The Indian Pharma Industry under the Product Patent Regime

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Case Details:

Case Code : BSTR169
Case Length : 26 Pages
Period : 1990-2005
Organization : -
Pub Date : 2005
Teaching Note : Not Available
Countries : India
Industry : Pharmaceutical

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Growth and Nature of the Industry

In 1901, Bengal Chemical & Pharmaceutical Company, the first Indian pharmaceutical manufacturer, was set up in Calcutta⁵. Over the years the Indian Pharma industry had evolved around the opportunities presented in the regulated environment:

• Lack of product patent: The Indian Patent Act 1970, allowed the Indian companies to reverse-engineer patented molecules and launch them in the domestic market.

• Drugs Price Control Order (DPCO): Price ceiling under DPCO limited the margins and shifted the focus on cost control

• Foreign Exchange Regulated Act (FERA): Foreign Exchange Regulated Act led to reduced MNC exposure in India.

• Small Scale Industry (SSI): Small-scale industry exemptions led to proliferation of small formulation manufacturers and low cost drug manufacturers.

In the 1990s, India was looked upon as a source of relatively less expensive pharma products. In 1994, India signed the Trade Related Intellectual Property Rights (TRIPS) agreement.

Indian companies established themselves as suppliers of Active Pharmaceutical Ingredients (APIs) and intermediates for MNCs. Large Indian generics⁶ companies moved up the value chain to offer custom synthesis and contract manufacturing services for patented molecules⁷. (Refer Table I for growth of the industry till the late 1990s).

In 2002-2003, retail sales for formulations in India reached Rs 187.9 billion, a 16.6% growth over 2002. Domestic companies had a market share of over 75% in the local market. In the domestic market, anti-infectives formed the largest therapeutic segment in domestic sales...

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5] Renamed Kolkata in 2001.

6] Once a drug goes off patent, it becomes an off-patent or generic drug.

7] Outsourcing work done by the Indian companies comes under three categories. The first category is manufacturing outsourcing, which includes the supply of APIs/intermediates; the second category is development outsourcing which deals with conducting pre-clinical and clinical trials; and the third category is customized chemistry services which deals with contract research services for molecules in the pre-launch stage.