Industry Snapshot : Pharmaceutical

  • Aug 22nd, 2017

1. Introduction:

Pharma Industry

The Pharmaceutical industry develops, discovers, and manufactures drugs and medications. The Indian pharmaceuticals market is the 3rd largest by volume and 13th largest by value  globally, as per Equitymaster’s report (2016). Over 80% of the drugs used to combat AIDS, are supplied by Indian pharmaceutical firms. India has a competitive edge since the cost of production is significantly lower than that of US and Europe. 


2. Classification of Pharmaceuticals:


The pharmaceutical industry can be classified into the following 2 categories, on the basis of the product manufactured:

  • Bulk drugs: Key constituents for the basic raw material for manufacturing Formulation. Constitutes to 22.6% of the Pharmaceuticals.
  • Formulation: Particular combination of a bulk drug or different bulk drugs. Constitutes to 77.4% of the Pharmaceuticals.

Further, on the basis of formulations and bulk drugs, pharmaceutical industry can be classified as:

  • Branded: It is the original/pioneer product that has undergone and passed the rigorous tests and evaluations involved in developing the drug product. They are marketed by a single pharmaceutical company and protected under the product patent. Large corporations research and invest in finding the next breakthrough in medication. Once a favourable candidate is discovered, they pursue a patent to protect the investment while research continues toward developing a safe and marketable drug.
  • Generics: These are the formulations that do not contain any patented bulk drug and can be manufactured by more than one company. Once the patent is filed, firms start to produce the generic versions of the branded drugs. Since the research is already done, generic manufacturers offer pharmaceuticals at a reduced rate. Generic drugs form the largest segment with 70% of market share (in terms of revenue).

For example, Paracetamol is the generic name of a medicine used to treat pain and fever. However, one of the companies that makes Paracetamol, GSK, sells it under the brand name Crocin. Both of them have the same clinical effect, but different manufacturer can give it a different name. Another common example is of  B-complex, which is a generic name. The branded name is Becosule.

Presently, there are 10,563 manufacturing units in India.

3. Industry vs GDP:

  • India's pharmaceutical exports accounted for US$ 16.4 billion in 2016-17 and are believed to reach US$ 20 billion by 2020 i.e., growth of 22% over the next 3 years.
  • Pharmaceutical exports registered a growth of 11.44% in FY16, as per the Ministry of Commerce and Industry.
  • India’s pharmaceutical industry accounts for about 1.4% of the global pharmaceutical industry in value terms and 10% in terms of volume.
  • The Indian Pharmaceutical Industry produces around 20% to 24% of the global generic drugs, which makes it the largest generic drugs provider.
  • Around 40% of the total pharmaceutical produce is exported.
  • The Indian Pharma Industry comprises of nearly 300 different companies, including small, medium, large scaled players.
  • The Indian pharma industry has been growing at a CAGR of more than 15% over the last five years and is expected to grow to USD 100 billion by 2025.



4. Key pharma companies:(in terms of revenue)


Type of Products



Revenue for 2016-2017

(In US $billion)

Products and Services

Sun Pharmaceutical Industries Limited


Generic and Branded

Mumbai, Maharashtra

Dilip Shanghvi


  • Formulations
  • Active Pharmaceutical Ingredients (APIs)
  • Over-The-Counter (OTC)
  • Antiretrovirals (ARVs)

Lupin (1968)

Generic and Branded

Mumbai, Maharashtra

Vinita D. Gupta


  • Branded Formulations
  • Advanced Drug Delivery Systems
  • Generics
  • Novel Drug Discovery
  • Active Pharmaceutical Ingredients (APIs)
  • Biotechnology

Cipla (1935)


Mumbai, Maharashtra

Subhanu Saxena


  • Active Pharmaceutical Ingredients (APIs)
  • Formulations
  • Veterinary

Aurobindo Pharma (1986)


Hyderabad, Telangana

P.V. Ramaprasad Reddy


  • Formulations
  • Active Pharmaceutical Ingredients (APIs)

Dr. Reddy's Labs

(1984 )

Generic and Branded

Hyderabad, Telangana

G. V. Prasad


  • Generic Formulations
  • Active Ingredients
  • Pharmaceutical Services

Cadila Healthcare


Generic and Branded

Ahmedabad, Gujrat

Pankaj Patel


  • Active Pharmaceutical Ingredients (APIs)
  • Formulations

Alkem Laboratories (1973)

Generic and Branded

Mumbai, Maharashtra

Prabhat Agrawal


  • Formulation
  • API manufacturing

Torrent Pharmaceuticals (1959)


Ahmedabad, Gujarat

Samir Mehta


  • Formulation
  • API manufacturing

Divi's Laboratories (1990)


Hyderabad, Telangana

Murali K Divi


  • Generics
  • Intermediates
  • Protected Amino Acids
  • Chiral Synthesis
  • Carotenoids (Synthetic) and Nutraceutical

Glenmark Pharmaceuticals (1977)

Generic and Branded

Mumbai, Maharashtra

Glenn Saldanha


  • Active Pharmaceutical Ingredients (APIs)
  • Formulations

Net sales' comparison of top 2 pharma companies:


Sun Pharma














5. Factors affecting the Industry:

  • Research and development: Since the companies are required to carry out a lot of clinical trials on all the new pharmaceuticals before they are approved in the market, ability to make profits depends on how many of these developments get through the approval stage. Once they get through, patent protection is provided only for some years before the competitors starts manufacturing their products at much lesser costs.

  • Consumer demand: Demands from consumers have risen tremendously for lifestyle drugs that enhance health.  They are high for certain therapeutic segments that changes as life expectancy and literacy increases. Educated patients have caused prescription explosion hence increasing the pharmaceutical sales.

  • Government Regulations: The profitability of the industry is greatly determined by the government regulations. Currently, the domestic market is protected by the DPCO (Drug Price Control Orders), which are issued by the Government to declare a ceiling price for essential and life saving medicines to ensure that the medicines are available at a reasonable price to the public.

  • Competition: A fragmented industry ensures that there is widespread competition in almost all product segments. The competition is hence high and fragmented because of many small players in the industry.

Growth Drivers

6. Impact of GST on Indian Pharmaceutical Industry:

Before GST, the overall taxes on drugs, in general, were about 13%. The current tax sab is of 12% for most of the medicines including Ayurvedic Drugs. The medicines for HIV-AIDS, malaria, tuberculosis and diabetes have a GST of 5%, were previously charged a VAT of about 4%. The best thing for the pharma companies is that their cost of purchase is reduced. Moreover, the burden of multiple tax and complexities associated with multiple tax system had slowed down the business. GST givse hassle free business environment to the pharmaceutical companies. For the consumer, the cost of drugs has come down. The vast majority of pharmaceutical items fall under 12 percent class.






Human blood and its components

Animal or human blood vaccines

All goods not specified elsewhere:

Medicines made by mixing two or more constituents for therapeutic or prophylactic uses.

(including Ayurvedic medicines)

All types of contraceptives

Diagnostic kit for all types of hepatitis

Medicines made by mixing two or more products for therapeutic or prophylactic uses.

(including Ayurvedic medicines)



Wadding gauge, bandages, and similar articles


Oral Rehydration Salts

Forms or packing for retail sale regarding surgical, dental or veterinary purposes


Desferrioxamine Injection or Deferiprone

Pharmaceutical goods specified such as sterile laminaria, dental adhesion barriers etc


Medicines (including veterinary medicines) used in bio-chemichal systems and not bearing any brand name


Drugs or medicines specified in the list 3 or 4 of notification 12/2012- central excise


Formulations manufactured from bulk drugs listed in the list 1 of notification 12/2012 -central excise


7. Challenges:

  • Pricing:

Indian pharma industry is a price controlled market. Government has restricted the profitability of pharma companies through NPPA (National Pharmaceutical Pricing Authority) which maintains DPCO to fix/revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in India. Hence price control is seen as a major hitch for many pharma companies as consequential revenue losses may make the production of price controlled drugs commercial unviable.

  • Trademark enforcement:

Trademark breaches may lead to use of wrong drugs. The Indian courts have taken a very strict view on issues of usage of deceptively similar marks. An example is of Cadila Health Care and Cadila Pharmaceutical Ltd, wherein Cadila Pharmaceutical Ltd was held in an action for passing off on the basis of unregistered trade mark.

  • Compulsory licensing (CL):

In the pharmaceutical context, the conditions for grant of CL are aimed at preventing a situation where the public health is prejudiced by the exclusivity granted to the patented product. While CLs have been viewed in the developing world as a necessary evil, they have also caused grave concerns in the industry due to the revenue loss that CLs tend to cause. There is a dire need for carefully balancing the requirements of the public and the industry.

  • Patent protection:

Patent protection is provided only for a couple of years before the competitors starts manufacturing products at much lesser costs. A major change in the patent laws in India was the enactment of the Patent (Amendment) Act in 2005, which made patent laws in India compliant with the TRIPS (Trade-Related Aspects of Intellectual Property Rights by WTO). However, patent disputes have regularly arisen in India, recently in the context of compulsory licensing.

  • IPR:

Intellectual Property Rights (IPR) in the pharma sphere have been a controversial issue between the branded and generic pharma companies. Because of India’s large poor population in need of basic healthcare, the Indian authorities were initially not keen on granting IPR protection. However, over a period of time, they have become more sensitised to the need and importance of IPR protection for the long-term good of industry.

8. Opportunities:


9. Investments:

  • Kedaara Capital Advisors LLP, a private equity firm plans to invest Rs 430 crore (US$ 64.5 million) to acquire a minority stake in Hyderabad-based diagnostics chain Vijaya Diagnostic Centre Pvt Ltd.
  • A US based global drug maker, Abbott Laboratories, plans to set up an Innovation and Development center in Mumbai, will would develop new drug formulations, dosing, packaging and other differentiated offerings for Abbott's global branded generics business.
  • Syngene International Limited plans to set up its 4th exclusive Research and Development (R&D) center named Syngene Amgen Research and Development Center (SARC) for a US-based biotechnology company Amgen Incorporation, in Bengaluru.
  • The investment arm of the World Bank, International Finance Corporation (IFC), plans to invest upto US$ 75 million in Glenmark, which is looking to raise around US$ 200 million for expansion and the launch of several new products in India and other emerging markets over the next 3 years.
  • The Medicines Patent Pool (MPP) has signed a licensing agreement with 6 Indian drug makers for the generic manufacturing of four Anti-Retro Virals (ARV) and hepatitis C direct-acting antiviral drug Daclatasvir.
  • Glaxosmithkline (GSK) has invested Rs 1,000 crore (US$ 150 million) in making its largest greenfield tablet manufacturing facility in Vemgal in Kolar district, Karnataka.
  • Several online pharmacy retailers like PharmEasy, Netmeds, Orbimed, are attracting investments from several investors, due to double digit growth in the Rs 97,000 crore ( S$ 14.55 billion) Indian pharmacy market.

10. Government Initiatives:

Key Govt Initiatives
  • The Government of India aims at making India a global leader in by unveiling 'Pharma Vision 2020' for end-to-end drug manufacturing.
  • Further, the government introduced mechanisms such as the Drug Price Control Order (DPCO) and the National Pharmaceutical Pricing Authority (NPPA) to deal with the issue of affordability and availability of medicines to the general public.
  • The Union Minister of Chemicals and Petrochemicals, Mr Ananth Kumar, has announced setting up of chemical hubs across the country, early environment clearances in existing clusters, adequate infrastructure, and establishment of a Central Institute of Chemical Engineering and Technology.
  • The Government of India plans to monitor the standards of imported and exported drugs and reduce the overall time spent on quality assessment, in order to improve the drug regulatory system and infrastructure facilities, by setting up around 8 mini drug-testing laboratories across major ports and airports in the country.
  • Government of India has decided to allow 50% public funding in the pharmaceuticals sector through its Public Private Partnership (PPP) model which would push India’s  rank among the top 5 global pharmaceutical innovation hubs by 2020.
  • The Government of India plans to encourage ‘Make in India’ programme and reduce dependency on imports of Active Pharmaceutical Ingredients (API), nearly 85% of which come from China.
  • The Department of Pharmaceuticals has set up an inter-ministerial coordination committee, which would periodically review and facilitate the resolution of the issues and constraints faced by the Indian pharmaceutical companies.
  • The Department of Pharmaceuticals has planned to launch a venture capital fund of Rs 1,000 crore (US$ 149.11 million) to support start-ups in the research and development in the pharmaceutical and biotech industry.

11. Relevant Questions:

  • How would you get a physician to switch to your drug when he is completely satisfied with the one he is currently prescribing?
  • If given a territory and a list of physicians to call on, how would you go about it?
  • What is the impact of GST on the Pharmaceuticals Industry?
  • What is the importance of patents in the Pharma Industry?

12. News:


You may also like the following articles: