The 

Indian pharmaceutical industry is the world's second-largest by volume and is likely to lead the
manufacturing sector of India.[1] India's bio-tech industry clocked a 17 percent growth with revenues of
Rs.137 billion ($3 billion) in the 2009-10 financial year over the previous fiscal. Bio-pharma was the
biggest contributor generating 60 percent of the industry's growth at Rs.8,829 crore, followed by bio-
services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.[2] The first pharmaceutical company are Bengal
Chemicals and Pharmaceutical Works, which still exists today as one of 5 government-owned drug
manufacturers, appeared in Calcutta in 1930. For the next 60 years, most of the drugs in India were
imported bymultinationals either in fully-formulated or bulk form. The government started to encourage the
growth of drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970,
enabled the industry to become what it is today. This patent act removed composition patents from food
and drugs, and though it kept process patents, these were shortened to a period of five to seven years.
The lack of patent protection made the Indian market undesirable to the multinational companies that had
dominated the market, and while they streamed out, Indian companies started to take their places. They
carved a niche in both the Indian and world markets with their expertise in reverse-engineering new
processes for manufacturing drugs at low costs. Although some of the larger companies have taken baby
steps towards drug innovation, the industry as a whole has been following this business model until the
present.

The Indian pharmaceutical industry (IPo) today

[edit]Statistics

Top 10 Pharmaceuticals in India, as of 2004

Ran Revenue Revenue

Company
k 2004(Rs crore) 2004(USD millions)

1 Ranbaxy Laboratories 4,461 1,026

2 Dr. Reddy's Laboratories 1,933 444

3 Cipla 1,842 423

4 Piramal Healthcare 1,387 319

5 Aurobindo Pharma 1,260 290

6 GlaxoSmithKline 1,228 282

 7 Lupin Laboratories 1,180 271

8 Sun Pharmaceutical Industries 1,110 255

9 Cadila Healthcare 1,091 251

10 Wockhardt 980 225

USD 1 = Rs 43.5
Source: Pharmaceutical Sales Busters, India Business Insight, 31-Dec-04

In 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk
drugs. 85% of these formulations were sold in India while over 60% of the bulk drugs were exported,
mostly to the United States and Russia[25]. Most of the players in the market are small-to-medium
enterprises; 250 of the largest companies control 70% of the Indian market [1]. Thanks to the 1970 Patent
Act, multinationals represent only 35% of the market, down from 70% thirty years ago[20].

Most pharma companies operating in India, even the multinationals, employ Indians almost exclusively
from the lowest ranks to high level management. Mirroring the social structure, firms are very hierarchical.
Homegrown pharmaceuticals, like many other businesses in India, are often a mix of public and private
enterprise. Although many of these companies are publicly owned, leadership passes from father to son
and the founding family holds a majority share.

In terms of the global market, India currently holds a modest 1-2% share, but it has been growing at
approximately 10% per year[27]. India gained its foothold on the global scene with its innovatively-
engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a
major player in outsourced clinical research as well as contract manufacturing and research. There are 74
U.S. FDA-approved manufacturing facilities in India, more than in any other country outside the U.S, and
in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be
filed by Indian companies[21,27]. Growth in other fields notwithstanding, generics are still a large part of
the picture. London research company Global Insight estimates that India’s share of the global generics
market will have risen from 4% to 33% by 2007[27].

Patents
As it expands its core business, the industry is being forced to adapt its business model to recent
changes in the operating environment. The first and most significant change was the January 1, 2005
enactment of an amendment to India’s patent law that reinstated product patents for the first time since
1972. The legislation took effect on the deadline set by the WTO’s Trade-Related Aspects of Intellectual
Property Rights (TRIPS) agreement, which mandated patent protection on both products and processes
for a period of 20 years. Under this new law, India will be forced to recognize not only new patents but
also any patents filed after January 1, 1995.[3] Indian companies achieved their status in the domestic
market by breaking these product patents, and it is estimated that within the next few years, they will lose
$650 million of the local generics market to patent-holders[42].

In the domestic market, this new patent legislation has resulted in fairly clear segmentation. The
multinationals narrowed their focus onto high-end patients who make up only 12% of the market, taking
advantage of their newly-bestowed patent protection. Meanwhile, Indian firms have chosen to take their
existing product portfolios and target semi-urban and rural populations[45].

[edit]Product development
Companies are also starting to adapt their product development processes to the new environment. For
years, firms have made their ways into the global market by researching generic competitors to patented
drugs and following up with litigation to challenge the patent. This approach remains untouched by the
new patent regime and looks to increase in the future. However, those that can afford it have set their
sights on an even higher goal: new molecule discovery. Although the initial investment is huge,
companies are lured by the promise of hefty profit margins and the recognition as a legitimate competitor
in the global industry. Local firms have slowly been investing more money into their R&D programs or
have formed alliances to tap into these opportunities.

[edit]Small and medium enterprises

As promising as the future is for a whole, the outlook for small and medium enterprises (SME) is not as
bright. The excise structure changed so that companies now have to pay a 16% tax on the maximum
retail price (MRP) of their products, as opposed to on the ex-factory price. Consequently, larger
companies are cutting back on outsourcing and what business is left is shifting to companies with facilities
in the four tax-free states - Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Jharkhand.[12]

As SMEs wrestled with the tax structure, they were also scrambling to meet the July 1 deadline for
compliance with the revised Schedule M Good Manufacturing Practices (GMP). While this should be
beneficial to consumers and the industry at large, SMEs have been finding it difficult to find the funds to
upgrade their manufacturing plants, resulting in the closure of many facilities. Others invested the money
to bring their facilities to compliance, but these operations were located in non-tax-free states, making it
difficult to compete in the wake of the new excise tax.
[edit]Challenges

All of these changes are ultimately good for the Indian pharmaceutical industry, which suffered in the past
from inadequate regulation and large quantities of spurious drugs. They force the industry to reach a level
necessary for global competitiveness. However, they have also exposed some of the inadequacies in the
industry today. Its main weakness is an underdeveloped new molecule discovery program. Even after the
increased investment, market leaders such as Ranbaxy and Dr. Reddy’s Laboratories spent only 5-10%
of their revenues on R&D, lagging behind Western pharmaceuticals like Pfizer, whose research budget
last year was greater than the combined revenues of the entire Indian pharmaceutical industry[13, 37].
This disparity is too great to be explained by cost differentials, and it comes when advances in genomics
have made research equipment more expensive than ever. The drug discovery process is further
hindered by a dearth of qualified molecular biologists. Due to the disconnect between curriculum and
industry, pharmas in India also lack the academic collaboration that is crucial to drug development in the
West[13].

[edit]R&D

Both the Indian central and state governments have recognized R&D as an important driver in the growth
of their pharma businesses and conferred tax deductions for expenses related to research and
development. They have granted other concessions as well, such as reduced interest rates for export
financing and a cut in the number of drugs under price control. Government support is not the only thing
in Indian pharma’s favor, though; companies also have access to a highly-developed IT industry that can
partner with them in new molecule discovery.

[edit]Labor force
India’s greatest strengths lie in its people [see http://en.wikipedia.org/wiki/India]. India also boasts a
cheap, well-educated, English-speaking [only a percentage,
seehttp://en.wikipedia.org/wiki/Official_languages_of_India] labor force that is the base of its competitive
advantage. Although molecular biologists are in short supply, there are a number of talented chemists
who are equally as important in the discovery process. In addition, there has been a reverse brain
drain effect in which scientists are returning from abroad to accept positions at lower salaries at Indian
companies. Once there, these foreign-trained scientists can transfer the benefits of their knowledge and
experience to all of those who work with them[13,25]. India’s wealth of people extends benefits to another
part of the drug commercialization process as well. With one of the largest and most genetically diverse
populations in any single country, India can recruit for clinical trials more quickly and perform them more
cheaply than countries in the West[47]. Indian firms have just recently started to leverage.

[edit]Biotechnology

[edit]Relationship between pharmaceuticals and biotechnology

Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly
defined in India. Bio-tech there still plays the role of pharma’s little sister, but many outsiders have high
expectations for the future. India accounted for 2% of the $41 billion global biotech market and in 2003
was ranked 3rd in the Asia-Pacific region and 11th in the world in number of biotechs.[45] In 2004-5, the
Indian biotech industry saw its revenues grow 37% to $1.1 billion.[2,9] The Indian biotech market is
dominated by biopharmaceuticals; 75% of 2004-5 revenues came from biopharmaceuticals, which saw
30% growth last year. Of the revenues from biopharmaceuticals, vaccines led the way, comprising 47% of
sales[46]. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and
India hopes to sweep the market in biogenerics and contract manufacturing as drugs go off patent and
Indian companies upgrade their manufacturing capabilities.

Biotechnology statistics

Top 20 Biotechnology Companies in India, 2004

Ran Revenue Revenue

Company
k 2004(Rs crore) 2004(USD millions)

1 Biocon 646 148.6

2 Serum Institute of India 565 129.9

3 Panacea Biotec 217 50.0

4 Venkateshwara Hatcheries 188 43.2

5 Mahyco Monsanto 166 38.3

6 Novo Nordisk 135 31.0

7 Rasi Seeds 87 20.0

8 Aventis Pharma 84 19.4

 9 Bharat Serums 81 18.6

10 Chiron Behring Vaccines 78 17.9

11 GlaxoSmithKline 78 17.9

12 Indian Immunologicals 72 16.6

13 Shantha Biotechnics 70 16.1

14 Novozymes 69 15.9

15 Eli Lilly and Company 68 15.7

16 Wockhardt 67 15.4

17 Bharat Immunological & Biological Corp. 53 12.3

18 Bharat Biological International 41 9.4

19 Advanced Biochemicals 40 9.1

20 Biological E 36 8.3

USD 1 = Rs 43.5
Source: BioSpectrum Top 20: A threshold crossed

Most companies in the biotech sector are extremely small, with only two firms breaking 100 million dollars
in revenues. At last count there were 265 firms registered in India, over 75% of which were incorporated
in the last five years.[2,47] The newness of the companies explains the industry’s high consolidation in
both physical and financial terms. Almost 50% of all biotechs are in or around Bangalore, and the top ten
companies capture 47% of the market. The top five companies were homegrown; Indian firms account for
62% of the biopharma sector and 52% of the industry as a whole.[4,46] The Association of Biotechnology-
Led Enterprises (ABLE) is aiming to grow the industry to $5 billion in revenues generated by 1 million
employees by 2009, and data from the Confederation of Indian Industry (CII) seem to suggest that it is
possible.[7,47]

[edit]Comparison with the U.S.

The Indian biotech sector parallels that of the U.S. in many ways. Both are filled with small start-ups while
the majority of the market is controlled by a few powerful companies. Both are dependent upon
government grants and venture capitalists for funding because neither will be commercially viable for
years. Pharmaceutical companies in both countries have recognized the potential effect that
biotechnology could have on their pipelines and have responded by either investing in existing start-ups
or venturing into the field themselves.[36] In both India and the U.S., as well as in much of the globe,
biotech is seen as a hot field with a lot of growth potential.

[edit]Relationship with IT
Many analysts have observed that the hype around the biotech sector mirrors that of the IT sector.
Biotech colleges have been popping up around the country eager to service the pools of students that
want to take advantage of a growing industry.[7] The International Finance Commission, the private
investment arm of the World Bank, called India the “centerpiece of IFC’s global biotech strategy.” Of the
$110 million invested in 14 biotech projects investment globally, the IFC has given $43 million to 4
projects in India.[29] According to Dr. Manju Sharma, former director of the Department of Biotechnology,
the biotech industry could become the “single largest sector for employment of skilled human resource in
the years to come.”[5] British Prime Minister Tony Blair was similarly impressed, citing the success of
India’s biotech industry as the reason for his own country’s own biotech opportunities.[22] Malaysia is also
looking to India as an example for growing its own biotech industry.[41]

[edit]Government support
The Indian government has been very supportive. It established the Department of Biotechnology in 1986
under the Ministry of Science and Technology.[47] Since then, there have been a number of
dispensations offered by both the central government and various states to encourage the growth of the
industry. India’s science minister launched a program that provides tax incentives and grants for biotech
start-ups and firms seeking to expand and establishes the Biotechnology Parks Society of India to support
ten biotech parks by 2010. Previously limited to rodents, animal testing was expanded to include large
animals as part of the minister’s initiative.[10] States have started to vie with one another for biotech
business, and they are offering such goodies as exemption from VAT and other fees, financial assistance
with patents and subsidies on everything ranging from investment to land to utilities[19].

[edit]Foreign investment
The government has also taken steps to encourage foreign investment in its biotech sector. An initiative
passed earlier this year allowed 100% foreign direct investment without compulsory licensing from the
government1.[6] In April, a delegation headed by the Kapil Sibal, the minister of science and technology
and ocean development, visited five cities in the U.S. to encourage investment in India, with special
emphasis on biotech.[32] Just two months later, Sibal returned to the U.S. to unveil India’s biotech growth
strategy at the BIO2005 conference in Philadelphia.[9]

[edit]Challenges

The biotech sector faces some major challenges in its quest for growth. Chief among them is a lack of
funding, particularly for firms that are just starting out. The most likely sources of funds are government
grants and venture capital, which is a relatively young industry in India. Government grants are difficult to
secure, and due to the expensive and uncertain nature of biotech research, venture capitalists are
reluctant to invest in firms that have not yet developed a commercially viable product.[26] As previously
mentioned, India hopes to solve its funding problem by attracting overseas investors and partners. Before
these potential saviors will invest significant sums in the industry, however, there needs to be better
scientific and financial accountability. India is slowly working towards these goals, but it will be a while
before they are up to the standards of Western investors.

India’s biotech firms share another problem with their pharmaceutical cousins: a lack of qualified
employees. Biotech has the additional disadvantage of competing against IT for ambitious, science-
minded students but not being able to guarantee the same compensation. An aspiring researcher in India
needs 7–10 years of education covering a range of specialties in order to qualify to work in biotech. Even
if a student does choose to go on the biotech path, the ineffectual curriculum at many universities makes
it doubtful as to whether he will be qualified to work in the field once finished. One estimate shows that
10% of upper-echelon biotech recruits have come from foreign countries. While this is not a problem, per
se, it drives up cost in a country whose competitive advantage is based on cheap, high-quality labor. Far
from ending with scientists, there is also a shortage of people with a knowledge of biotechnology in
related fields: doctors, lawyers, programmers, marketing personnel and others.[7,15,17]

While little has been done about the latter half of the employee crunch, the government has addressed
the problem of educated but unqualified candidates in its Draft National Biotech Development Strategy.
This plan included a proposal to create a National Task Force that would work with the biotech industry to
revise the curriculum for undergraduate and graduate study in life sciences and biotechnology. The
government’s strategy also stated intentions to increase the number of PhD Fellowships awarded by the
Department of Biotechnology to 200 per year. These human resources will be further leveraged with a
“Bio-Edu-Grid” that will knit together the resources of the academic and scientific industrial communities,
much as they are in the U.S.[5]

[edit]Major players
This section is written like an advertisement. Please help rewrite this section from
a neutral point of view. (August 2010)

Ranbaxy Laboratories
Arun Puri, Chairman

Ranbaxy is the leader in the Indian pharmaceutical market, taking in $1.174 billion in revenues
for a net profit of $160 million in 2004. It was the first Indian pharmaceutical to have a
proprietary drug (extended-release ciprofloxacin, marketed by Bayer) approved by the U.S.
FDA, and the U.S. market accounts for 36% of its sales. 78% of Ranbaxy’s sales are from
overseas markets; its offices in 44 countries manage manufacturing in 7 countries and
distribution in over 100.

IMS Health estimated that Ranbaxy is among the top 100 pharmaceuticals in the world and
that it is the 15th fastest growing company. By 2012, Ranbaxy hopes to be one of the top 5
generics producers in the world, and it consolidated its position with the purchase of French
firm RGP Aventis in 2003. Ranbaxy also has higher aspirations, however, “to build a
proprietary prescription business in the advanced markets.” To this end, it keeps a dedicated
research facility in Gurgaon staffed with over 1100 scientists. They currently have two
molecules in Phase II trials and 3-5 in pre-clinical testing. It spent $75 million in R&D in 2004, a
43% increase over its 2003 expenditure.

CEO Brian Tempest is the only non-Indian on the senior management team.38,39

Dr. Reddy's Laboratories

K. Anji Reddy, Chairman

Founded in 1984 with $160,000, Dr. Reddy’s was the first Asia-Pacific pharmaceutical outside
of Japan and the sixth Indian company to be listed on the New York Stock Exchange. It earned
$446 million in fiscal year 2005, deriving 66% of this income from the foreign market. In order
to strengthen its global position, Dr. Reddy acquired UK-based BMS Laboratories and
subsidiary Meridian Healthcare.
 Although 58% of Dr. Reddy’s revenues come from generic drugs, the company was committed
to WTO-compliance long before the 2005 bill took effect, and most of these products were
already off patent. Dr. Reddy has long been a research-oriented firm, preceding many of its
peers in setting up a New Drug Development Research (NDDR) in 1993 and out-licensing its
first compound just four years later. Dr. Reddy’s has since outlicensed two more molecules
and currently has three others in clinical trials.

Although Dr. Reddy’s is publicly-traded, the Reddy family (including founder/chairman K. Anji
Reddy, son-in-law/CEO GV Prasad and son/COO Satish Reddy) holds a hefty 26% share in
the company.11,44

Nicholas Piramal
Asish Mishra, Chairman

Now a company grossing $350 million per year, Nicholas Piramal started its existence with the
1988 acquisition of Nicholas Laboratories and grew through a series of mergers, acquisitions
and alliances. The company has formed a name for itself in the field of custom manufacturing.
It cites its 1700-person global sales force as another core strength; with its acquisition
of Rhodia’s inhalation anaesthetics business, Nicholas Piramal gained a sales and marketing
network spanning 90 countries34.

Nicholas Piramal is well-poised for the challenge of surviving in the aftermath of product patent
protection. The company has respected intellectual property rights since its inception and
refused to "support generic companies seeking first-to-file or early-to-market strategies."
Instead, it decided to make its own intellectual property and opened a research facility last
November in Mumbai with hopes of launching its first drug in 2010 at a cost of $100,000.24,33

Cipla
Dr. Yusuf K. Hamied, Chairman and Managing Director

Cipla burst into the international consciousness in 2000 with Triomune, an AIDS treatment
costing between $300 and $800 per year that infringed upon patents held by several
companies who were selling the cocktail for $12,000 per year. Long before this news, Cipla
had been building a strong global presence, and it now distributes its 800-odd products in over
140 countries. Privately-held Cipla holds a prominent spot in its home country as well; it is the
leader in domestic sales, having just unseated GlaxoSmithKline for the first time in 28 years.
 Revenue in 2004 totaled $552 million (using Rs 43.472 = $1) about 75% of which was derived
in India. Cipla did not report having a research program.8,18

Biocon
Dr. Kiran Mazumdar-Shaw, Chairman and Managing Director

Originally an extension to an Irish chemicals company seeking to break into the Indian market,
Biocon is now the leading biotech in India, bringing in Rs 646.36 crore (almost $150 million) in
revenue for fiscal year 2004. It initially made its money by producing enzymes, but Biocon
recently decided to become a research-oriented company with the goal of bringing a
proprietary new drug to market.

The company went public in March 2004, and "its shares were oversubscribed by 33 times on
opening day." Eight months later it launched Insugen, a bio-insulin that is its first branded
product. Biocon also has two wholly-owned subsidiaries, Syngene and Clinigene, that perform
custom research and clinical trials.3,14,31

Serum Institute of India[4]

Dr. Cyrus Poonawalla, Chairman

The Serum Institute of India can make the enviable claim that 2 out of every 3
children in the world are immunized with one of their vaccines. It is the world’s
largest producer of measles and DTP vaccines, and its portfolio includes other
vaccines, antisera, plasma products and anticancer compounds. The Serum
Institute earned Rs 565 crore ($130 million) in revenue in fiscal year 2005, selling
mainly to UN agencies and to the Indian government. The Serum Institute is part of
the Poonawalla Group, whose holdings include a horse stud farm and
manufacturers of industrial equipment and components.1,4,40