Dr Reddy's Laboratories: Growing Pains
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Case Code: BSTR403 Case Length: 16 Pages Period: 2006-2011 Pub Date: 2012 Teaching Note: Not Available |
Price: Rs.500 Organization: Dr. Reddy's Laboratories. Industry: Pharmaceuticals Countries: Global; India; US; Europe Themes: International Management, Corporate Strategy, Strategy Implementation |
Abstract Case Intro 1 Case Intro 2 Excerpts
Industry Overview
As of 2011, the Indian pharmaceutical industry was the world's 13th largest in terms of value and the 4th largest in terms of volume. It was emerging as the global hub for contract research and clinical trials for global drug companies due to low-cost labor and world-class quality standards. An increase in disposable incomes, development of medical infrastructure, rising occurrence of chronic diseases, and adoption of product patents would influence the growth of Indian pharmaceuticals, experts said. It was predicted that branded generics would continue to dominate and the industry was all set to gain from the patent expiry of some blockbuster drugs abroad. In the US, 61 drugs worth US$80 billion were to go off-patent between 2011 and 2013.
Since the 1970s, the Indian pharmaceutical industry had been flourishing as the Patents Act of 1970 which came into effect in 1972 only recognized process patents and not product patents. This enabled Indian drug manufactures to grow by focusing on reverse engineering the drugs developed by research-based pharmaceutical companies. In 1984, the US became a lucrative market for Indian companies following changes to the Hatch-Waxman Act in that country. Under this new law, manufacturers of generic drugs no longer had to go through a lengthy period of clinical trials in order to market a generic drug. It also allowed generics companies to challenge the originator companies long before patent expiration and also established a 180-day exclusivity period for the first company to file an Abbreviated New Drug Applications (ANDA) under this provision. The low cost advantage due to cheap availability of labor and other economies of scale brought in big margins for the Indian companies. During the 1990s, the industry grew at an average industry growth rate of about 15% for bulk drugs and 20% for formulations...
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