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Pharmaceutical Industry Business Environment 3 Agenda • • • • • • • History Indian Pharmaceutical Evolution Facts and Figures Regulatory Framework Current ongoing activities SWOT Analysis The India Advantage 4 History • Bengal Chemicals and Pharmaceutical Works, Calcutta, the first Indian pharmaceutical company established in 1901 • Still exists as one of the 5 government owned drug manufacturers • Next 60 years saw most of the drugs imported from multinationals 5 History contd. The government started to encourage growth in early 1960’s • Introduction of Patents Act, 1970 ? Removal of composition patents from food & drugs ? Process patents were shortened to 5-7 years • Lack of patent protection made it undesirable for MNCs who had so far dominated Indian market 6 Indian Pharmaceutical Evolution Early Years Government Control Development Growth Innovation & Research Before 1970 • Market share dominated by foreign companies • Relative absence of organized Indian companies 7 Indian Pharmaceutical Evolution

Early Years Government Control Development Growth Innovation & Research 1970 – 1980 • Indian Patent Act, 1970 • Drug prices capped • Local companies begin to make an impact 8 Indian Pharmaceutical Evolution Early Years Government Control Development Growth Innovation & Research 1980 – 1990 • Process development • Product infrastructure creation • Export initiatives 9 Indian Pharmaceutical Evolution Early Years Government Control Development Growth Innovation & Research 1990 – 2000 • Rapid expansion of domestic market International market development • Research orientation 10 Indian Pharmaceutical Evolution Early Years Government Control Development Growth Innovation & Research 2000 – 2010 and beyond • New IP law • Discovery Research • Convergence 11 Moving up the value chain * Active Pharmaceutical Ingredients ‡ Specialty products include hormones, steroids, peptides etc Specialty Products‡ Innovative Products API Exports* Generic Exports to developing countries Generic exports to developed countries 12 Facts & Figures 4th largest in terms of production • US $8 billion market value (2% of world’s pharmaceutical market)

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• Expected to grow to US $12 billion by 2010 • Average growth rate of 7. 2% seen in recent years 13 Facts & Figures contd. • Pharma output has increased 10 times in past 15 years • Produces 20-24% of the world’s generic drugs (in terms of value) • Market is highly competitive and fragmented with the top 10 players accounting for 36. 1% of the total sales in 2008 14 Facts ; Figures contd. • Has employed approximately 2. 6 million people and has around 20,053 units countrywide • Accounts for about 2. 91% of total FDI into the country • Manufactures over 400 bulk drugs and roughly 60,000 finished medicines used in different formulations. 15 India’s Top 10 Pharmaceutical companies Ranbaxy Laboratories Dr. Reddy’s Laboratories Cipla Sun Pharma Industries Lupin Labs Aurobindo Pharma GlaxoSmithKline Pharma Cadila Healthcare Aventis Pharma Ipca Laboratories 16 The Regulatory Framework

• The Indian pharmaceutical industry is highly regulated, essentially on three aspects: Patents Price Quality 7 Patents • India’s 1970 patent law recognised only patents on processes, not products. • This enabled Indian firms to use alternative methods to produce cheap “generic” copies of drugs that were patented in other countries. 18 Patents • But after joining the World Trade Organization in 1995, India had to change its patent laws by 1 January 2005 to meet its commitments under the WTO’s agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) • The new bill, finally passed by the Indian Parliament, now recognises both product and process patents. 9 Price Control • Drug Price Control Order (DPCO) , 1995 issued under Sec 3 of Essential Commodities Act, 1995 to regulate prices of drugs: ? ? ? ? Provide list of price controlled drug Procedures for fixation of prices of drugs Method of implementation of prices fixed by Government Penalties for contravention of provisions among other things.

• For implementing provisions of DPCO, powers of the government have been vested in National Pharmaceutical Pricing Authority (NPPA) 20 Regulatory Environment • The major sources for pharmaceutical regulation are: Drugs and Cosmetic Acts of 1940 (DCA) ? Drugs and Cosmetics Rules (DCR) • There are two major government agencies responsible for drug regulation and control: ? Drugs Controller of India (DCI) ? State Food and Drug Administrations (FDAs) 21 Regulatory Environment contd. • The DCI, under Ministry of Health, has five main functions: ? ? ? ? ? Controlling the quality of imported drugs Coordinating the activities of State FDAs Enforcing new drug legislation Granting approval to new drugs Controlling the quality of imported drugs 2 Regulatory Environment contd. • State FDAs: ? Monitor the drug manufacture, sale, and testing by companies in their jurisdiction ? The most powerful state FDA is located in the western state of Maharashtra, where the country’s pharmaceutical industry has been concentrated for the past 46 years. • There are also two main statutory bodies formed by Parliament: ? The Drugs Technical Advisory Board, whose technical experts advise the Central and State Governments on special technical matters involving drug regulation ?

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