Detailed Analysis of the Indian Pharmaceutical Industry: Report

This report provides a comprehensive analysis of the Indian pharmaceutical industry, examining its current state and future prospects. It begins by identifying the industry and its global ranking, highlighting key hubs and historical developments, including the impact of government regulations like the Patents Act. The report then delves into the reasons for choosing this industry, discussing the pressures faced by pharmaceutical companies, such as R&D, regulatory concerns, and pricing issues. It emphasizes the opportunities for Indian companies due to lower production costs and the changing business models of larger international firms. The analysis outlines the methodology, including reviewing reports, focusing on the relevant industry segments, examining demand and supply, assessing the competitive landscape using Porter's Five Forces, considering current developments, and concentrating on industrial dynamics. The report anticipates growth in the Indian pharmaceutical market, driven by mergers and acquisitions and expansion in specific therapeutic areas, while also acknowledging challenges related to product patents, price controls, and infrastructure. The report concludes by referencing relevant academic sources to support the analysis.

Running head: MANAGERIAL ECONOMICS
Managerial Economics
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Table of Contents
1. Industry to be analysed:...............................................................................................................2
2. Reasons for choosing the Indian pharmaceutical industry:.........................................................2
3. Method of proceeding with the industrial analysis:.....................................................................4
References:......................................................................................................................................7

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1. Industry to be analysed:
The industry to be analysed for meeting the purpose of this assignment is the Indian
pharmaceutical industry. This industry ranks third in the world in terms of volume, while in
terms of value, it is ranked 14th in the world. In accordance with the “Department of
Pharmaceuticals, Ministry of Chemicals and Fertilisers”, the overall turnover of the
pharmaceutical industry of the nation has been $21.09 billion in 2009 (Abrol, Prajapati and
Singh 2017). The main pharmaceutical hubs of India include Mumbai, Bangalore, Hyderabad
and Ahmedabad and the value of the domestic market was $13.8 billion in 2013.
There is strengthening of the government in relation to the progress of manufacturing
drugs on the part of the Indian organisations in the beginning 1960s and with the “Patents Act”
in 1970. This particular act eliminated patents of composition from drugs and food and despite
the continuation of process patents, the timeframe has been reduced within five to seven years
(Ashwin, Krishnan and George 2016).
2. Reasons for choosing the Indian pharmaceutical industry:
Over the past decade, the Indian pharmaceutical organisations have been going through
tough situation, in which the shareholders, regulators and the market have formed considerable
pressures for change within the industry. The main issues for majority of the drug organisations
include in-house research and development, raising regulatory and legal concerns, patent
expiration of various major drugs and pricing problems (Banerjee and Thakurta 2015). Due to
this, the bigger pharmaceutical organisations are switching over to new business model having
higher outsourcing of services, discovery, manufacturing and clinical research.

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The recent financial conditions in the global economy and the recessionary threat drove
the schedule in order to implement transformational changes in the international organisations.
This is because the industry encounters lower prices of shares along with the cost-averse
customers. The market players of the biggest international pharmaceutical firms realise the need
for transformational modification in their firms; however, they are required to progress promptly
for assuring sustained growth (Bouet 2015).
The transformations in the business model of the bigger pharmaceutical organisations
offer additional opportunities for the Indian pharmaceutical organisations. The pharmaceutical
cost of production are nearly 50% lower in India in contrast to the western countries, while the
overall costs related to research and development are nearly 1/8th and the expense related to
clinical trial are nearly 1/10th of the western levels (Jagadeesh and Sasidharan 2014).
The share market of India might be dreading a likely recession; however, the
pharmaceutical organisations of India do not seem to be fazed by the fears of slowdown. Riding
on greater sales in the export and domestic markets, the Indian pharmaceutical industry is
anticipated to carry on with its sound performance. In the current era, the Indian pharmaceutical
industry could wait for the upcoming years with higher expectations. The opportunities are
inherent to diversify the group of generic products, since additional molecule come-off patent,
outsourcing and concentrating into drug delivery come from conventional plays due to additional
profit. At the same time, the pharmaceutical industry of India might have to combat with various
challenges, which primarily include the following:
 Impact of new product patent,
 Control in prices of drugs

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 Regulatory reforms
 Development of infrastructure
 Adherence to international standards
 Quality management
According to Mahajan, Nauriyal and Singh (2015), it is anticipated that India would
experience the maximum number of mergers and acquisitions in the healthcare and
pharmaceutical sector. Moreover, the progress of the pharmaceutical organisations of India
would be fostered due to the rapid growing molecules in skincare, diabetes and segment of eye
care. Furthermore, the Indian pharmaceutical organisations like Ranbaxy, Cipla, Lupin and Dr.
Reddy’s Labs might become parts of the ambitious ‘Jan Aushadhi” project of the government.
For commercialising the project, the Indian government is probably to rope in the private sector
for procuring generic drugs in bulk from them. Hence, the plan of the government is to expand
such stores across the nation within the upcoming years.
3. Method of proceeding with the industrial analysis:
The approach that is adopted to proceed ahead with the analysis of the Indian
pharmaceutical industry is carried out with the following series of steps, which are demonstrated
briefly as follows:
Reviewing available reports:
Firstly, all the available and pertinent industrial reports and statistics would be gathered
to obtain in-depth knowledge about the specified industry. However, it would not be feasible to
rely on the existing reports due to the volatility of the market and change in industrial factors.

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Hence, for this particular analysis, a current report needs to be chosen and then its relevancy is to
be envisaged in the existing market.
Approaching the correct industry:
Since an industry contains sub-parts, it is significant to concentrate on the pertinent
industry. This is because it would not be possible to depict rightful industrial analysis report.
Demand and supply scenario:
It is highly required for an economist to review the demand and supply scenario for a
specific industry to study its previous trends and anticipate future (Singh and Singh 2017). With
the help of demand and supply forecasting of the Indian pharmaceutical industry, the investors
could gain an overview of the feasibility of future investments in relation to gains and losses.
Competitive scenario:
The most important part of an industrial analysis is to study the competitive position with
the help of Porter’s Five Forces Model, as it acts as the basis for the stated analysis (Taylor
2017). These forces primarily include threat of new entrants, bargaining power of the suppliers,
bargaining power of the buyers, threat of substitutes and threat of competition.
Current developments:
The analyst is required to incorporate influencing factors at macro-level like current
industrial developments, valuation of sector, international comparative analysis and innovation in
report of industrial analysis.
Concentration on industrial dynamics:

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The industrial analysis needs to be specific to the Indian pharmaceutical sector and hence,
it is significant to concentrate along with gaining an insight of the industrial dynamics. Thus, the
industrial analysis would be in-depth and specific. Since this assessment would focus on the
Indian pharmaceutical industry, it is necessary to know about the consumption of volume in the
nation.

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References:
Abrol, D., Prajapati, P. and Singh, N., 2017. Globalization of the Indian pharmaceutical industry:
implications for innovation. Institutions and Economies, pp.327-365.
Ashwin, A.S., Krishnan, R.T. and George, R., 2016. Board Characteristics, Financial Slack and
R&D Investments: An Empirical Analysis of the Indian Pharmaceutical Industry. International
Studies of Management & Organization, 46(1), pp.8-23.
Banerjee, K. and Thakurta, R., 2015. Innovations in the Indian pharmaceutical industry: The
present scenario and an agenda for the future. Journal of Generic Medicines, 12(2), pp.50-59.
Bouet, D., 2015. A study of intellectual property protection policies and innovation in the Indian
pharmaceutical industry and beyond. Technovation, 38, pp.31-41.
Jagadeesh, H. and Sasidharan, S., 2014. Do stronger IPR regimes influence R&D efforts?
Evidence from the Indian pharmaceutical industry. Global Business Review, 15(2), pp.189-204.
Mahajan, V., Nauriyal, D.K. and Singh, S.P., 2015. Trade performance and revealed comparative
advantage of Indian pharmaceutical industry in new IPR regime. International Journal of
Pharmaceutical and Healthcare Marketing, 9(1), pp.56-73.
Singh, J. and Singh, P., 2017. Production Structure and Technical Efficiency of the Indian
Pharmaceutical Industry: A Parametric Analysis. Arthshastra: Indian Journal of Economics &
Research, 6(5), pp.7-23.
Taylor, H., 2017. Uncovering the institutional foundations of specialization patterns in the Indian
pharmaceutical industry. Transnational Corporations, 24(1), pp.57-79.