| Supply |
Higher for traditional therapeutic segments, which is typical of a developing market. Relatively lower for lifestyle segment.
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| Demand |
Very high for certain therapeutic segments. Will change as life expectancy, literacy increases.
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| Barriers to entry |
Licensing, distribution network, patents, plant approval by regulatory authority.
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| Bargaining power of suppliers |
Distributors are increasingly pushing generic products in a bid to earn higher margins.
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| Bargaining power of customers |
High, a fragmented industry has ensured that there is widespread competition in almost all product segments. (Currently also protected by the DPCO).
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| Competition |
High. Very fragmented industry with the top 300 (of 24,000 manufacturing units) players accounting for 85% of sales value. Consolidation is likely to intensify. |
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FY11/CY10 was a strong year for domestic pharma companies on back of strong growth in both domestic and exports sales. There was good growth seen in generics especially in the US and the semi regulated markets. Europe continued to face pressure. Companies focusing on custom manufacturing for innovators did not see a sign of recovery this year as well. Further, the efforts of global innovators to entrench in the domestic market intensified with many strategic tie-ups and small acquisitions of Indian companies. Now with Abbott taking over Piramal's domestic division and Daiichi Sankyo having acquired Ranbaxy, 2 of the top 3 players in the Indian market are MNCs.
| Another problem which continued to hamper the pharma sector was the stringency of the US FDA while inspecting manufacturing plants. Ranbaxy and Sun Pharma are yet to come to a resolution with respect to their plants with the US FDA. Aurobindo Pharma was new in the list to receive the warning letter for one of its biggest manufacturing unit.
| In the domestic market, FY11 was a decent year for the pharmaceutical industry with most of the top players managing to clock a double-digit growth. However, it was the chronic therapy segment, which once again stole the thunder of the acute therapy segment. While the former recorded a robust 18% YoY growth, the latter grew by 14% YoY.
| MNC pharma companies did well during FY11/CY10. On an average, they were able to clock topline growth in the range of 10% to 15%. On the margin front, performance was not good. Most of the companies saw increase in costs on the raw material costs and employee costs.
| The intensifying competition led to higher attrition and the industry is facing huge increase in the employee costs.
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| The product patents regime heralds an era of innovation and research resulting in the launch of new patented product launches. In the longer run, domestic companies would face fresh competition from MNCs, as they would make aggressive new launches. However, the latter would most likely be subject to price negotiation.
| Drugs having estimated sales of over US$ 100 bn are expected to go off patent between CY10 and CY14. With the governments in the developed markets looking to cut down healthcare costs by facilitating a speedy introduction of generic drugs into the market, domestic pharma companies will stand to benefit. However, despite this huge promise, intense competition and consequent price erosion would continue to remain a cause for concern.
| The life style segments such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyle patterns. High growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment as the lifestyle diseases like hypertension, congestive heart failure, depression, asthma, and diabetes are on the rise.
| Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. India's competitive strengths in research services include English-language competency, availability of low cost skilled doctors and scientists, large patient population with diverse disease characteristics and adherence to international quality standards. As for contract manufacturing, both global innovators and generic majors are finding it profitable to outsource production. Although the scenario has yet not improved for this space after the financial crisis, it is expected to improve going forward as the pressure to prune costs increases.
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