Indian Pharma industry will continue to flourish after 2005, according to an exclusive research conducted by Facts For You. There has been a lot of uncertainty that has been prevalent about the state of the industry after 2005. Facts For You’s research has dispelled these notions and have suggested directions for Indian pharma industry to do well globally.

India pharma industry is currently doing very well. The share of multinational pharma companies, which dominated with a market share of 90% in 1970, came down to 28% in 2002. The production of bulk drugs and formulations was Rupees 65.29bn and Rs 242.85bn, respectively. At present, around 24,000 small, medium, and large-scale industries are producing drugs in India. The exports stood at Rs104.75bn in 2002.

Currently the Pharma sector is governed by the Indian Patent Act (IPA), 1970 (enforced in 1972), which did not allow product patent on medicines, agricultural products, and atomic energy. India became a signatory of the GATT (now WTO) in 1994 and therefore a signatory to the TRIPS under the TRIPS agreement. The country is now under compulsion to introduce a product patent regime by 2005 after a transition period of ten years. India should shift process patent to product patent from January 1, 2005 onwards.

Worldwide, the pharmaceutical industry operates in two categories, namely, innovative and generic companies. Generic companies are adoptive in nature and permit copying of medicines only after the patent expires or for unpatented drugs. Due to lack of any patent regulations, Indian pharma industry has remained largely a generic market with the share of patented products being quite small.

After 2005, there will be a wide scope for the Indian pharmaceutical industries in the world market. The players who have their own strong R&D activities as well as significant domestic and international business will have an edge over others. A few companies such as Ranbaxy, Dr Reddy's Laboratories, Orchid Chemicals, and Lupin Chemicals have already shifted their focus and taken active measures for innovation of medicines since 1994, when India signed in WTO.

The growth of generic companies will depend upon the growth rate of the pharmaceutical market, which, in turn, will be driven by the rate of urbanization, pace of economic development, income level, and per capita GDP. In India, only 40%of the population relies on allopathic medicines. With every 1% rise in GDP, there should be a corresponding 1.4% increase in healthcare. The Indian pharmaceutical industry produced drugs valued at Rs 308.14bn (both bulk drugs and formulations) as of March 2003, and has been growing at a rate of 15% per annum.

The US generic market is considered to provide golden opportunities for the Indian companies. The market is very large. The size of the market will be US$16bn by 2004. However, the investments required are also large. It takes US$0.5mn for one Abbreviated New Drugs Application (ANDA) and it takes 22 months before a product is approved. Assuming that one files ten ANDAs a year, US$5mn are to be locked at any point of time. Moreover, the competition is stiff.

The largest change in the post-2005 scenario will be the unprecedented number of drugs going off-patent. Between 2005-2010, the patent will expire of many widely used drugs. In 2005, the drugs going off-patent include Glimepiride, Ondansetron, Clarithromycin, Fluconazole, Pamiotronate disodium, Zidovudin, Provastatin Sodium, Pranlukasf, Azithomycin, Paroxetine, Simvastalin and Sortaline. This basically implies a huge potential in national and international generic markets.

Indian players have strong infrastructure facilities to manufacture generic drugs, such as bulk drug manufacture base, low manufacturing and capital costs, skilled man-power, optimal use of process research skills, focus on exports and niche therapeutic area. Above all, many Indian players have good manufacturing practices approved by US-FDA. Hence, the Indian pharmaceutical companies will definitely flourish in the national and international generic markets even after the introduction of the product patent.

For the last three decades, generic drugs consistently account for 70 to 80% of the total sales. The remaining 20 to 30% of drugs are based on research. The generic market will increase to 90% in the period 2005-10 after the introduction of product patent in 2005 and it will fall from 90% to 75% of the pharmaceutical market in 2015. Ultimately, the rates may settle at around 65% of generics versus 35% of patent drugs by the year 2020.

Speaking about the research, Ramesh Chopra, M. D., EFY Enterprises Pvt. Ltd. said, "The next few years will see a variety of changes in the Indian pharma industry. The industry will need to adopt itself to do well in India and in global market. Research by Facts For You has set directions for the Indian pharma industry. I hope that our efforts will be useful for anyone that has an interest in this sector."