Vipul Patil P.Marketing Assignment


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Vipul Patil P.Marketing Assignment

  1. 1. Narsee monjee institute of management studies (SPTM) "The Indian Pharmaceutical Industry: Crystal ball gazing into the year 2020 AD". By Vipul patil Pharm.analysis(MBA)ROLL NO.20 2012 Minor assignment (pharmaceutical marketing)
  2. 2. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 1 India is one of the fastest growing pharma markets in the world and hasgrown at a CAGR of 20 % over the last five years. The introduction of the product patentsregime in India has put the industry on a new growth trajectory. Indian pharma is makingbig strides in the global industry. No global economy can either either as a competitivesourcing base for its global supply chain requirements or as a destination to capitalise onthe rapidly growing domestic demand for drugs. Whether it is the potential in terms ofcapturing increasing generic market opportunity in the international markets, seizing asubstantial share of the global outsourcing pie or building strong R&D pipelines, Indianpharma has already made its presence felt all the way and is increasingly spanning acrossthe entire pharma value chain. Strengthening intellectual property laws and regulatoryreforms are encouraging multi-nationals to take increased interest in this market andsignificantly increase scale of investments .Sector Structure/ Market SizeThe US$ 12 billion valued pharmaceutical industry in India is expected to grow at an annualcompound annual growth rate (CAGR) of 10-11 per cent. The industry spends around 18per cent of its revenue on research and development (R&D).India is one of the most significant emerging markets for the global pharmaceuticalindustry. Moreover, India is expected to join the league of top 10 global pharmaceuticalsmarkets in terms of sales by 2020 with the total value reaching US$ 50 billion, according toa report by PricewaterhouseCoopers (PwC). 1REPORT PHARMA 2020
  3. 3. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 2The domestic pharma market is expected to grow at a CAGR of 15 to 20 percent to reach avalue anywhere between USD 50 and 74 billion by 2020, says a PwC report titled ‘IndiaPharmaInc: Enhancing Value through Alliances & Partnerships’.ExportsIndia’s exports of drugs, pharmaceutical & fine chemicals stood at US$ 9.26 billion duringApril 2010–Feb 2011, up 16.15 per cent as compared to US$ 7.97 billion in the same periodduring the previous year. India’s exports has recorded a growth rate of over 20.07 per cent,during the period of the two financial years in the study, the exports to rest of the world hasgrown by 9 per cent, according to DGCIS data from Pharmexcil Research.India and Russia signed a memorandum of understanding (MoU) last year. Another will besigned in December 2011, as per MrDevendraChaudhry, Joint Secretary, Department ofPharmaceuticals. Indian pharma companies export drugs worth US$ 600 million to Russiaevery year. Pharma sector accounts for the largest Indian export to Russia.GrowthThe drugs and pharmaceuticals sector attracted foreign direct investments (FDI) worth US$4.89 billion between April 2000 and August 2011, according to the latest data published byDepartment of Industrial Policy and Promotion (DIPP).Indian pharmaceutical market is predicted to grow to US$ 55 billion by 2020 from US$ 12.6billion in 2009, according to a report by McKinsey.On back of a high middle-class population base, improvements in medical infrastructure andthe establishment of intellectual property rights, the Indian pharma industry is estimated togrow manifold.GenericsGenerics will continue to dominate the market while patent-protected products are likely toconstitute 10 per cent of the pie till 2015, according to McKinsey report ‘India Pharma 2015- Unlocking the potential of Indian Pharmaceuticals market’. Moreover, as per a pressrelease by research firm RNCOS, the report titled ‘Booming Generics Drug Market in India.The report further projects the Indian generic drug market to grow at a CAGR of around 17per cent between 2010-11 and 2012-13.First, population growth at around 1.3 per cent every year and a steady rise in diseaseprevalence will increase the patient pool by nearly 20 per cent by 2020.Second, the affordability of drugs will rise due to sustained growth in incomes and increasesin insurance coverage. Moreover, rising incomes will drive 73 million households into themiddle and upper income segments by 2020. 2REPORT PHARMA 2020
  4. 4. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 3Third, the largest impact will be seen through government sponsored programmers that arelargely focused on the ‘below poverty line’ (BPL) segment5, and are expected to providecoverage to nearly 380 million people by 2020.Fourth,accessibility to drugs will expand due to growth in medical infrastructure, newbusiness models for Tier-II towns and rural areas, launches of patented products, andgreater government spending on healthcare.Why India???Competent workforce: India has a pool of personnel with high managerial and technicalcompetence as also skilled workforce. It has an educated work force and English iscommonly used. Professional services are easily available.Cost-effective chemical synthesis: Its track record of development, particularly in the areaof improved cost-beneficial chemical synthesis for various drug molecules is excellent. Itprovides a wide variety of bulk drugs and exports sophisticated bulk drugsLegal & Financial Framework: India has a 53 year old democracy and hence has a solid legalFramework and Strong Financial Markets: There is already an established internationalindustry and business community.Information & Technology: It has a good network of world-class educational institutions andestablished strengths in Information Technology.Globalization: The country is committed to a free market economy and globalization. Aboveall, it has a 70 million middle class market, which is continuously growing.Consolidation: For the first time in many years, the international pharmaceutical industry isfinding great opportunities in India. The process of consolidation, which has become ageneralized phenomenon in the world pharmaceutical industry, has started taking place inIndia. 3REPORT PHARMA 2020
  5. 5. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 4India in 2020—envisioned stateThe envisioned future state will have the following benchmarks: Ensuring access to affordable medicines by anyone and everyone in need Achieve the laudable objective of medicines for All through the three levers of accessibility, affordability and awareness Bridging of urban rural health divide with increase in number of beds, primary health care facilities and number of doctors Contribution to nation building through improved health for all Increased emphasis on wellness as a proactive system to reduce dependence on medicines.The shift in income demographics: How per capita pharmaceuticals spendwill increase: 1. The INDIAN population is currently in a period of intense change, radically affecting the healthcare industry. 2. This shift can be broken down into three overarching trends—an ageing population, changing lifestyles and the emergence of several countries in the global market. 3. People are living longer. Age drastically increases the number of patients with multiple diseases, which in turn changes the need for medicines. 4REPORT PHARMA 2020
  6. 6. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 5The expansion of medical infrastructure: the approach to translatinggrowth in medical infrastructure into demand for drugs. 1. Medical infrastructure will experience dramatic growth over the next decade, with over USD 200 billion being invested in creating and upgrading medical infrastructure. As a result, over 160,000 beds will be added every year across different segments of hospitals. This infrastructure creation will need to be supported by the creation of ‘soft’ capacity in terms of doctors and other healthcare professionals. State health expenditures be raised to 7% by 2015 and to 8% of State budgets thereafter. Indeed the target could be stepped up progressively to 10% by 2020. it also suggests that Central funding should constitute 25% of total public expenditure in health against the present 15%.Determinants of accessibility Availability, i.e, whether a satisfactory product has been developedBasic research Discovery Development Distribution system effectiveness and efficiency Knowledge and health-seeking behaviour of consumers Ensuring quality, rational selection, appropriate prescription and use 5REPORT PHARMA 2020
  7. 7. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 6 Affordability, including economic factors, including cost, pricing, procurement and financingAccessibility of medicinesMillions of poor people in India struggle to get the medicines they need, which can havedevastating consequences for the individual and their family, as well as hinder economicand social development.The human and economic costs of illness to patients, their families, and the nation can betremendous. Helping get the right medicine for the right patient at the right time increasesthe chance that a patient will live a longer, healthier, and a more productive life. It canfurther help reduce or slow the escalation of healthcare costs. Making sure that patients andhealthcare professionals understand how and when to use medicines is a critical part ofimproving the quality of healthcare and keeping costs in check.Pharma companies, by definition, have their core values centred on providing medicines tocure unmet needs and ensuring access to them. This is a basic tenet of the industry. Novelcures for unmet diseases are a natural consequence of this value, wherein the massavailability of these drugs against the entire gamut of drug innovation represents anindustry-wide dilemma.The WHO recommendation for spending in health is five percent of the national GrossDomestic Product (GDP). This aspect gains cognizance in the wake of the widening gapbetween the privileged, and the not so privileged, and underprivileged class in India, interms of access to quality healthcare, both in terms of medical and human resources. Theproblem that we face is not so much related to the unavailability of medicine and humanresources, however their proper accessibility and distribution. Notably, the health sector inIndia is plagued more by the distribution lacunae than the production bottlenecks.AffordabilityThe main argument against drug price controls is the negative impact that they would haveon innovation. Biotech and pharma firms are competing to be pioneers in launching new andvaluable drugs to the market and thus receive the potential prize of sizable economicprofits. The company expects to use cash flows from current and future profits to supportfuture rounds of research and development (R&D), with the intention of discovering,developing, and marketing newer and therapeutically more important drugs in future.Price controls are likely to have a negative impact on development of new drugs for tworeasons. First, regulations on drug prices reduce expected revenues and thereby make R&Dinvestment less attractive from the firms (and investors) perspective. Second, suppressionof drug prices will also reduce the firms cash flows, which are an important source offunding pharmaceutical R&D. Moreover, capital markets will not provide funds necessary tosupport future R&D if government forces rates of return below opportunity cost of capital. 6REPORT PHARMA 2020
  8. 8. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 7Increase in burden of disease: the increasing cases of lifestylediseases and how this will impact pharmaceuticals demand. 1. According to the study, in the current decade, the spread of diabetes will drive the growth of new therapies in Indias pharmaceutical market and by 2020, the disease will assume greater proportions by rising six times. 2. Diabetes presently affects around 50 million Indians, killing about 4 million annually and as per official statistics. 3. Treatment for chronic diseases like asthma, cancer, diabetes, heart ailments, and osteoporosis and kidney ailments will likely to constitute more than half of Indias pharma market by the end of the decade. 4. The expert team has identified three major disease viz. tuberculosis, HIV and water- borne diseases and methods to combat these diseasesCASE 1: a patient with arthritis treats pain without harming a delicate digestive system, forexample? More individualized and combination treatment options are particularly critical forthis population, and pharm companies must increase the speed of innovation to matchthese changing needs.CASE 2: As obesity rises across the globe, so does the prevalence of diabetes and otherhealth complications.Increase in penetration of health Insurance: 7REPORT PHARMA 2020
  9. 9. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 8 1. By 2020, nearly 650 million people will have health insurance cover, while private insurance coverage will grow by nearly 15 percent annually till 2020. The Indian healthcare industry is estimated to be worth $275.6 billion. 2. India’s healthcare insurance industry is currently very small and limited, but is expected to grow at a CAGR of 15% till 2015. 3. Around 80% of India’s healthcare expenditure is the propensity of Indians to spend on healthcare, particularly in lower and middle income groups which comprise around 95% of population. 4. By 2020, nearly 650 million people will have health insurance cover, while private insurance coverage will grow by nearly 15 percent annually till 2020. The Indian healthcare industry is estimated to be worth $275.6 billion. 5. India’s healthcare insurance industry is currently very small and limited, but is expected to grow at a CAGR of 15% till 2015. 6. Around 80% of India’s healthcare expenditure is the propensity of Indians to spend on healthcare, particularly in lower and middle income groups which comprise around 95% of population 8REPORT PHARMA 2020
  10. 10. A CRYSTALBALL GAZING INTO THE YEAR 2020 AD: 9INDIAN PHARMA IN 2020 ‘Pharma returning to prominence on back of competitive strength’ The Indian pharmaceutical industry has weathered many a cross current on the basis of strong fundamentals. Today, investors once lured to other sectors, are returning to the pharma industry on the basis of its competitive strengths. Changing Indian pharmas contribution to global health Get a clear vision of the Indian pharma industry in 2020 depends on the industrys 20/20 eyesight in thepresent. God is in the details: Stitching loose ends for realizing the vision India and China continue to fascinate the world—the two ancient civilisations are today the worlds fastest growing economies and predicted to dominate global economy over the next few decades. Imperatives for the Indian pharmaceutical industry in a changing world The Indian pharmaceutical industry can look forward to the New Year, as well as to the years to come, with great expectations. It is important to create the right environment for building entrepreneurship India, today is emerging as a market of great opportunity for the global pharmaceutical industry. The pharma industry has evolved dynamically with India joining the WTO and the implementation of product patents. Indian pharma is undergoing a radical makeover The roots of the pharmaceutical industry were laid centuries back. It had basic applications of curing diseases and treating wounds. Innovation-driven semi-blockbusters will emerge The pharmaceutical industry is a prisoner of past success. While the business environment has changed dramatically in the past five years, the business model that served the industry well in the past has not kept pace. ‘India to be amongst top three generic makers in the world’ By 2020, global integration of most sectors in the world economy would be much more pronounced, and the pharma industry will not be an exception. ‘India will emerge as a dominant force on the global arena’REFERENCES: 1. Indian pharma 2020 Mckinseyreport,propelling access and acceptance,realising true potential. 2. PricewaterhouseCoopers (PwC). REPORT. 3. Pharmexcil Research. 9REPORT PHARMA 2020