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APPLYINGFORBUSINESS ANALYSTTRAINEE-ASSIGNMENT2(MARKETANALYSISREPORTFORMEDICINE
SEGMENT OF HEALTHCARE INDUSTRY)
HEALTHCARE AND PHARMACEUTICALS
INDUSTRY-INDIA
HEALTHCARE HAS BECOME ONE OF INDIA'SLARGEST SECTORS - BOTH IN TERMS OF
REVENUE ANDEMPLOYMENT. THE INDUSTRY COMPRISESHOSPITALS,MEDICAL DEVICES,CLINICAL
TRIALS,OUTSOURCING, TELEMEDICINE, MEDICAL TOURISM, HEALTH INSURANCEANDMEDICAL
EQUIPMENT. THE INDIAN HEALTHCAREINDUSTRY IS GROWINGAT A TREMENDOUS PACEDUE TO ITS
STRENGTHENINGCOVERAGE,SERVICESAND INCREASINGEXPENDITUREBY PUBLIC ASWELL PRIVATE
PLAYERS.
THE INDIAN HEALTHCAREDELIVERY SYSTEM IS CATEGORIZEDINTO TWO MAJORCOMPONENTS –
- PUBLIC
- PRIVATE.
THE GOVERNMENT,I.E. PUBLIC HEALTHCARE SYSTEMCOMPRISES LIMITED SECONDARYAND TERTIARY
CARE INSTITUTIONSIN KEY CITIES ANDFOCUSESON PROVIDINGBASICHEALTHCAREFACILITIESIN THE
FORMOF PRIMARY HEALTHCARE CENTERS (PHCS) IN RURAL AREAS.
THE PRIVATESECTORPROVIDESMAJORITY OFSECONDARY,TERTIARY ANDQUATERNARY CARE
INSTITUTIONSWITH A MAJORCONCENTRATION IN METROS,TIER I ANDTIER II CITIES.
INDIAN HEALTHCARE INDUSTRY ANALYSIS
THE HEALTHCARE SECTOR ISEXPECTED TO GROW AT A RATE OF 17 %( COMPOUNDED ANNUALLY).BY
2020, IT IS ESTIMATED TO HAVE A SIZEOF 280 USD BILLION.

THE PER CAPITA EXPENDITUREGROWTH RATE BETWEEN 2008 AND 2015 IS11.3 %. ECONOMIC
PROSPERITYIS DRIVINGTHE IMPROVEMENT IN AFFORDABILITYFOR GENERICDRUGS IN THE MARKET.
GOVERNMENT INITIATIVES
Major initiatives taken by the Government of India to promote Indian healthcare industry are as
follows:
 The Competition Commission of India (CCI) in its meeting has approved the proposed
merger between Sun Pharma and Ranbaxy, subject to the parties inter alia carrying out
the divestiture of their products relating to seven relevant markets for formulations.
 India and Sweden celebrated five years of memorandum of understanding (MoU). The
cooperation in healthcare between India and Sweden will help in filling gaps in research
and innovative technology to aid provisioning of quality healthcare.
 Generic drug maker Mylan Inc. and the US-based Abbott Industries have received the
CCI’s nod to proceed with their merger.
 Mr J P Nadda, Union Minister for Health & Family Welfare, Government of India has
launched the National Deworming initiative aimed to protect more than 24 crore children
in the ages of 1-19 years from intestinal worms, on the eve of the National Deworming
Day.
 Under the National Health Assurance Mission, Prime Minister Mr. Narendra Modi's
government would provide all citizens with free drugs and diagnostic treatment, as well
as insurance cover to treat serious ailments.
 All the government hospitals in Andhra Pradesh would get a facelift with a cost of Rs 45
crore (US$ 7.23 million), besides the establishment of 1,000 generic medical shops
across the State in the next few months.

PHARMA SECTOR
- HOW DOES IT WORK?
THE PHARMACEUTICALINDUSTRY IS DIVIDEDINTOTWO SEGMENTS, BASED ON THE THERAPEUTIC
AREAS:
1. ACUTE- IT INCLUDES DISEASES THAT USUALLY LAST FOR A SHORT DURATION AND INCLUDES
THERAPIESLIKE ANTI-INVECTIVES, PAIN-KILLERS OR ANALGESICS ETC.
2. CHRONIC- IT INCLUDES DISEASES THAT ARE RECURRING IN NATURE AND INCLUDE LIFESTYLE
DISEASES. THIS INCLUDES THERAPIESLIKE ANTI-DIABETICS, CARDIOVASCULAR (CVS), CANCER ETC.
IN MOST CASES, AILMENTS IN THE CHRONIC SEGMENT ENSURE REGULAR CONSUMPTION OF MEDICINESFOR
THE LIFETIME OF THE PATIENT. THUS, CHRONIC SEGMENT IS EXPECTED TO GROW MUCH FASTER THANTHE
ACUTE SEGMENT. CURRENTLY, THE INDIAN PHARMACEUTICAL MARKET IS MORE THAN 60% ACUTE WITH
THE REST BEING CHRONIC. THE SHARE OF CHRONIC IS EXPECTED TO INCREASE.

USERS
Pharmaceutical products reach the end users through different mechanisms. There have
emerged 2 different types of markets globally:
1. Branded Markets: Countries like India, Brazil, Russia, Mexico, etc. are branded in nature.
Consider the mechanism in India. In India, our doctor prescribes us the medicine for a particular
disease. The prescription is usually a brand name of a drug for that disease. We also tend to
purchase the exact brand prescribed by the doctor even if the chemist offers a different/generic
version available at a low cost.
2. UnbrandedMarkets:Developed countries like US, UK and someEuropean countries are known
as unbranded markets.Here, instead of prescribing the brand, the doctors prescribe the molecule
or API (with the dosage) for a particular disease. In these countries, a large percentage of the
population (~95%) has medical insurance. Hence, the insurancecompanies decide which generic
drugs will be covered by the insurance; understandably these will be the ones which are sold at
the lowest costs. When consumers approach the chemist, they are given the drug as per the
prescription and their insurer.
PHARMA COMPANIES PERFORMANCE
1. ASSEEN IN THE ABOVETABLE, DR. REDDY’S LABORATORIES LTD. HASCLOCKEDTHE HIGHESTNET
SALES CAGR OF ~31% OVER THE LAST 6 YEARS. ITS NET PROFIT HAS ALSO GROWN STRONGLY
WITH A 5 YEAR CAGR OF CLOSE TO 84%. HOWEVER, ITS NET PROFIT MARGIN IS QUITE LOW AT
7%. IN TERMS OFVOLUME, CIPLA IS THE MARKET LEADER WITH A 5.3% MARKET SHARE IN INDIA.

2. SUN PHARMA ENJOYS THE HIGHEST NET PROFIT MARGINS WITH A 6 YEAR AVERAGE OF
36.5%. THIS IS BECAUSE OF THE STRONG BRAND IT HAS CREATED AND ITS STRONG PRESENCE
ESPECIALLYIN THE CNSTHERAPY AREA.
GROWTH DRIVERS OF PHARMA SECTOR
1) Increasing incomes& healthcare spendsto spur domesticgrowth
With increasing affordability, shifting disease patterns and healthcare reforms, the total consumer
spendingonhealthcare productsand servicesinIndiahasgrownata CAGR of more than 14% since 2000.
According to a research report by the Mckinsey Global Institute, spending on healthcare in India will
witnessthe highestgrowthrate amongall spendingcategoriesoverthe nexttwodecades.
2)SignificantpatentexpiriesindevelopedmarketspresentgoodgrowthopportunitiesforIndiangeneric
companies:
A slewof patentswill expire inthe US and EU over2011-15, includingtop-sellingbrandsLipitor,Nexium,
ZyprexaandPlavix.Overthis period,productswithestimatedannual salesof ~US$ 80 bn inthe US alone
will lose patent exclusivity, and this will translate into an estimated incremental generic sales
opportunity of US$ 18 billion.
3) Emerging markets to become the nextdestinationsfor pharma companies
“Pharmerging”markets,includingthe BRICcountries,SouthAfrica,Mexico,Turkey,Poland,Indonesiaand
Romania,are growingfasterthandevelopedmarkets.
4) M&A a potential catalyst
With higher growth prospects in emerging markets, many multinational branded drug companies are
trying to expand their presence in generic pharmaceuticals. This has increased their interest in generic
companies with an established product portfolio and sales/distribution network in emerging countries
including India. The acquisitions of Ranbaxy (by Daiichi Sankyo) and Piramal (by Abbott) are a case in
point. Thisis expectedto continue.
FUTURE SCOPE
THE PHARMA SECTORIN INDIA ISEXPECTEDTOSHOWROBUST GROWTH IN THE NEXTFEWYEARS DRIVEN
BY GROWTH IN ALL 3 SEGMENTS VIZ.
1. DOMESTIC FORMULATIONSWHICH ARE EXPECTED TO GROW AT ~15%

2. EXPORTSWHICH WILL SEE HUGE GROWTH DUE TO THE PATENTCLIFFIN 2012 ANDEMERGING MARKETS
LIKE BRAZIL,MEXICO, SOUTH AFRICA DRIVINGGROWTH
3. CRAMS WHICH IS EXPECTED TO GROW AT A RATE OF AROUND13% GLOBALLY.
INDIAN COMPANIES HAVE THE LARGEST NUMBER OF US FDA (FOOD AND DRUG ADMINISTRATION)
APPROVED FACILITIES OUTSIDE US. THEY HAVE MADE REGULATORY FILINGS FOR AROUND 70% OF THE
DRUGS THAT ARE GOING OFF PATENT IN 2012. BESIDES MANY COMPANIESHAVE SIZABLEUS EXPOSURE
IN THEIR OVERALL REVENUE. THE BIG PHARMA COMPANIES ALSO SEEM TO HAVE ACKNOWLEDGED
CAPABILITYOF INDIAN COMPANIESWITH MANY TIE-UPS,ACQUISITIONSANDPRODUCT SPECIFICDEALS
HAPPENINGOVERTHE LAST 2 YEARS.
THE COMPANIES THAT WILL BENEFIT THE MOST ARE THOSE WHICH HAVE A ROBUST PIPELINE OF
PRODUCTS IN THE REGULATED MARKETS, A FAVOURABLE GEOGRAPHIC MIX (STRONG PRESENCE IN
INDIAAND USWITH SOMEPRESENCE INEMERGING MARKETS) ANDPOTENTIAL INBIOSIMILARS/NICHE
PRODUCTS. THESE COMPANIESWILL BE BEST POSITIONED FOR SUSTAINABLE GROWTH.
THUS, CONSIDERING ALL THESE FACTORS, WE CANSAY THAT INTHE LONG TERM THE INDIANPHARMA
SECTOR IS POISED FOR ROBUST GROWTH ANDIS SHIFTING FROM A DEFENSIVE TO A GROWTHSECTOR.
ONLINE SALE OF DRUGS
THE ‘SALE’ OF DRUGS ON INTERNET HAS A LARGE SCOPE FOR IT SAVES TIME AND MONEY.
VARIOUS E-COMMERCE PORTALS SUCH AS SNAPDEAL HAVE RECENTLY STARTED SELLING
DRUGS ONLINE. THE EASY AVAILABILITY OF DRUGS(WITH PRESCRIPTION AS SECURITY) MAKES
THE LIFE EASIER FOR THE DISEASED AND HANDICAPPED.

CONCLUSION
INDIAN PHARMACEUTICALS MARKET HAS GROWN IN CONFIDENCE AND
FIRMLY MOVED ON TO AN ACCELERATED GROWTH PATH. THE CENTRAL
QUESTION NOW RESTS AROUND THE TRUE NATUREAND THE FULL EXTENT
OF THIS MARKET’S POTENTIAL
REPORT BY:
DIVYANSHU SHARMA
B.TECH(IIIRDYR)
DEPARTMENTOF ELECTRICALENGINEERING
IIT-ROORKEE
SOURCE:ibef.org FORGRAPHSAND DATA.

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