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Change is said to be permanent. This applies to almost
everything including technology, business models and
lifestyles. Earlier, pharmaceutical companies did everything in-house, whether
it was manufacturing, drug development, clinical trials or
marketing. But the business environment is changing, and this is forcing
companies to change their style of doing business. They need to reduce
costs, improve R & D facilities and focus on developing countries and
emerging economies to tap their market potential. The recession too has
triggered changes in the business model, as companies are now considering
collaborations and joint ventures as a means to be efficient and effective,
in order to provide value for money.
At the time of independence, the Indian pharmaceutical industry
was majorly dependent on imports. But today, it presents an example of
phenomenal growth and is now the fourth largest pharmaceutical industry in
the world. The Indian pharmaceutical industry includes more than
20,000 registered manufacturing units, which produce more than 400 bulk
drugs and about 60,000 formulations. By value, it produces more than 20%
of the world's generic drugs. The progress is continuous with high
compounded annual growth rate (CAGR), and the Indian
pharmaceutical industry seems to have a bright future by the year 2020, in spite of
the many challenges lying ahead.
The first and foremost reason for optimistic projections of the
phenomenal growth of the pharma industry is major blockbuster drugs going
off-patent in the near future. The business model followed by the
western pharmaceutical industry till now has been to promote a few drugs to
make them blockbusters and these drugs contributed to a significant part
of the profits. But this model needs to be changed, as many blockbuster
drugs will be going off-patent over the coming years. According to a
research firm's estimates, the top ten global companies may lose around 40%
of their revenue due to this, and most
of these companies do not even have any drug in the pipeline to
adequately compensate for this loss. But this situation offers an
advantage for the Indian pharmaceutical industry, as Indian companies have
excellence in the production of genericsthat too with low cost and high
quality. It can, therefore, tap this opportunity which is worth more than
US$ 25 bn in sales (Exhibit). Being equipped with requisite resources,
India has a 30-50% cost advantage and thus proves to be both effective
and efficient. |
