of generic medicines have to be at least 35% cheaper than prices of original medicines but, in practice, they are up to 50% cheaper. In 2009, generic medicines represented 19.4% of the pharmacy sector by volume, increasing 19.0% over the previous year to 330.0 million units. In value terms, pharmacy sales of generic medicines increased by 24.0% to R$4.5 billion (US$2.2 billion). Indian companies have been present in the Brazilian market for several years. In 2008, Indian pharmaceutical exports to Brazil were valued at around US$166 million per year and made up a significant part of all trade between India and Latin America.
Australia: Due to low prices of branded products, Australia is not yet a major market for generics. A number of leading drugs are due to lose patent protection, but price competition tends to be muted for off-patent drugs. The government is, however, currently looking at ways to boost generic consumption in an effort to rein in the overall drugs bill. The market is beginning to attract Indian companies, a number of which have gained approval from the Therapeutic Goods Administration for their manufacturing facilities and a range of products.
Indian pharmaceutical companies are no strangers to competition. The Indian market is highly competitive with more than 300 organised players and branded promotional costs associated with every product, yet the industry is able to offer low-priced products and remain profitable in India. However, whether the Indian industry will be able to maintain the pace of expansion across the world is questionable in the current economic climate.
The Indian Pharma Industry - looking beyond generics
The Indian pharmaceutical industry has a long history of reverse-engineering and its ability to produce and distribute globally generic copies of pharmaceutical products is well proven. Post TRIPs, the R&D focus of Indian companies has shifted towards novel drug delivery systems or discovery research. But the global launch of innovative new products is still some way off, so what are the options for companies going forward?
In-licensing and custom manufacturing are alternative strategies to generics
Building upon its strengths in chemical synthesis and process engineering, the availability of highly-skilled labour and a low-cost manufacturing base, some companies have elected to pursue alternative business strategies.
Piramal Healthcare has always partnered global innovator companies and, in addition to an extensive Indian generic business, is a global player in custom manufacturing and has a number of early stage development candidates. In May 2010, it was announced that Abbott had agreed to pay a total of US$3.7 billion for the domestic drug business, leaving Piramal to concentrate on its research, formulation and customer manufacturing businesses.
Another company with a diverse portfolio of services is Jubilant Organosys. The company’s main focus is its Pharmaceuticals and Life Sciences Products and Services business, which has grown significantly over the last few years. Jubilant is active in APIs, proprietary products, contract manufacturing of liquid and lyophilized sterile injectables, ointments, creams and liquids, radiopharmaceuticals, drug discovery services, medicinal chemistry services, clinical research services, generic dosage forms and healthcare.
The resolution of the regulatory issues surrounding biosimilars in the USA has removed at least one obstacle to the development of these products. As one of the leading producers of generic drugs, it is logical that Indian companies would see biosimilars as a natural follow-on business. Recent milestones in the development of biosimilars include:
Opinion driven analysis – available now!
The Indian Pharmaceutical Industry: New strategies in a changing world is a new, insightful and data-rich management report packed with facts, maps and statistics. Published in June 2010 and extending to 248 pages, the report provides a complete and detailed review of the Indian market and the 18 companies that are leading the way.
About the Author
The report has been researched and written by Espicom’s Senior Analyst, Karen Holmes. Karen has over 15 years pharmaceutical and healthcare market analysis experience. Her recent studies include Injectable Generic Drugs: Prospects and Opportunities, Emerging Opportunities in Inhalation and Nasal Spray Generic Drugs, Emerging Opportunities in Controlled-Release Generic Drugs and The Pharmaceutical Market: India, Challenges and Opportunities.