The Indian Pharma Industry under the Product Patent Regime

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India's potential to be a sourcing hub for pharmaceuticals is presenting a huge opportunity and hence there is likely to be significant investments.¹

- Alok Gupta, Country Head, Life Sciences & Biotechnology, Yes Bank.

Many MNC pharmaceutical companies are looking to do clinical trials and research in India, resulting in many contract research organizations (CROs) coming up. A significant number of pharmaceutical companies have Indian operations for clinical trials and research.²

- R Chandrasekaran, Managing Director, Cognizant Technology Solutions.

Indian generics could well be the next big thing in the West where the generic market is growing in a big way. This has reinforced India's part in the emerging generics space.³

- Ton Gardeniers, Managing Director & Global Head - Healthcare and Chemicals, ABN Amro Bank.

Introduction

In 2004, the Indian pharmaceutical (pharma) industry grew at a rate of 7.2% and it contributed 1.3% of India's GDP. The total production of the Indian pharma industry for financial year 2004 was valued at Rs 357.5 billion, of which the formulations segment accounted for 78% while bulk drugs accounted for 22%4. The Indian pharma industry's share in the global pharma sales volumes was 8%, while its sales amounted to 1% of global sales in value terms. With around 400 bulk drugs and almost the entire range of formulations, the Indian pharma industry ranked 4th in the world in volume terms, and 13th in terms of value. Production increased at an annual rate of 15.8% between 1993-94 and 2003-04.

McKinsey predicted that the Indian pharma industry would have sales of Rs 1000 billion by 2010 from Rs 374 billion in 2004. In 2005, the domestic pharma industry employed half a million people directly while it provided employment to another two and a half million people indirectly, taking the total employment generation of the industry to three million people (Refer Exhibit I for key statistics related to pharma industry in India).

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1] D'Silva, Jeetha, Kuber, Girish, "Pharma tops the FDI chart in '04 with $340 mn inflow,"The Economic Times, April 18, 2005.

2] Kumar, Vinod P., Hussain, Shabana, "The next dollar hunt: pharma pops the IT pill,"The Financial Express, March 28, 2005.

3] Unnikrishnan, Rajesh, "Global generic drug cos descend on India,"The Financial Express, March 14, 2005.

4] Formulations are drugs used to cure a disease or disorder in the patient. To prevent misuse/incorrect administration, most formulations are disbursed by pharmacies only under medical prescription and they are called ethical products. However, some formulations such as pain balms, health tonics and drugs out of patent can also be purchased by users directly. These are called Over-the-Counter (OTC) products. Formulations can be categorized as per the route of administration to patients, viz. Oral i.e. tablets, syrups, capsules, powders etc. taken internally. Topical, i.e. ointments, creams, liquids, which are applied on the skin. Parenterals i.e. sterile solutions injected in an intravenous or intramascular fashion and others such as eye-drops, surgical dressings etc. Bulk drugs are medically effective chemicals. They are derived from four types of intermediaries or raw materials viz. plant derivatives (herbal products), animal derivatives (e.g. Insulin extracted from bovine pancreas), synthetic chemicals and biogenetic human derivatives (e.g. Human insulin).