Pharmaceutical Industry in India Essay Example
Pharmaceutical Industry in India Essay Example

Pharmaceutical Industry in India Essay Example

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  • Pages: 14 (3592 words)
  • Published: September 15, 2017
  • Type: Case Study
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The pharmaceutical industry holds significant importance in modern economies, including India's. Despite having humble beginnings in the country, its growth was prioritized by the government after gaining independence, along with that of manufacturing and steel industries. To safeguard the market from competition, smaller firms were given incentives while license-raj was imposed for an extended duration.

The pharmaceutical sector holds a prominent position in India's science-based industry due to its remarkable expertise in drug manufacturing and technology. It is estimated that this sector will expand at an annual rate of around 13%, reaching a worth of US$ 7.3 billion. Moreover, projections suggest that India's retail market will attain a value of US$ 12 billion by the year 2012.

Producing 20%-24% of generic drugs and accounting for 8% of global sales, the Indian pharmaceutical industry is ranked fourth in volume and thirteenth in value worl

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dwide. Domestic companies serve the nation's demand for bulk drugs and formulations, as well as competing with multinational players on a global scale.

Efficient manufacturing, R&D practices, and skilled workers have contributed to a significant increase in companies' earnings from exports. This portion can be as high as 60% to 70%. One example of this growth is the pharmaceutical industry's exports, which increased from US$5.73 billion (2006-07) to US$6.68 billion (2007-08), representing a rise of 16%.

India's pharmaceutical market is expanding, drawing in significant foreign direct investment and major companies. To safeguard its domestic industry during its early stages, India implemented a regulatory system that acknowledged only process patents, resulting in a robust domestic market but restricted foreign entry. The Indian pharmaceutical sector can be categorized into two phases: the Pre-Patent regime and the Post-Patent regime.

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them closely: Pre-Patent Regime: This era can be divided into multiple time periods for better comprehension: 1947-1970. During this time, the country was striving to establish itself after obtaining independence. The pharmaceutical industry had to be developed from scratch. Although several domestic companies emerged in the market, they had limited influence on the market. This was because they couldn't compete with multinational corporation players who had greater access to resources, technical expertise, and larger funds. These foreign players imported formulations and sold them in India.

India's pharmaceutical and manufacturing industries were not receiving any input from the general population due to their low income, resulting in limited healthcare options. To combat this issue, the government acknowledged the importance of decreasing their reliance on imported drugs to make fundamental medications affordable and accessible to the public. The solution was to cultivate domestic drug production capabilities.

To achieve this goal, the Hindustan Antibiotics Limited (HAL) and Indian Drugs & Pharmaceutical Limited (IDPL) were established in 1954 and 1961 respectively. Both companies became significant producers of essential medications that were previously imported. However, during the 1970s, the multinational corporations (MNCs) remained dominant in the local market despite government efforts. In response, two laws were implemented in 1970 to expedite self-sufficiency and domestication: the Indian Patent Act and the Drug Price Control Order (DPCO).

The Indian pharmaceutical industry took off into a new growth spiral due to two regulations - the Indian Patent Act and the Drug Price Control Order. The Indian Patent Act granted patents solely for methods and processes used in manufacturing a substance, enabling domestic players to reverse engineer drugs in the market and uncover their constituents. Modified production

processes using the same bulk drug allowed for the creation of the product. The Drug Price Control Order regulated prices of 354 essential bulk drugs and formulations to promote the widespread availability of drugs at a reasonable cost.

The industry structure and growth pattern underwent transformation due to two legislations which resulted in the emergence of several small-scale industries (SSI) in the formulation business. These SSIs had a considerable advantage as their products were exempted from price control, and due to low entry barriers, availability of bulk drugs, and a dispersed market, they grew even faster. This had a significant impact on the position of MNCs in India. These regulations introduced price control but did not consider product patents.

As time passed, the overall share of formulations held by MNCs declined because they did not see any benefit in launching new drugs in the market. In 1979, the government amended the DPCO by reducing the number of drugs covered from 354 to 163. The government also raised the permissible mark-up on drugs from 40%-60% to 75%-100%. Additionally, the DPCO regulated production by establishing a ratio between formulation and key bulk drugs.

The government's past investments are paying off with a consistent and unbroken supply of essential bulk drugs. Smaller players received technical support from IDPL and HAL to establish themselves, resulting in their ability to supply critical drugs. Additionally, the availability of skilled researchers in the country has encouraged Indian companies to invest in R;D.

This led to the introduction of new medications through process re-engineering, with significant contributions from the Central Drug Research Institute (CDRI) and Council of Scientific and Industrial Research (CSIR), which received government

funding. Indian companies benefitted from their low cost structure and strong proficiency in reverse engineering. Once they had established themselves in the domestic market, they shifted their focus to exports.

Even though multinational corporations faced challenges such as increased product prices due to high tariffs and government price control measures requiring them to sell at lower prices, they were still able to leverage their global advantage and achieve success. Consequently, they redirected their attention towards sectors where they maintained a strong position.

Insufficient patent protection in the country resulted in a reluctance to introduce new products, resulting in reduced market share during 1987-1994. However, this time period saw industry consolidation and double-digit growth due to the availability of cost-effective medications and rising per-capita income.

The increase in bulk drug production was not limited to the domestic market as exports also saw significant growth. The compound annual growth rate (CAGR) for production was 16%, while exports experienced a CAGR of 40%. By 1994, exports accounted for half of the total bulk drug production. To meet the growing demand, companies had to make substantial investments in expanding their capacities.

Amidst this timeframe, the market's rapid expansion enticed fresh contenders and generated a surge in competition. Yet, the most noteworthy advancement was the government's initiative to promote open markets by reducing tariff barriers and fostering equal opportunities for both multinational corporations (MNCs) and domestic contenders.

The policy of liberalization resulted in a rise in foreign investment in the domestic pharmaceutical sector, as well as aiding local companies seeking to expand globally with less tariff and non-tariff obstacles. From 1995 to 2001, the government pledged to accept the product patent system after 2005, which

created increased anticipation among multinational corporations (MNCs). Consequently, several MNCs raised their shares in Indian operations.

India's quality manufacturing facilities at low costs prompted both MNCs and domestic firms to view India as a potential manufacturing base. As domestic firms had already saturated the Indian market, they began focusing on global markets. To strengthen their position, they formed alliances with MNCs, established world-class manufacturing facilities, and improved their brands. This led to small players becoming more competitive with their larger counterparts.

Despite a 15% growth in the market, the larger players were pushed towards producing generic formulations due to fierce competition from smaller competitors. Due to intense competition, the profit margins for bulk drugs were low. To address this, many companies either moved into production of formulations or increased exports to non-regulated markets where margins were better. In the period between 2001 and 2004, domestic players shifted their focus towards the generic drug market.

Investing in research and development and upgrading manufacturing facilities to comply with GMP norms occurred while the domestic formulations market experienced a decline, except for a few segments. At the same time, multinational corporations were bolstering their interest in the domestic market due to the impending implementation of the product patent regime in 2005. After the implementation of the product patent regime in 2005 through a government ordinance, India aimed to align with the global pharmaceutical market.

Throughout this period, there were several significant advancements in the Indian pharmaceutical industry. These included the implementation of VAT, a change from excise duty levy to MRP based levy, and the adoption of good manufacturing processes. Additionally, Indian manufacturers made a name for themselves in the global market

with their innovative generic drugs and APIs. In 2006-2007, the new pharmaceutical policy became the focus of attention, as the government aimed to bring essential drugs under the purview of DPCO in order to regulate profits made by manufacturers.

The aim of the proposed pharmaceutical policy was to make 354 important medicines available to the public by placing them under DPCO's supervision. To control pharmaceutical companies' profits, the policy introduces a measure that limits MAPE to a maximum of 150%. To encourage manufacturing, tariffs on API were lowered. The government established NPPA to regulate drug pricing in India.

Companies selling drugs must adhere to the pricing established by the NPPA, while in Europe, the EMEA serves as the regulatory agency for medicine. The committees of the EMEA are responsible for drafting scientific opinions.

The European Medicines Agency (EMEA) is responsible for assessing medicinal products in the EU. They evaluate quality, safety, and efficacy through various committees such as CHMP for human use, CVMP for veterinary use, COMP for rare diseases, and HMPC for herbal medicinal products. EMEA also coordinates scientific evaluation resources for mutual recognition procedure and master files related to plasma and vaccine antigens. Companies can seek guidance from EMEA prior to new marketing authorization applications through the SAWP committee.

Selling products in EU markets requires obtaining a license granted by CHMP after assessing the product. The quality specifications for pharmaceutical preparations and their ingredients are specified by European Pharmacopoeia (Ph Eur). Before submitting a Marketing Authorization Application (MAA), firms must show the safety and efficacy of the medicinal product by generating local clinical data. Therefore, conducting clinical trails is necessary before launching

a product in EU.

If a product has been deemed safe and effective in a different country, a bridging clinical study is sufficient for obtaining a license. The license has an initial validity of five years but must be renewed thereafter. Renewal involves evaluating the risk-benefit balance, and if positive, the license is granted indefinitely unless otherwise decided by competent authority. For drugs that necessitate long-term safety studies, an unlimited period license is typically awarded after 2-3 re-evaluations.

Pharmaceutical legislation is strict in both the EU and USA. The EU has regulations and guidelines for licensing medicinal products to ensure therapy safety and quality, while in the USA, the Department of Health and Human Services oversees the sector with primary enforcement by the US FDA for basic drug and food laws. Manufacturers must conduct animal testing before obtaining Investigational New Drug (IND) authorization for human trials on a new drug.

The creation of a new drug involves collecting data from clinical trials on humans and animal studies. This information is used to prepare and submit a New Drug Application (NDA) to the FDA. The NDA provides crucial details about safety, effectiveness, manufacturing standards, and labeling. Patents protect the development of the drug by offering exclusive marketing rights to the originator until they expire. After this point, other companies are allowed to market their own versions of the drug.

To be sold, generic drugs must go through the FDA's Abbreviated New Drug Application (ANDA) process because they are copies of existing medications. Manufacturers find this profitable as it avoids costly clinical trials with animals and humans. Pharmacists can offer patients generic substitutes unless told otherwise by their doctor. In an

ANDA application, the generic drug must contain identical active ingredients, dosage form, strength, and administration method as the original medication while manufacturing standards match those of the original drug. To get FDA approval, a Drug Master File (DMF) containing all relevant information about the drug is required.

The Indian pharmaceutical industry is governed by the Drug and Cosmetic Act and Rule, which are monitored by both the central government and state governments. These rules encompass drug importation, production, sales, and distribution. The central government oversees drug approval policies, clinical trials, and quality control for imported drugs while state governments enforce them within their respective companies. The Drug Controller General of India (DCGI) supervises all activities in this sector. It is important to acknowledge that some information in the document may be confidential.

India's pharmaceutical sector is regulated with regards to price, patents, and quality. The Drug Price Control Order (DPCO) sets a ceiling on the highest possible price of crucial formulations and active pharmaceutical ingredients (APIs). On the other hand, the National Pharmaceutical Pricing Authority (NPPA) supervises drug pricing for all drugs sold or produced within India. Firms must obtain NPPA authorization for any pricing decisions they make. Furthermore, NPPA has established a maximum threshold of 150% on the highest allowable post-manufacturing expenses (MAPE).

If a company heavily invests in research and development, the limit will increase by 50%. In 1995, the government amended the DPCO to restrict the size of drugs under its jurisdiction to 74. With the introduction of the product patent system, the government is considering increasing the quantity of drugs under DPCO to approximately 200. The Drug and Cosmetic Act mandates quality standards for

all drugs manufactured, sold, or distributed in India. Manufacturers must follow Good Manufacturing Practices at their facilities. For bulk drugs, intermediate pharmaceuticals, and formulations (excluding those resulting from recombinant DNA technology), up to 74% foreign direct investment is permitted via automatic approval.

FDI above 74% for the manufacture of bulk drugs is subject to a case-by-case evaluation by the Government and is only permitted if it involves the production of bulk drugs from basic stages and their intermediates, as well as bulk drugs created using recombinant DNA technology and cell/tissue targeted formulations, provided that production from basic stages is included. The Government had intended to increase the FDI cap to 100% and make the investment process more accessible and investor-friendly, but this plan was hampered by political pressure from leftist parties. Current events such as a shortage of raw materials and the suspension of high-flying Indian pharmaceutical industry due to the Olympics in China have occurred.

China has closed multiple drug manufacturing units to prevent environmental harm and maintain a clean image during the games. As a result, there is now a scarcity of raw materials in India, leading to increased prices for generic medicines. Despite this, Daiichi Sankyo has acquired a majority stake in Ranbaxy Laboratories Limited from the Singh family – Ranbaxy's largest controlling shareholders. The acquisition will require regulatory approvals but will enable Ranbaxy to enter new global markets that were previously unavailable to them. With this move, Daiichi Sankyo hopes to establish a stronger presence in India's rapidly expanding market and leverage on Ranbaxy's established foothold in the United States.

Sun Pharmaceutical Industries Ltd has received final approval from the USFDA for its

Abbreviated New Drug Application (ANDA) for generic Depakote, which are divalproex sodium delayed release tablets used as monotherapy and adjunctive therapy in treating patients with complex partial seizures. Meanwhile, the US House Energy ; Commerce committee is investigating the FDA's handling of Ranbaxy's imports and its stance on the Ranbaxy case.

The committee is investigating two issues. The first concerns whether the FDA permitted perilous drugs to enter the United States through imports. The second pertains to the proposed acquisition of Taro Pharmaceuticals by Sun Pharmaceuticals for $454 million. Taro is an Israeli pharmaceutical company with a worldwide presence, and despite encountering various obstacles, the sale has not yet been finalized. Should it be successful, this transaction would allow Sun to expand into less crowded fields like pediatrics and dermatology.

Sun is attracted to Taro's dominant position in the Canadian market. The Q2 FY09 brought about advancements in product and geographical diversity with a higher percentage of exports (62%) for generics and a larger portion of CRAMS business (46%). The quarter had notable highlights, such as improved margins due to heightened overseas and CRAMS sales, along with a 5.9% YoY depreciation in Rupee versus USD and an increase in captive consumption from companies like Dishman, Lupin, and Piramal Healthcare. In the near future, there will be ongoing pressure on raw materials because China has decided to close polluting plants surrounding Beijing and limit hazardous chemical movement during the Olympics; this will lead to deficits in raw materials which will result in increased prices. Additionally, crude oil prices have risen leading to increased costs for API solvents and intermediates.

It is possible that there will be a shortage of

raw materials for the next one to two quarters based on our experience with certain companies. Furthermore, several companies like Ranbaxy, Jubilant, and Cipla have reported MTM losses on their FCCBs and foreign debt due to a depreciation in the rupee against the USD and Euro (7% and 9% QoQ, respectively). Recently, GSK has formed a partnership with Aspen and Strides to gain access to a portfolio containing 1200 products and 450 molecules. GSK will obtain approval for these products in 95 emerging markets where they will distribute and market them while Aspen continues marketing in Sub-Saharan Africa and other countries.

Jubilant Bosys Ltd. and Amgen Inc., the largest biotech company in the US, have entered into a drug discovery partnership. Under the agreement, Amgen and Jubilant will work together to develop a range of new drugs in various therapeutic areas of interest and target areas. Jubilant will be responsible for developing early preclinical candidates derived from Amgen's initial discovery efforts for a three-year period. Following that, Amgen will take on the responsibility of subsequent pre-clinical development, clinical development, and commercialization.

Amgen and Jubilant Biosys have formed a collaboration in drug development, with Amgen retaining ownership and commercialization rights for the drugs. Jubilant Biosys will participate in early-preclinical development at their research center in Bangalore, while Amgen will manage later stage pre-clinical and clinical development and global commercialization. The financial agreement includes research funding and success-based milestones for multiple projects. Glenmark Pharmaceuticals has announced that their candidate for Neuropathic Pain, Osteoarthritis, and other Inflammatory Pain-GRC 10693, a cannabinoid-2 receptor agonist, is entering Phase I trials with the primary indication being neuropathic pain.

The molecule has been submitted

for Phase-I approval in Europe. Biocon Limited and Abraxis BioScience, Inc have jointly launched ABRAXANE (paclitaxel protein bound particles for injectable suspension) (albumin-bound) in India for treating breast cancer. ABRAXANE is available in India as a lyophilized powder to be reconstituted for intravenous administration. The Phase III clinical trial of ABRAXANE in the U.S. showed a significant increase in response rate, progression-free survival, and overall survival in the second line setting compared to solvent-based Taxol for the approved indication. Additionally, The Medical House Plc, a drug delivery specialist, has entered into a non-exclusive development, licensing and supply agreement with Dr Reddy's Laboratories.

TMH and Dr. Reddy's have agreed to supply products to the US, European Union, and Canada for the next five years. The agreement may be extended to other regions, with customization costs being paid by TMH along with reimbursement of any external expenses. Furthermore, Strides has acquired a controlling stake in Ascent Pharmahealth Limited, becoming Australia's fourth largest generics company by holding 50%.

Strides has acquired a 1% stake in Ascent Pharmahealth Limited, which is listed on the ASX. By the end of September 2008, Strides may have a maximum ownership of 55% in Ascent Pharmahealth Ltd. Shareholders have approved the renaming of Genepharm Australasia Limited to Ascent Pharmahealth Limited. The new entity will encompass Drug Houses of Australia's assets in Singapore, which is fully owned by Strides. On a combined Performa basis, revenue will exceed US$90mn.

Lupin Ltd has acquired Hormosan Pharma GmbH, a German company that specializes in supplying pharmaceutical products for the Central Nervous System (CNS). Hormosan develops, licenses, and markets generics in Germany, generating Euro 6.8mn in total sales in 2007. The

company's product portfolio includes CNS and Cardiovascular therapeutic segments. Its strong brand identity in the German generics market is due to a compliance message that is essential for patients within the CNS sector.

Aside from having a strong key account management team, Aurobindo Pharma also boasts successful teams in Regulatory, Pharmacovigilance, Medical Information, and Marketing. Recently, Aurobindo Pharma was granted final approval by the US Food & Drug Administration (USFDA) for two ANDAs - Ceftriaxone for injection USP in 250mg, 500mg, and 2g doses, as well as Ceftriaxone for injection USP in a 10g pharmacy bulk pack. These Cephalosporins fall under the Anti-infective segment. In other news, Lupin Pharmaceuticals, Inc. was granted approval for Divaiproex Sodium Tablets.

The USFDA has given final approval to LPI's Abbreviated New Drug Application (ANDA) for Divaiproex Sodium Delayed-Release Tablets in 125 mg, 250 mg and 500 mg doses. The product has already begun commercial shipments.

Dr Reddy's Laboratories Limited has invested US$18mn in Perlecan Pharma Private Limited, purchasing a holding previously owned by Citigroup Venture Capital International Mauritius Limited and its nominees, as well as IDBI Trusteeship Services Limited. Lupin Divaiproex sodium delayed-release tablets are the AB-rated generic equivalent of Depakote tablets sold by Abbott Laboratories. Depakote generated approximately US$803mn in annual sales for the twelve months ending March 2008, according to IMS Health sales data.

Here are some links related to the pharmaceutical industry: http://www.com/pharmaceutical-industry/, http://www.thehindubusinessline.com/iw/2004/07/25/stories/2004072500401000.htm, and http://www.ibef.com.

The website www.indiainbusiness.nic.org/industry/pharmaceuticals.aspx is focused on the pharmaceutical industry.The URL for the drug and pharmaceutical industrial sector can be found in the industry infrastructure section.

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