• Introduction to Indian Pharma Industry
• Structure of Pharma Sector In India
• About the company
• Advantage in India
• SWOT Analysis
• Porter’s five forces
• Legal Framework
Introduction-Indian Pharma Industry
Indian pharmaceuticals retailing market
is expected to grow at a CAGR of 5% by
2020 driven by the aging and growing
population, rising income levels,
emerging medical conditions and new
diseases, finds a new research report
launched by NOVONOUS
The pharmaceuticals retailing market in
India is largely unorganized and
fragmented. The market is wide spread
within the urban landscape while the
rural area is largely underserved.
This is compounded by the fact the
Indian pharmaceuticals retail industry
uses elongated logistics and distribution
chains resulting in poor management
and sometime counterfeiting.
Structure of Pharma Sector In India
About the company
Mera Medicare, an e-commerce portal for generic medicines, aims to provide cheaper drugs
At present, they have close to 5000 registered patients and more than 250 pharmacies in their
After deliberating and researching various aspects of running an e-commerce business in the
pharmaceutical industry, Madhu and Pankaj finally started up in July 2014.
For every medicine, customers can buy either branded or generic versions. While branded
medicines cost more, generic medicines are cheap in comparison with the same benefits.
The company has its presence in Delhi, Noida, Gurgaon and Bangalore.
Advantage in India
• Low cost of production and R&D boosts
efficiency of Indian pharma companies
• India’s cost of production is
approximately 60 per cent lower than that
of the US and almost half of that of Europe.
• Due to lower cost of treatment, India is
emerging as a leading destination for
• Economic prosperity to improve
• Increasing penetration of health
• With increasing penetration of
chemists, especially in rural India,
OTC drugs will be readily available
• Accounts for over 10 per cent of the
global pharmaceutical production
• Over 60,000 generic brands across
60 therapeutic categories
• Manufactures more than 500
• 49 per cent of all drug master filings
from India is registered in the USA
• Government unveiled „Pharma
Vision 2020‟ aimed at making India a
global leader in end-to-end drug
• Reduced approval time for new
facilities to boost investments
• In this sector, 100 per cent FDI is
allowed under automatic route
Pharmaceuticals industry in India
Anti-Infective Drugs lead the Pharma market
• Higher GDP growth leading to increased disposable income in the hands of general public and
their positive attitude towards spending on healthcare.
• Highly skilled set of labor force and proven track record in design of high technology
• Demographic potential
• Well established R&D facilities.
• Low cost of labor, innovation, manufacturing and operations.
• Property rights supported by well-developed judicial system.
• Stringent pricing regulations affecting the profitability of pharma companies.
• Poor all-round infrastructure is a major challenge.
• Presence of more unorganized players versus the organized ones, resulting in
an increasingly competitive environment, characterized by stiff price
• Poor health insurance coverage.
• Inadequate emphasis on Biosciences in education system leading to slower
development in areas related to Biology giving away advantage to China.
• India has a low level of government spending on healthcare, at 1% of the GDP
• Competency in API/Formulation, intellectual property creation, facility design
and maintenance, global regulatory and legal affairs, and managing
international work force is limited to a few players among the big players
• Opening of the health insurance sector and increase in per capita income - the growth drivers for the
• India, a potentially preferred global outsourcing hub for pharmaceutical products due to low cost of skilled labour.
• Health insurance is growing.
• Global demand for generics rising.
• The government is increasing spend on healthcare
• Indian population is spending an increased amount of money on healthcare, Changing disease profile and favorable
• Increased penetration in the non - metro markets
• Significant investment from MNCs
• Public-Private Partnerships for strengthening infrastructure
• Exports have grown very significantly at around 19% CAGR
• India has a very high potential for developing as a center for international clinical trials due to its rich diversity
• There is a possibility of greater returns from an Indian entry into mature markets like Brazil, Japan, Russia, etc
• Rapid urbanization -Around 742 million people reside in rural areas. There is a significant gap between the number
of people residing in villages that require treatment, and quality treatment and medicines reaching these villages
• Other low-cost countries such as China , Thailand and Israel affecting
outsourcing demand for Indian pharmaceutical products
• Skilled Labour shortage
• Wage inflation
• Government expanding the umbrella of the Drugs Price Control Order
• Competition from other emerging economies
• Entry of foreign players (well-equipped technology-based products)
into the Indian market.
• Product patent regime poses serious challenge to domestic industry
unless it invests in research and development.
• Mergers and acquisitions by foreign companies particularly
multinational corporations of a few Indian generic leaders may
completely change the direction of India’s pharmaceutical movement
neutralizing its thrust on generics and cost competitiveness
Generics form the largest Indian Pharma
With 72 per cent of market share
(in terms of revenues), generic
drugs form the largest segment of
the Indian pharmaceutical sector
India’s generic drugs account for 20 per cent of global exports in terms of
volume, making the country the largest provider of generic medicines globally
and expected to expand even further in coming years
Over the Counter (OTC) medicines and
patented drugs constitute 19 per cent
and 9 per cent, respectively, of total
Porters Five Forces
• Growth opportunities for
pharma companies are expected
to grow in next few years, with
many drugs going off-patent in
the US and other countries, thus
• Indian pharma companies will
face competition from big
pharma companies, backed by
huge financial muscle
Threat of New
• Strict government
regulations thwart entry of
• Difficult to survive
because of high gestation
Bargaining Power of
• Generic drugs offer a cost
effective alternative to
drugs innovators and
significant savings to
• Biosimilar offer significant
cost saving for insurance
companies in India
Bargaining Power of
APIs such as steroids, sex
hormones and peptides
give bargaining power to
generic APIs do not have
much of that power
The laws enumerated below are some of the most important laws that concern the Industry.
•The Drugs and Cosmetics Act, 1940 and Rules, 1945: It regulates manufacturing, import, distribution and sale of
pharmaceuticals (includes certain medical devices) and cosmetics.
•The Drugs & Magic Remedies (Objectionable Advertisements) Act, 1954 and Rules, 1955: It Regulates
advertisements of drugs relating to diagnosis / cure / mitigation / treatment / prevent of certain prescribed diseases
•The Indian Patents Act, 1970: It provides the framework for grant of process and product patents. The patent term
for a product and process patent is 20 years.
•The Drugs Price Control Order, 2013 (DPCO): It lays down the framework for price control of drugs identified as
essential under the National List of Essential Medicines, 2011.
•The Uniform Code for Pharmaceutical Marketing Practices (UCPMP): It regulates the marketing practices of the
• The Income Tax Act, 1961: Income tax is a tax on income imposed by the Central Government.
Residents in India are taxed on their worldwide income. Non-residents are taxed on the Indian
source of income. The Indian tax rates applicable to non-residents could be up to 40% (excluding
applicable surcharge). If the tax payable by any company, including a foreign company taxable in
India, is less than 18.5% of its book profits, it will be required to pay Minimum Alternate Tax. The
payments towards royalty and fees for technical services are subject to withholding taxes.
• The Customs Act, 1963: It imposes import duty on all imported goods. Import of pharmaceuticals
is liable to basic customs duty, additional customs duty and countervailing duty.
• Central and State-specific Sales Tax / Value Added Tax (VAT) legislations: It imposes sales tax.
Sales tax is a tax levied on the sale of pharmaceuticals.
• The Excise Act, 1944: It imposes a duty on the manufacture of goods called Excise Duty. Excise
duty is also referred to as CENVAT. It is payable on the manufacture of pharmaceuticals in India.
• The Finance Act, 1994: It imposes a tax on all services unless a service qualifies as an exempt
service. All contract research organizations have to pay service tax.
Notable trends in Indian Pharma Industry
•Indian pharma companies spend 8-11 per cent of their total turnover
•Expenditure on R&D is likely to increase due to the introduction of
product patents; companies need to develop new drugs to boost sale
Research and Development
•India’s pharmaceutical export market is thriving due to strong presence
in the generics spaceExport Revenue
•Multinational companies are collaborating with Indian pharma firms to
develop new drugs
•Indian Players are expanding their markets as well as production
Expansion by Indian players abroad
•Amendments to the Patents Act, 1970, to make it TRIPS compliant
•The introduction of product patents in India in 2005 gave a boost to the
discovery of new drugs
•In order to compete with global player in pharma industries, approval
process of drugs has been simplified by the authorities and approval
time for new facilities has been drastically reduced
Less time for approval
India is now among the top five pharmaceutical emerging markets.
Domestic Pharma market to grow at 10-12 per cent in FY15 as compared to 9
per cent in FY14
Generic drugs account for 20 per cent of global exports in terms of volume,
making the country the largest provider of generic medicines globally