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PHARMACEUTICAL SECTOR: INDUSTRY ANALYSIS

KISHINCHAND CHELLARAM COLLEGE 1

EXECUTIVE SUMMARY

In 1991, the U.S. International Trade Commission (the Commission)conducted a study on the pharmaceutical industry, Global Competitivenessof U.S. Advanced-Technology Manufacturing Industries: Pharmaceuticals,1

as part of a series on global competitiveness of U.S. advanced-technologymanufacturing industries requested by the Senate Committee on Finance.Many of the findings of that study are still valid today, although significantchanges have occurred in the industry. The purpose of this report is todescribe the principal factors currently affecting the competitiveness of theU.S. pharmaceutical industry, particularly in relation to the industries ofWestern Europe and Japan.

The pharmaceutical industry is complex, dynamic, and highly globalized;

moreover, the industry is characterized by high research and development(R&D) expenditures and extensive regulation of its products compared withother manufacturing sectors. The industry has also been affected by a highnumber of mergers and acquisitions (M&As), which have increasedglobalization and, arguably, heightened efficiency. In the Commissions1991 study, the major factors of competitiveness were found to be thosethat affect a companys ability to develop and deliver new pharmaceuticalproducts or new chemical entities (NCEs), particularly those NCEssuccessful on a global basis.2 In the United States, changes in U.S.Food and Drug Administration (FDA) policies have led to faster approvaltimes for NCEs, which result in extended periods during which companiescan exclusively market their pharmaceutical products. As noted in theCommissions 1991 competitiveness study, longer periods of marketexclusivity for pharmaceuticals increase sales revenues, and increasedsales revenues in turn lead to greater profits and potentially more fundingfor R&D.

The Commissions 1991 competitiveness study also indicated that changesin Government policies affect the competitiveness of pharmaceutical firms.

Sweeping changes in barriers to trade worldwide, from tariffs to intellectualproperty rights and patent issues have occurred since 1991. An initiative onpharmaceuticals, established during the Uruguay Round, was implementedon January 1, 1995, providing duty-free treatment for about 7,000pharmaceutical products and pharmaceutical intermediates; another 496products and intermediates became duty-free on April 1, 1997, andnegotiations are currently underway to make further additions. There is


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greater participation of member countries of the World Trade Organization(WTO), formed in 1995, including those of the European Union (EU),3 inagreements relating to intellectual property and patents. In the Westernhemisphere, the North American Free Trade Agreement (NAFTA) hasresulted in low or no tariff barriers and greater protection of patents andintellectual property rights among Canada, Mexico, and the United States.

Overall, the U.S. pharmaceutical industry seems to enjoy a domesticenvironment conduciveto researching and developing drugs, protecting itsintellectual property, and obtaining regulatory approval to market itsproducts. There is also a strong trend in the United Statesto invest thoseprofits in new R&D. Recent improvements to the patent systems andGovernment regulatory policies in Western Europe and Japan are likely to

benefit the U.S. industry as well. Because of the strong internationalcomponent to this industry, that whichbenefits the industry in any one ofthese three areas will likely work to the benefit of theothers. Since agingpopulations will only bring a rise in the demand for drug products, theU.S. pharmaceutical industry, along with the industries of Western Europeand Japan, canexpect growing markets for their products.


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PURPOSE AND SCOPE

In 1991, the U.S. International Trade Commission (the Commission)conducted a study on the pharmaceutical industry, Global Competitivenessof U.S. Advanced-Technology Manufacturing Industries: Pharmaceuticals,

as part of a series on global competitiveness of U.S. advanced-technologymanufacturing industries requested by the Senate Committee on Finance.In the Commissions 1991 study, the major factors of competitiveness werefound to be those that affect a companys ability to develop and deliver newpharmaceutical products or new chemical entities (NCEs), particularlythose NCEs successful on a global basis. While the ability to put innovativeproducts on the market is still considered the key to success in thepharmaceutical industry, pharmaceutical companies are currently affected

by several changes, such as lowertariff and nontariff barriers,improved protection of intellectualproperty rights, and globalconsolidation. The purpose of thisreport is to describe the principalfactors currently affecting thecompetitiveness of the U.S.pharmaceutical industry,particularly in relation to theindustries of Western Europe and

Japan.

The original study found that a pharmaceutical companys research anddevelopment (R&D) infrastructure is a major contributing factor to itscompetitiveness. R&D, which by its nature is capital intensive, is necessaryto create new, innovative treatments for the market. Sales revenuesgenerate company profits, allowing for more research, which in turn mightlead to another successful novel product. A cycle is initiated wherebyprofits from existing drug sales fund the development and marketing offuture drugs. The cycle may potentially be repeated for each new drugdeveloped and marketed.

The Commissions 1991 competitiveness study also indicated thatGovernment policies affect the competitiveness of pharmaceutical firms.Sweeping changes in barriers to trade worldwide, from tariffs to intellectualproperty rights and patent issues have occurred since 1991. There is


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greater participation of member countries of the World Trade Organization(WTO), formed in 1995, including those of the European Union (EU), inagreements relating to intellectual property and patents. In the Westernhemisphere, the North American Free Trade Agreement (NAFTA) hasresulted in low or no tariff barriers andgreater protection of patents andintellectual property rights amongCanada, Mexico, and the United States.In the United States, changes inGovernment policies have also led tofaster approval times for NCEs by theU.S. Food and Drug Administration(FDA). As noted in the Commissions1991 competitiveness study,

Government policies that lead to longerperiods of market exclusivity increase the amount of sales revenues;increased sales revenues lead to greater profits and potentially morefunding for R&D. Another Government policy examined in this report is theinitiative on pharmaceuticals established during the Uruguay Round (seechapter 4). The agreement was implemented on January 1, 1995, providingduty-free treatment for about 7,000 pharmaceutical products andpharmaceutical intermediates; another 496 products and intermediatesbecame duty-free on April 1, 1997, and negotiations are currently underwayto make further additions. The cumulative effect of this initiative has not yetbeen ascertained. The Commissions 1991 competitiveness study

examined conditions of competitiveness in worldmarkets. Now, as then, the pharmaceutical industrycontinues to be global in scope and any distinctdelineation between a domestic and foreign firm isfurther blurred by continued consolidation. In theCommissions 1991 competitiveness study, countryand regional data were aggregated based ongeographical location of facilities rather than the

location of corporate headquarters. The samepractice will be used in this report, unless otherwise specified. Overviews ofthe U.S., Western European, 6 and Japanese industries, similar thoughless extensive than in the Commissions 1991 report, are provided forassessment of relative competitiveness.


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HISTORY

The earliest drugstores date to the middle ages. The first known drugstore

was opened by Arabian pharmacists in Baghdad in 754, and many more

soon began operating throughout the medieval Islamic world and

eventually medieval Europe. By the 19th century, many of the drugstores inEurope and North America had eventually developed into larger

pharmaceutical companies.

Most of today's major pharmaceutical companies were founded in the late

19th and early 20th centuries. Key discoveries of the 1920s and 1930s,

such as insulin and penicillin, became mass-manufactured and distributed.

Switzerland, Germany and Italy had particularly strong industries, with the

UK, US, Belgium and the Netherlands following suit.

Legislation was enacted to test and approve drugs and to require

appropriate labeling. Prescription and non-prescription drugs became

legally distinguished from one another as the pharmaceutical industry

matured. The industry got underway in earnest from the 1950s, due to the

development of systematic scientific approaches, understanding of human

biology (including DNA) and sophisticated manufacturing techniques.

Numerous new drugs were developed during the 1950s and mass-

produced and marketed through the 1960s. These included the first oral

contraceptive, "The Pill", Cortisone, blood-pressure drugs and other heartmedications.

MAO Inhibitors, chlorpromazine (Thorazine), Haldol (Haloperidol) and the

tranquilizers ushered in the age of psychiatric medication.

Valium (diazepam), discovered in 1960, was marketed from 1963 and

rapidly became the most prescribed drug in history, prior to controversy

over dependency and habituation. Attempts were made to increase

regulation and to limit financial links between companies and prescribing

physicians, including by the relatively new U.S. Food and DrugAdministration (FDA). Such calls increased in the 1960s after

the thalidomide tragedy came to light, in which the use of a new anti-emetic

in pregnant women caused severe birth defects. In 1964, the World

Medical Association issued its Declaration of Helsinki, which set standards

for clinical research and demanded that subjects give their informed
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consent before enrolling in an experiment. Pharmaceutical companies

became required to prove efficacy in clinical trials before marketing drugs.

Cancer drugs were a feature of the 1970s. From 1978, India took over as

the primary center of pharmaceutical production without patent protection.

The industry remained relatively small scale until the 1970s when it began

to expand to a greater rate. Legislation allowing for strong patents, to cover

both the process of manufacture and the specific products, came in to force

in most countries. By the mid-1980s, small biotechnology firms were

struggling for survival, which led to the formation of mutually beneficial

partnerships with large pharmaceutical companies and a host of corporate

buyouts of the smaller firms. Pharmaceutical manufacturing became

concentrated, with a few large companies holding a dominant position

throughout the world and with a few companies producing medicines withineach country. The pharmaceutical industry entered the 1980s pressured by

economics and a host of new regulations, both safety and environmental,

but also transformed by new DNA chemistries and new technologies for

analysis and computation. Drugs for heart disease and for AIDS were a

feature of the 1980s, involving challenges to regulatory bodies and a faster

approval process. Managed care and Health maintenance

organizations (HMOs) spread during the 1980s as part of an effort to

contain rising medical costs, and the development of preventative and

maintenance medications became more important. A new business

atmosphere became institutionalized in the 1990s, characterized by

mergers and takeovers, and by a dramatic increase in the use of contract

research organizations for clinical development and even for basic R&D.

The pharmaceutical industry confronted a new business climate and new

regulations, born in part from dealing with world market forces and protests

by activists in developing countries. Animal Rights activism was also a

challenge. Marketing changed dramatically in the 1990s. The Internet made

possible the direct purchase of medicines by drug consumers and of rawmaterials by drug producers, transforming the nature of business. In the

US, Direct-to-consumer advertising proliferated on radio and TV because of

new FDA regulations in 1997 that liberalized requirements for the

presentation of risks. The new antidepressants, the SSRIs,

notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for
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additional disorders. Drug development progressed from a hit-and-miss

approach to rational drug discovery in both laboratory design and natural-

product surveys. Demand for nutritional supplements and so-called

alternative medicines created new opportunities and increased competition

in the industry. Controversies emerged around adverse effects, notablyregarding Vioxx in the US, and marketing tactics. Pharmaceutical

companies became increasingly accused ofdisease mongering or over-

medicalizing personal or social problems.

RESEARCH AND DEVELOPMENT

Drug discovery is the process by which potential drugs are discovered or

designed. In the past most drugs have been discovered either by isolatingthe active ingredient from traditional remedies or by

serendipitous discovery. Modern biotechnology often focuses on

understanding the metabolic pathways related to a disease state

orpathogen, and manipulating these pathways using molecular biology or

biochemistry. A great deal of early-

stage drug discovery has

traditionally been carried out by

universities and research

institutions. Public funding accountsfor 80% of the amount spent on

basic research for new drugs and

vaccines in the United States. Drug

development refers to activities

undertaken after a compound is

identified as a potential drug in order to establish its suitability as a

medication. Objectives of drug development are to determine

appropriate Formulation and Dosing, as well as to establish safety.Research in these areas generally includes a combination ofin

vitro studies, in vivo studies, and clinical trials. The amount of capital

required for late stage development has made it a historical strength of the

larger pharmaceutical companies.
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INDUSTRY ASSOCIATIONS

European Confederation of Pharmaceutical Entrepreneurs (EUCOPE)

Drug Information Association (DIA)

European Generic Medicines Association European Federation of Pharmaceutical Industries and

Associations (EFPIA)

European Pharmaceutical Market Research Association (EphMRA)

International Federation of Pharmaceutical Manufacturers and

Associations (IFPMA)

Japan Pharmaceutical Manufacturers Association (JPMA)

New York Health Products Council (NYHPC)

Pharmaceutical Research and Manufacturers of America (PhRMA) Irish Pharmaceutical Healthcare Association (IPHA)

REGULATORY AUTHORITIES

International Conference on Harmonisation of Technical Requirements forRegistration of Pharmaceuticals for Human Use (ICH)

European Medicines Agency (EMEA)

Therapeutic Goods Administration (Australia) (TGA) U.S. Food and Drug Administration (FDA)

Ministry of Health, Labour and Welfare (Japan)

Medicines and Healthcare products Regulatory Agency (MHRA)

Central Drugs Standards Control Organisation (India) (CDSCO)

Ukrainian Drug Registration Agency

Medicines Authority (Malta)
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THE COST OF INNOVATION

Drug companies are like other companies in that they manufacture

products that must be sold for a profit in order for the company to survive

and grow. They are different from some companies because thedrug business is very risky. For instance, only one out of every ten

thousand discovered compounds actually becomes an approved drug for

sale. Much expense is incurred in the early phases of development of

compounds that will not become approved drugs. In addition, it takes about

7 to 10 years and only 3 out of every 20 approved drugs bring in sufficient

revenue to cover their developmental costs, and only 1 out of every 3

approved drugs generates enough money to cover the development costs

of previous failures. This means that for a drug company to survive, it

needs to discover a blockbuster (billion-dollar drug) every few years.

Drug discovery and development is

very expensive; of all compounds

investigated for use in humans only a

small fraction are

eventually approved in most nations

by government appointed medical

institutions or boards, who have to

approve new drugs before they canbe marketed in those countries. In

2010 18 NMEs (New Molecular

Entities) were approved and three

biologics by the FDA, or 21 in total, which is down from 26 in 2009 and 24

in 2008. On the other hand, there were only 18 approvals in total in 2007

and 22 back in 2006. Since 2001, the Center for Drug Evaluation and

Research has averaged 22.9 approvals a year.

This approval comes only after heavy investment in pre-clinicaldevelopment and clinical trials, as well as a commitment to ongoing safety

monitoring. Drugs which fail part-way through this process often incur large

costs, while generating no revenue in return. If the cost of these failed

drugs is taken into account, the cost of developing a successful new drug

(New chemical entity or NCE), has been estimated at about 1.3 billion USD
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(not including marketing expenses). Professors Light and Lexchin reported

in 2012, however, that the rate of approval for new drugs has been a

relatively stable average rate of 15 to 25 for decades. Industry-wide

research and investment reached a

record $65.3 billion in 2009. While thecost of research in the U.S. was about

$34.2 billion between 1995 and 2010,

revenues rose faster (revenues rose by

$200.4 billion in that time). A study by

the consulting firm Bain &

Company reported that the cost for

discovering, developing and launching

(which factored in marketing and other business expenses) a new drug(along with the prospective drugs that fail) rose over a five-year period to

nearly $1.7 billion in 2003. These estimates also take into account

the opportunity cost of investing capital many years before revenues are

realized (see Time-value of money). Because of the very long time needed

for discovery, development, and

approval of pharmaceuticals, these

costs can accumulate to nearly half the

total expense. Some approved drugs,

such as those based on re-formulationof an existing active ingredient (also

referred to as Line-extensions) are

much less expensive to develop.

Calculations and claims in this area are

controversial because of the implications for regulation and subsidization of

the industry through tax credits and federally funded research grants.
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PRODUCT APPROVAL

In the United States, new pharmaceutical products must be approved by

the Food and Drug Administration (FDA) as being both safe and effective.

This process generally involves submission of an Investigational new

drug filing with sufficient pre-clinical data to support proceeding with human

trials. Following IND approval, three phases of progressively larger human

clinical trials may be conducted. Phase I generally studies toxicity using

healthy volunteers. Phase II can include Pharmacokinetics and Dosing in

patients, and Phase III is a very large study of efficacy in the intended

patient population. Following the successful completion of phase III testing,

a New Drug Application is submitted to the FDA. The FDA review the data

and if the product is seen as having a positive benefit-risk assessment,

approval to market the product in the US is granted.A fourth phase of post-approval surveillance is also often required due to

the fact that even the largest clinical trials cannot effectively predict the

prevalence of rare side-effects. Post-marketing surveillance ensures that

after marketing the safety of a drug is monitored closely. In certain

instances, its indication may need to be limited to particular patient groups,

and in others the substance is withdrawn from the market completely.

Questions continue to be raised regarding the standard of both the initial

approval process, and subsequent changes to product labeling (it may takemany months for a change identified in post-approval surveillance to be

reflected in product labeling) and this is an area where congress is active.

The FDA provides information about approved drugs at the Orange Book

site. In many non-US western countries a 'fourth hurdle' ofcost

effectiveness analysis has developed before new technologies can be

provided. This focuses on the efficiency (in terms of the cost perQALY) of

the technologies in question rather than their efficacy. In

England NICE approval requires technologies be made available by theNHS, whilst similar arrangements exist with the Scottish Medicines

Consortium in Scotland and the Pharmaceutical Benefits Advisory

Committee in Australia. A product must pass the threshold for cost-

effectiveness if it is to be approved. Treatments must represent 'value for

money' and a net benefit to society. There is much speculation that a NICE

style framework may be implemented in the USA in an attempt to decrease
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CONTROVERSIES

Due to repeated accusations and findings

that some clinical trials conducted or

funded by pharmaceutical companies may

report only positive results for the preferred

medication, the industry has been looked at

much more closely by independent groups

and government agencies. In response to

specific cases in which unfavorable data

from pharmaceutical company-sponsored

research was not published, the Pharmaceutical Research and

Manufacturers of America have published new guidelines urging

companies to report all findings and limit the financial involvement in drugcompanies of researchers. US congress signed into law a bill which

requires phase II and phase III clinical trials to be registered by the sponsor

on the clinical trials.gov website run by the NIH. Drug researchers not

directly employed by pharmaceutical companies often look to companies

for grants, and companies often look to

researchers for studies that will make their

products look favorable. Sponsored

researchers are rewarded by drugcompanies, for example with support for

their conference/symposium costs. Lecture

scripts and even journal articles presented

by academic researchers may actually be

'ghost-written' by pharmaceutical

companies. Some researchers who have tried to reveal ethical issues with

clinical trials or who tried to publish papers that show harmful effects of new

drugs or cheaper alternatives have been threatened by drug companieswith lawsuits. Since 2008, pharmaceutical companies have been

increasing the cost of name-brand prescriptions to offset declining

revenues as out-of-patent drugs become available as generics.Simultaneously, pharmaceutical manufacturers are taking increasing

advantage oftax havens to avoid taxation.
http://en.wikipedia.org/wiki/Pharmaceutical_Research_and_Manufacturers_of_Americahttp://en.wikipedia.org/wiki/Pharmaceutical_Research_and_Manufacturers_of_Americahttp://en.wikipedia.org/wiki/Tax_havenhttp://en.wikipedia.org/wiki/Tax_havenhttp://en.wikipedia.org/wiki/Pharmaceutical_Research_and_Manufacturers_of_Americahttp://en.wikipedia.org/wiki/Pharmaceutical_Research_and_Manufacturers_of_America


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LEGAL ISSUES

Where pharmaceutics have

been shown to cause side-

effects, civil action has occurred,

especially in countries

where tort payouts are likely to

be large. The top 20

pharmaceutical cases account

for over $16 billion in recoveries.

Due to high-profile cases

leading to large compensations,

most pharmaceutical companies

endorse tort reform. Recent controversies haveinvolved Vioxx and SSRI antidepressants.

PHARMACEUTICAL FRAUD

Pharmaceutical fraud involves activities that result in false claims to

insurers or programs such as Medicare in the United States or equivalent

state programs for financial gain to a pharmaceutical company. There are

several different schemes used to defraud the health care system which

are particular to the pharmaceutical industry. These include: GoodManufacturing Practice (GMP)

Violations, Off Label Marketing,

Best Price Fraud, CME Fraud,

Medicaid Price Reporting, and

Manufactured Compound Drugs.

The Federal Bureau of

Investigation (FBI) estimates

that health care fraud costsAmerican taxpayers $60 billion a

year. Of this amount $2.5 billion

was recovered through False Claims Actcases in FY 2010. Examples of

fraud cases include the GlaxoSmithKline $3 billion settlement, Pfizer$2.3

billion settlement and Merk $650 million settlement. Damages from fraud
http://en.wikipedia.org/wiki/Civil_actionhttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical_Settlementshttp://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical_Settlementshttp://en.wikipedia.org/wiki/Tort_reformhttp://en.wikipedia.org/wiki/Vioxxhttp://en.wikipedia.org/wiki/SSRIhttp://en.wikipedia.org/wiki/Pharmaceutical_fraudhttp://en.wikipedia.org/wiki/Medicare_(United_States)http://en.wikipedia.org/wiki/Health_care_systemhttp://en.wikipedia.org/wiki/Federal_Bureau_of_Investigationhttp://en.wikipedia.org/wiki/Federal_Bureau_of_Investigationhttp://en.wikipedia.org/wiki/Health_care_fraudhttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Merkhttp://en.wikipedia.org/wiki/Merkhttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/Health_care_fraudhttp://en.wikipedia.org/wiki/Federal_Bureau_of_Investigationhttp://en.wikipedia.org/wiki/Federal_Bureau_of_Investigationhttp://en.wikipedia.org/wiki/Health_care_systemhttp://en.wikipedia.org/wiki/Medicare_(United_States)http://en.wikipedia.org/wiki/Pharmaceutical_fraudhttp://en.wikipedia.org/wiki/SSRIhttp://en.wikipedia.org/wiki/Vioxxhttp://en.wikipedia.org/wiki/Tort_reformhttp://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical_Settlementshttp://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical_Settlementshttp://en.wikipedia.org/wiki/Torthttp://en.wikipedia.org/wiki/Civil_action


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can be recovered by use of the False Claims Act, most commonly under

thequi tamprovisions which rewards an individual for being a

"whistleblower", orrelator (law).

Antipsychotic drugs are now the top-selling class of pharmaceuticals in

America, generating annual revenue of about $14.6 billion. Every major

company selling the drugs Bristol-Myers Squibb, Eli Lilly,

Pfizer, AstraZeneca and Johnson & Johnson has either settled recent

government cases, under the False Claims Act, for hundreds of millions of

dollars or is currently under investigation for possible health care fraud.

Following charges of illegal marketing, two of the settlements set records

last year for the largest criminal fines ever imposed on corporations. One

involved Eli Lillys antipsychotic Zyprexa, and the other involved Bextra. In

the Bextra case, the government also charged Pfizer with illegallymarketing another antipsychotic, Geodon; Pfizer settled that part of the

claim for $301 million, without admitting any wrongdoing. On 2 July

2012, GlaxoSmithKline pleaded guilty to criminal charges and agreed to a

$3 billion settlement of the largest health-care fraud case in the U.S. and

the largest payment by a drug company. The settlement is related to the

company's illegal promotion of prescription drugs, its failure to report safety

data, bribing doctors, and promoting medicines for uses for which they

were not licensed.

The drugs involved were Paxil, Wellbutrin, Advair, Lamictal, and Zofran for

off-label, non-covered uses.Those and the drugs Imitrex, Lotronex, Flovent,

and Valtrex were involved in the kickback scheme.The following is a list of

the four largest settlements reached with pharmaceutical companies from

1991 to 2012, rank ordered by the size of the total settlement.

The following is a list of the four largest

settlements reached with pharmaceutical

companies from 1991 to 2012, rank orderedby the size of the total settlement. Legal

claims against the pharmaceutical industry

have varied widely over the past two

decades, including Medicare and Medicaid

fraud, off-label promotion, and inadequate

manufacturing practices.
http://en.wikipedia.org/wiki/False_Claims_Acthttp://en.wikipedia.org/wiki/Qui_tamhttp://en.wikipedia.org/wiki/Qui_tamhttp://en.wikipedia.org/wiki/Qui_tamhttp://en.wikipedia.org/wiki/Whistleblowerhttp://en.wikipedia.org/wiki/Relator_(law)http://en.wikipedia.org/wiki/Bristol-Myers_Squibbhttp://en.wikipedia.org/wiki/Eli_Lillyhttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/AstraZenecahttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/Zyprexahttp://en.wikipedia.org/wiki/Bextrahttp://en.wikipedia.org/wiki/Geodonhttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/Bribinghttp://en.wikipedia.org/wiki/Paxilhttp://en.wikipedia.org/wiki/Wellbutrinhttp://en.wikipedia.org/wiki/Advairhttp://en.wikipedia.org/wiki/Lamictalhttp://en.wikipedia.org/wiki/Zofranhttp://en.wikipedia.org/wiki/Imitrexhttp://en.wikipedia.org/wiki/Lotronexhttp://en.wikipedia.org/wiki/Floventhttp://en.wikipedia.org/wiki/Valtrexhttp://en.wikipedia.org/wiki/Kickbackhttp://en.wikipedia.org/wiki/Medicare_fraudhttp://en.wikipedia.org/wiki/Medicare_fraudhttp://en.wikipedia.org/wiki/Off-label_usehttp://en.wikipedia.org/wiki/Off-label_usehttp://en.wikipedia.org/wiki/Medicare_fraudhttp://en.wikipedia.org/wiki/Medicare_fraudhttp://en.wikipedia.org/wiki/Kickbackhttp://en.wikipedia.org/wiki/Valtrexhttp://en.wikipedia.org/wiki/Floventhttp://en.wikipedia.org/wiki/Lotronexhttp://en.wikipedia.org/wiki/Imitrexhttp://en.wikipedia.org/wiki/Zofranhttp://en.wikipedia.org/wiki/Lamictalhttp://en.wikipedia.org/wiki/Advairhttp://en.wikipedia.org/wiki/Wellbutrinhttp://en.wikipedia.org/wiki/Paxilhttp://en.wikipedia.org/wiki/Bribinghttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/Geodonhttp://en.wikipedia.org/wiki/Bextrahttp://en.wikipedia.org/wiki/Zyprexahttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/AstraZenecahttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Eli_Lillyhttp://en.wikipedia.org/wiki/Bristol-Myers_Squibbhttp://en.wikipedia.org/wiki/Relator_(law)http://en.wikipedia.org/wiki/Whistleblowerhttp://en.wikipedia.org/wiki/Qui_tamhttp://en.wikipedia.org/wiki/False_Claims_Act


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IMPORTANCE OF PHAMACEUTICALSPharmaceuticals are important in all aspects of health care and have beenshown to be the most cost-effective means of treating some diseases whencompared with surgical procedures. In the United States, emergence ofhealth maintenance organizations (HMOs), coupled with rising privatemedical care costs and Government management of Medicare andMedicaid health programs, hascontributed to a trend toward findingthe most cost-effective way of treatingillnesses. As a result of these trends,consumption of both ethical8 and over-the- counter (OTC) pharmaceuticalsincreased during 1993-97. Increases inWestern European and Japanese

consumption of pharmaceuticals alsooccurred during the period covered.

CompanySettlem

entViolation(s) Year Product(s)

Laws

allegedly

violated (if

applicable)

GlaxoSmithKline$3

billion

Off-label

promotion/failure

to disclose

safety data

2012Avandia/Wellbu

trin/Paxil

False Claims

Act/FDCA

Pfizer$2.3

billion

Off-label

promotion/kickba

cks

2009Bextra/Geodon/

Zyvox/Lyrica

False Claims

Act/FDCA

Abbott

Laboratories

$1.5

billion

Off-label

promotion2012 Depakote

False Claims

Act/FDCA

Eli Lilly$1.4

billion

Off-label

promotion2009 Zyprexa

False Claims

Act/FDCA


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INDUSTRY REVENUES

For the first time ever, in 2006, globalspending on prescription drugs topped $643billion, even as growth slowed somewhat in

Europe and North America. The UnitedStates accounts for almost half of the globalpharmaceutical market, with $289 billion inannual sales followed by the EU andJapan. Emerging markets such as China,Russia, South Korea and Mexico outpacedthat market, growing a huge 81 percent.

US profit growth was maintained even whilstother top industries saw little or no growth. Despite this, "the

pharmaceutical industry is and has been for years the most profitableof all businesses in the U.S. In the annual Fortune 500 survey, thepharmaceutical industry topped the list of the most profitable industries,with a return of 17% on revenue." Pfizer's cholesterol pill Lipitorremains abest-selling drug worldwide. Its annual sales were $12.9 billion, more thantwice as much as its closest competitors: Plavix, the blood thinner fromBristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill from

AstraZeneca; and Advair, the asthma inhaler from GlaxoSmithKline. IMSHealth publishes an analysis of trends expected in the pharmaceuticalindustry in 2007, including increasing profits in most sectors despite loss ofsome patents, and new 'blockbuster' drugs on the horizon.

Teradata Magazine predicted that by 2007, $40 billion in U.S. sales couldbe lost at the top 10 pharmaceutical companies as a result of slowdown inR&D innovation and the expiry of patents on major products, with 19blockbuster drugs losing patent.

MARKET LEADERS IN TERMS OF HEALTHCARE REVENUE

The following is a list of the 20largest pharmaceutical and biotech companies ranked by healthcarerevenue. Some companies (e.g., Bayer, Johnson and Johnson and Procter& Gamble) have additional revenue not included here. The phrase BigPharma is often used to refer to companies with revenue in excess of $3billion, and/orR&D expenditure in excess of $500 million.
http://en.wikipedia.org/wiki/Atorvastatinhttp://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_saleshttp://en.wikipedia.org/wiki/Clopidogrelhttp://en.wikipedia.org/wiki/Esomeprazolehttp://en.wikipedia.org/wiki/Fluticasone/salmeterolhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/Pharmaceuticalhttp://en.wikipedia.org/wiki/Biotechhttp://en.wikipedia.org/wiki/Bayerhttp://en.wikipedia.org/wiki/Johnson_and_Johnsonhttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/R%26Dhttp://en.wikipedia.org/wiki/R%26Dhttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Johnson_and_Johnsonhttp://en.wikipedia.org/wiki/Bayerhttp://en.wikipedia.org/wiki/Biotechhttp://en.wikipedia.org/wiki/Pharmaceuticalhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/IMS_Healthhttp://en.wikipedia.org/wiki/Fluticasone/salmeterolhttp://en.wikipedia.org/wiki/Esomeprazolehttp://en.wikipedia.org/wiki/Clopidogrelhttp://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_saleshttp://en.wikipedia.org/wiki/Atorvastatin


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RevenueRank2008

Company Country TotalRevenues

HealthcareR&D 2006

Net income/(loss) 2006

Employees2006

(USD (USD (USD

millions) millions) millions)

1 Pfizer USA 33,547 7,599 19,337 122,200

2 Novartis Switzerland 26,475 7,125 11,053 138,000

3 Merck & Co. USA 22,476 4,783 4,434 74,372

4 Bayer Germany 17,914 1,791 6,450 106,200

5 GlaxoSmithKline UnitedKingdom

15,691 6,373 10,135 106,000

6 Johnson andJohnson

USA 14,268 5,349 7,202 102,695

7 Sanofi France 13,284 5,565 5,033 100,735

8 HoffmannLaRoche

Switzerland 33,547 5,258 19,337 122,200

9 AstraZeneca UnitedKingdom

26,475 3,902 11,053 138,000

10 AbbottLaboratories

USA 22,476 2,255 1,717 66,800

11 Bristol-MyersSquibb

USA 17,914 3,067 1,585 60,000

12 Eli Lilly andCompany

USA 15,691 3,129 2,663 50,060

13 Amgen USA 14,268 3,366 2,950 48,00014 Boehringer

IngelheimGermany 13,284 1,977 2,163 43,000

15 Schering-Plough USA 10,594 2,188 1,057 41,500

16 BaxterInternational

USA 10,378 614 1,397 38,428

17 TakedaPharmaceuticalCo.

Japan 10,284 1,620 2,870 15,000

18 Genentech USA 9,284 1,773 2,113 33,500

19 Procter & Gamble USA 8,964 n/a 10,340 29,258

SUM 497,519 70,843 110,077 1,342,700

AVERAGE 22,476 2,255 1,717 66,800


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MARKET LEADERS IN TERMS OF SALES

The top 15 pharmaceutical companies by 2008 sales are:

Rank Company Sales($M)

Based/Headquartered in

1 Pfizer 43,363 United States

2 GlaxoSmithKline 36,506 United Kingdom

3 Novartis 36,506 Switzerland

4 Sanofi-Aventis 35,642 France

5 AstraZeneca 32,516 United Kingdom

6 HoffmannLa Roche 30,336 Switzerland

7 Johnson & Johnson 29,425 United States

8 Merck & Co. 26,191 United States

9 Abbott 19,466 United States

10 Eli Lilly and Company 19,140 United States

11 Amgen 15,794 United States

12 Wyeth 15,682 United States

13 Bayer 15,660 Germany

14 Teva 15,274 Israel

15 Takeda 13,819 Japan

MERGERS, ACQUISITIONS, AND CO-MARKETING OF DRUGS

A merger, acquisition, orco-marketing deal between pharmaceutical

companies may occur as a result of complementary capabilities between

them. A small biotechnology company might have a new drug but no sales

or marketing capability. Conversely, a large pharmaceutical company might

have unused capacity in a large sales force due to a gap in the company

pipeline of new products. It may be in both companies' interest to enter into

a deal to capitalize on the synergy between the companies.
http://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_saleshttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Novartishttp://en.wikipedia.org/wiki/Novartishttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Sanofi-Aventishttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/AstraZenecahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Hoffmann%E2%80%93La_Rochehttp://en.wikipedia.org/wiki/Hoffmann%E2%80%93La_Rochehttp://en.wikipedia.org/wiki/Hoffmann%E2%80%93La_Rochehttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Merck_%26_Co.http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Abbott_Laboratorieshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Eli_Lilly_and_Companyhttp://en.wikipedia.org/wiki/Eli_Lilly_and_Companyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Amgenhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wyethhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Bayerhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Teva_Pharmaceutical_Industrieshttp://en.wikipedia.org/wiki/Israelhttp://en.wikipedia.org/wiki/Takeda_Pharmaceutical_Companyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Co-marketinghttp://en.wikipedia.org/wiki/Biotechnologyhttp://en.wikipedia.org/wiki/Biotechnologyhttp://en.wikipedia.org/wiki/Co-marketinghttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Takeda_Pharmaceutical_Companyhttp://en.wikipedia.org/wiki/Israelhttp://en.wikipedia.org/wiki/Teva_Pharmaceutical_Industrieshttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Bayerhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Wyethhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Amgenhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Eli_Lilly_and_Companyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Abbott_Laboratorieshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Merck_%26_Co.http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Johnson_%26_Johnsonhttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Hoffmann%E2%80%93La_Rochehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/AstraZenecahttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Sanofi-Aventishttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Novartishttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/GlaxoSmithKlinehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Pfizerhttp://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_sales


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PRESCRIPTIONS

In the U.S., prescriptions have increased over the

past decade to 3.4 billion annually, a 61 percent

increase. Retail sales of prescription drugsjumped

250 percent from $72 billion to $250 billion, whilethe average price of prescriptions has more than

doubled from $30 to $68.

PATENTS AND GENERICS

Patents have been criticized in the developing world, as they are thought toreduce access to existing medicines.[74]However, without the financialincentive of patents, future innovation of medicines is discouraged.

Reconciling patents and universal access to medicine would require anefficient international policy ofprice discrimination. Moreover, underthe TRIPS agreement of the World Trade Organization, countries mustallow pharmaceutical products to be patented. In 2001, the WTO adoptedthe Doha Declaration, which indicates that the TRIPS agreement should beread with the goals of public health in mind, and allows some methods forcircumventing pharmaceutical monopolies: via compulsorylicensing orparallel imports, even before patent expiration. In March 2001,40 multi-national pharmaceutical companies brought litigationagainst South Africa for its Medicines Act, which allowed the genericproduction of antiretroviral drugs (ARVs) for treating HIV, despite the factthat these drugs were on-patent. HIV was and is an epidemic in South

Africa, and ARVs at the time cost between 10,000 and 15,000 USD perpatient per year. This was unaffordable for most South African citizens, andso the South African government committed to providing ARVs at pricescloser to what people could afford. To do so, they would need to ignore thepatents on drugs and produce generics within the country (using acompulsory license), or import them from abroad. The Indianpharmaceutical company Cipla audaciously offered to make the drugs at

350 USD per patient per year, roughly 1/40th of the lowest price availablefrom a patent holder, which stunned the world community. After massiveinternational protest in favor of public health rights (including the collectionof 250,000 signatures by MSF), the governments of several developedcountries (including The Netherlands, Germany, France, and later the US)backed the South African government, and the case was dropped in Aprilof that year.
http://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_saleshttp://en.wikipedia.org/wiki/Pharmaceutical_industry#cite_note-74http://en.wikipedia.org/wiki/Pharmaceutical_industry#cite_note-74http://en.wikipedia.org/wiki/Pharmaceutical_industry#cite_note-74http://en.wikipedia.org/wiki/Price_discrimination#International_price_discriminationhttp://en.wikipedia.org/wiki/TRIPShttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/Doha_Declarationhttp://en.wikipedia.org/wiki/Compulsory_licensinghttp://en.wikipedia.org/wiki/Compulsory_licensinghttp://en.wikipedia.org/wiki/Parallel_importshttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Medicines_Acthttp://en.wikipedia.org/wiki/Ciplahttp://en.wikipedia.org/wiki/MSFhttp://en.wikipedia.org/wiki/MSFhttp://en.wikipedia.org/wiki/Ciplahttp://en.wikipedia.org/wiki/Medicines_Acthttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Parallel_importshttp://en.wikipedia.org/wiki/Compulsory_licensinghttp://en.wikipedia.org/wiki/Compulsory_licensinghttp://en.wikipedia.org/wiki/Doha_Declarationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/TRIPShttp://en.wikipedia.org/wiki/Price_discrimination#International_price_discriminationhttp://en.wikipedia.org/wiki/Pharmaceutical_industry#cite_note-74http://en.wikipedia.org/wiki/Annual_pharmaceutical_drug_sales


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PUBLICATIONS

The drug company Merck & Co. publishes the Merck Manual of Diagnosisand Therapy, the world's best-selling medical textbook, and the MerckIndex, a collection of information about chemical compounds.

MARKETING

Pharmaceutical companies commonly spend a large amount onadvertising, marketing and lobbying. In the US, drug companies spend $19billion a year on promotions. Advertising is common in healthcare journalsas well as through more mainstream media routes. In some countries,notably the US, they are allowed to advertise directly to the general public.Pharmaceutical companies generally employ sales people (often called

'drug reps' or, an older term, 'detail men') to market directly and personallyto physicians and other healthcare providers. In some countries, notablythe US, pharmaceutical companies also employ lobbyists to influencepoliticians. Marketing of prescription drugs in the US is regulated by thefederal Prescription Drug Marketing Act of 1987.

TO HEALTHCARE PROFESSIONALS

Currently, there are approximately 81,000 pharmaceutical sales

representatives in the United States pursuing some 830,000pharmaceutical prescribers. A pharmaceutical representative will often tryto see a given physician every few weeks. Representatives often have acall list of about 200-300 physicians with 120-180 targets that should bevisited in 1-2 or 3 week cycle. The number of pharmaceutical sales repshas been shrinking between 2008 and 2010, an estimated 30% industrywide reduction has occurred and current estimates are there May only be60,000 pharmaceutical sales reps in the United States.

TO INSURANCE AND PUBLIC HEALTH BODIESPrivate insurance or public health bodies (e.g. the NHS in the UK) decidewhich drugs to pay for, and restrict the drugs that can be prescribedthrough the use of formularies. Public and private insurers restrict thebrands, types and number of drugs that they will cover. Not only can theinsurer affect drug sales by including or excluding a particular drug from a
http://en.wikipedia.org/wiki/Merck_%26_Co.http://en.wikipedia.org/wiki/Merck_Manual_of_Diagnosis_and_Therapyhttp://en.wikipedia.org/wiki/Merck_Manual_of_Diagnosis_and_Therapyhttp://en.wikipedia.org/wiki/Merck_Indexhttp://en.wikipedia.org/wiki/Merck_Indexhttp://en.wikipedia.org/wiki/Lobbyistshttp://en.wikipedia.org/wiki/Prescription_Drug_Marketing_Act_(PDMA)http://en.wikipedia.org/wiki/Pharmaceutical_sales_representativehttp://en.wikipedia.org/wiki/Pharmaceutical_sales_representativehttp://en.wikipedia.org/wiki/Pharmaceutical_sales_representativehttp://en.wikipedia.org/wiki/Pharmaceutical_sales_representativehttp://en.wikipedia.org/wiki/Prescription_Drug_Marketing_Act_(PDMA)http://en.wikipedia.org/wiki/Lobbyistshttp://en.wikipedia.org/wiki/Merck_Indexhttp://en.wikipedia.org/wiki/Merck_Indexhttp://en.wikipedia.org/wiki/Merck_Manual_of_Diagnosis_and_Therapyhttp://en.wikipedia.org/wiki/Merck_Manual_of_Diagnosis_and_Therapyhttp://en.wikipedia.org/wiki/Merck_%26_Co.


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formulary, they can affect sales by tiering or placing bureaucratic hurdles toprescribing certain drugs as well. In January 2006, the U.S. instituted a newpublic prescription drug plan through its Medicare program knownas Medicare Part D. This program engages private insurers to negotiatewith pharmaceutical companies for the placement of drugs on tieredformularies.

TO RETAIL PHARMACIES AND STORES

Commercial stores and pharmacies are a major target of non-prescriptionsales and marketing for pharmaceutical companies.

DIRECT TO CONSUMER ADVERTISING

Since the 1980s new methods of marketing for prescription drugs toconsumers have become important. Direct-to-consumer media advertisingwas legalized in the FDA Guidance for Industry on Consumer-DirectedBroadcast Advertisements. Internationally, many pharmaceuticalcompanies market directly to the consumer rather than going through aconventional retail sales channel.

CONTROVERSY ABOUT DRUG MARKETING AND LOBBYING

There has been increasing controversy surrounding pharmaceuticalmarketing and influence. There have been accusations and findings ofinfluence on doctors and other health professionals through drug reps,including the constant provision of marketing 'gifts' and biased informationto health professionals; highly prevalent advertising in journals andconferences; funding independent healthcare organizations and healthpromotion campaigns; lobbying physicians and politicians (more than anyother industry in the US); sponsorship ofmedical schools or nurse training;sponsorship of continuing educational events, with influence on thecurriculum; and hiring physicians as paid consultants on medical advisoryboards.

To help ensure the status quo on U.S. drug regulation and pricing, thepharmaceutical industry has thousands of lobbyists in Washington, DC thatlobby Congress and protect their interests. The pharmaceutical industryspent $855 million, more than any other industry, on lobbying activities from1998 to 2006, according to the non-partisan Center for Public Integrity.
http://en.wikipedia.org/wiki/Medicare_Part_Dhttp://en.wikipedia.org/wiki/Medical_schoolhttp://en.wikipedia.org/wiki/Medical_schoolhttp://en.wikipedia.org/wiki/Medicare_Part_D


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Some advocacy groups, such as No Free Lunch, have criticized the effectof drug marketing to physicians because they say it biases physicians toprescribe the marketed drugs even when others might be cheaper or betterfor the patient. There have been related accusations ofdiseasemongering (over-medicalising) to expand the market for medications. Aninaugural conference on that subject took place in Australia in 2006. In2009, the Government-funded National Prescribing Service launchedthe "Finding Evidence - Recognising Hype" program, aimed at educatingGPs on methods for independent drug analysis.It has been argued that thedesign of the Diagnostic and Statistical Manual of Mental Disorders and theexpansion of the criteria represent an increasing medicalization of humannature, or "disease mongering", driven by drug company influence onpsychiatry. The potential for direct conflict of interest has been raised,partly because roughly half the authors who selected and defined the DSM-

IV psychiatric disorders had or previously had financial relationships withthe pharmaceutical industry. The president of the organization that designsand publishes the DSM, the American Psychiatric Association, recentlyacknowledged that in general American psychiatry has "allowed thebiopsychosocial model to become the bio-bio-bio model"

DEVELOPING WORLD

The role of pharmaceutical companies in

the developing world is a matter of somedebate, ranging from those highlighting theaid provided to the developing world, tothose critical of the use of the poorest inhuman clinical trials, often withoutadequate protections, particularlyin states lacking a strong rule of law. Othercriticisms include an alleged reluctance ofthe industry to invest in treatments ofdiseases in less economically advancedcountries, such as malaria; Criticism forthe price ofpatented AIDS medication,which could limit therapeutic options for patients in the Third World, wheremost of the AIDS infected people are living. However, a better policyofprice discrimination would benefit to both patients and companies.
http://en.wikipedia.org/wiki/No_Free_Lunch_(organization)http://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/National_Prescribing_Servicehttp://www.nps.org.au/health_professionals/ferhhttp://en.wikipedia.org/wiki/Diagnostic_and_Statistical_Manual_of_Mental_Disordershttp://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/Conflict_of_interesthttp://en.wikipedia.org/wiki/American_Psychiatric_Associationhttp://en.wikipedia.org/wiki/State_(polity)http://en.wikipedia.org/wiki/Rule_of_lawhttp://en.wikipedia.org/wiki/Malariahttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/AIDShttp://en.wikipedia.org/wiki/Third_Worldhttp://en.wikipedia.org/wiki/Price_discriminationhttp://en.wikipedia.org/wiki/Price_discriminationhttp://en.wikipedia.org/wiki/Third_Worldhttp://en.wikipedia.org/wiki/AIDShttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/Malariahttp://en.wikipedia.org/wiki/Rule_of_lawhttp://en.wikipedia.org/wiki/State_(polity)http://en.wikipedia.org/wiki/American_Psychiatric_Associationhttp://en.wikipedia.org/wiki/Conflict_of_interesthttp://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/Diagnostic_and_Statistical_Manual_of_Mental_Disordershttp://www.nps.org.au/health_professionals/ferhhttp://en.wikipedia.org/wiki/National_Prescribing_Servicehttp://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/Disease_mongeringhttp://en.wikipedia.org/wiki/No_Free_Lunch_(organization)


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SWOT ANALYSIS:

Strengths:

1. Cost Competitiveness

2. Developed Industries with Strong Manufacturing Base3. Well Established R&D infrastructure

4. Access to pool of highly trained scientists,

Weaknesses:

1. Low investments in innovative R&D.

2. Lack of resources to compete with MNCs for New Drug Discovery &Research

3. Lack of strong linkages between industry andacademia.

4. Low medical and healthcare expenditure inthe country

Opportunities:

1. Significant export potential.

2. Marketing alliances for MNC products indomestic market and international market.

3. Contract manufacturing arrangements withMNCs

4. Potential for developing India as a centre for international clinical trials.

Threats:

1. Product patent regime poses serious challenge to domestic industryunless it invests in research and development

2. R&D efforts of Indian pharmaceutical companies hampered by lack of

enabling regulatory requirement.

3. Drug Price Control Order puts unrealistic ceilings on product prices andprofitability

4. Export effort hampered by procedural hurdles in India as well as non-tariff barriers imposed abroad.


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Power of Suppliers

Volume benefits occur

Inputs standard, available locally

Numerous suppliers-switching cost low

Suppliers can go for forward integration

Raw material cost constitute more than50% of

the total expenses

Barriers to Entry

Very low barriers to entryGovernment policies supportive

For entry price regulation exists

Economies of scale exist

Proprietory technology and

Product will exist after 2005

Industry Competition

Highly competitive.Top five players have

mere

18% market share

Lower fixed cost andhigh working capital

Threats of Substitutes

No substitutes for themedicines

Biotechnology is a threat

synthetic pharma product

Power of Buyers

End consumers do not have bargaining power

Brand identity exists but is in the hands

Of Influencer (Doctors)

Price Sensitivity is less

Highly fragmented market, so buyer

Concentration v/s industry is low


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OVERVIEW OF PHARMACUETICAL INDUSTRY IN INDIA

The Indian pharmaceutical industry currently tops the chart amongst India's

science-based industries with wide ranging capabilities in the complex field

of drug manufacture and technology. A highly organized sector, the Indianpharmaceutical industry is estimated to be worth $ 4.5 billion, growing at

about 8 to 9 percent annually. It ranks very

high amongst all the third world countries, in

terms of technology, quality and the vast

range of medicines that are manufactured.

It ranges from simple headache pills

to sophisticated antibiotics and complex

cardiac compounds; almost every type of

medicine is now made in the Indian

pharmaceutical industry. The Indian

pharmaceutical sector is highly

fragmented with more than 20,000

registered units. It has expanded

drastically in the last two decades. The

Pharmaceutical and Chemical industry in

India is an extremely fragmented market with severe price competition and

government price control. The Pharmaceutical industry in India meetsaround 70% of the country's demand for bulk drugs, drug intermediates,

pharmaceutical formulations, chemicals, tablets, capsules, orals and

injectibles. There are approximately 250 large units and about 8000 Small

Scale Units, which form the core of the pharmaceutical industry in India

(including 5 Central Public Sector Units).The Government has also played

a vital role in the development of the India Software Industry. In 1986, the

Indian government announced a new software policy which was designed

to serve as a catalyst for the software industry. This was followed in 1988with the World Market Policy and the establishment of the Software

Technology Parks of India (STP) scheme. In addition, to attract foreign

direct investment, the Indian Government permitted foreign equity of up to

100 percent and duty free import on all inputs and products.


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CURRENT SCENARIO

India's pharmaceutical industry is now the third largest in the world in terms

of volume and stands 14th in terms of value. According to data published

by the Department of Pharmaceuticals, Ministry of Chemicals andFertilizers, the total turnover of India's pharmaceuticals industry between

September 2008 and September 2009 was US$ 21.04 billion. Of this the

domestic market was worth US$ 12.26 billion. The Indian pharmaceuticals

market is expected to reach US$ 55 billion in 2020 from US$ 12.6 billion in

2009. The market has the further potential to reach US$ 70 billion by 2020

in an aggressive growth scenario. Moreover, the increasing population of

the higher-income group in the country, will open a potential US$ 8 billion

market for multinational companies selling costly drugs by 2015. Besides,

the domestic pharma market is estimated to touch US$ 20 billion by 2015,

making India a lucrative destination for clinical trials for global giants.

Further estimates the healthcare market in India to reach US$ 31.59 billion

by 2020.

Diagnostics Outsourcing/Clinical Trials

The Indian diagnostic services are projected to grow at a CAGR of more

than 20 per cent during 2010-2012. Some of the major Indian

pharmaceutical firms, including Sun Pharma, Cadilla Healthcare andPiramal Life Sciences, had applied for conducting clinical trials on at least

12 new drugs in 2010, indicating a growing interest in new drug discovery

research.

Generics

India tops the world in exporting generic medicines worth US$ 11 billion

and currently, the Indian pharmaceutical industry is one of the worlds

largest and most developed. Moreover, the Indian generic drug market togrow at a CAGR of around 17 per cent between 2010-11 and 2012-13.

Union Minister of Commerce and Industry and Minister for Trade and

Industry, Singapore, have signed a 'Special Scheme for Registration of

Generic Medicinal Products from India' in May 2010, which seeks to fast-

track the registration process for Indian generic medicines in Singapore.


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ADVANTAGE INDIA

The Indian Pharmaceutical Industry, particularly, has been the front runner

in a wide range of specialties involving complex drugs' manufacture,

development and technology. With the advantage of being a highlyorganized sector, the pharmaceutical companies in India are growing at the

rate of $ 4.5 billion, registering further growth of 8 - 9 % annually. More

than 20,000 registered units are fragmented across the country and reports

say that leading Indian pharmaceutical companies control 70% of the

market share with stark price competition and government price

regulations.

Competent workforce: India has a pool of personnel with high managerial

and technical competence as also skilled workforce. It has an educatedwork force and English is commonly used. Professional services are easily

available.

Cost-effective chemical synthesis: Its track record of development,

particularly in the area of improved cost-beneficial chemical synthesis for

various drug molecules is excellent. It provides a wide variety of bulk drugs

and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracy andhence has a solid legal framework and strong financial markets. There is

already an established international industry and business community.

Information & Technology: It has a good network of world-class

educational institutions and established strengths in Information

Technology.

Globalization: The country is committed to a free market economy and

globalization. Above all, it has a 70 million middle class market, which is

continuously growing.

Consolidation: For the first time in many years, the international

pharmaceutical industry is finding great opportunities in India. The process

of consolidation, which has become a generalized phenomenon in the

world pharmaceutical industry, has started taking place in India.


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RANBAXY

Ranbaxy is among the predominant pharmaceutical companies in India and

was founded in 1961. Ranbaxy is a research based pharma giant and

became a public limited company in 1973. Ranbaxy was recently ranked

among the top 10 international pharmaceutical companies in the world

have presence across 49 countries. Ranbaxy is also reputed for its 11

state-of-the-art manufacturing facilities in countries like China, India, Brazil,

South Africa, and Nigeria. The company has also won several awards and

recognitions for its pioneering initiatives in the developing markets of the

world. Ranbaxy is also a member of the Indian Pharmaceutical Alliance

and Organization of Pharmaceutical Producers of India. In the present

scenario Ranbaxy commands more than 5% share of the Indian

pharmaceutical market. Ranbaxys product portfolio is diverse and includes

drugs that cater to nutrition, infectious diseases, gastro-enteritis, pain

management, cardiovascular ailments, dermatology, and central nervous

system related ailments. Ranbaxys operations in India are designed under

as many as 9 SBUs which take care of the various categories of medicinesand drugs that are manufactured by Ranbaxy. The company is especially

well-known for having the highest research and development (R&D) budget

among pharma companies in the world which is as high as US$ 100

million. Ranbaxy India operations are handled by 2,500 employees and the

companys market share in India is worth around US$6 billion.

Company name Sales inUS$ million

Cipla 1,033.46

Ranbaxy Lab 951.03

Dr Reddy's Labs 866.44

Sun Pharma 805.51

LupinLtd 603.99

Aurobindo Pharma 582.27

Piramal Health 483.1

Cadila Health 354.02

Matrix Labs 310.06

Wockhardt 309.68


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DR. REDDY'S LABORATORIES

Dr. Reddy's Laboratorie is one of the popular

pharmaceutical companies with base in more

than 100 countries. The medicines of Dr. Reddy'sLaboratories Limited are easily available all

across the globe. Dr. Reddy's Pharmaceutical

Company is very much customer friendly. It takes

care of the fact that maximum people get benefited by the products of this

pharmaceutical company. It commercialized various treatments so as to

provide high tech treatment to the masses. It tries to meet the medical

needs of the people. Though Dr. Reddy's Laboratories is located in various

parts of the world, it has its headquarters in India. The subsidiaries of this

company are found at various countries like US, Germany, UK, Russia and

Brazil. 16 countries have the representative offices of Dr. Reddy's

Laboratories Limited. 21 countries have third party distribution.

CIPLA

Cipla was founded by Khwaja Abdul Hamied in 1935

and was known as The Chemical, Industrial and

Pharmaceutical Laboratories, though it is better known

by the acronym Cipla today. Cipla was registered in August, 1935 as apublic limited enterprise and it began with an authorized capital of Rs. 6

lakh. Though set up in 1935, it was only in 1937 that Cipla began

manufacturing and marketing its pharmaceutical products. Today, the

company has its facilities spread across several locations across India such

as Mumbai, Goa, Patalganga, Kurkumbh, Bangalore, and Vikhroli. Apart

from its strong presence in the Indian market, Cipla also has an extensive

export market and regularly exports to more than 150 countries in regions

such as North America, South American, Asia, Europe, Middle East,Australia, and Africa. For the year ended 31st March, 2007 Ciplas exports

were worth approximately Rs. 17,500 million. Cipla is also considerably

well-known for its technological innovation and processes for which the

company received know-how loyalties to the tune of Rs. 750 million during

2006-07.


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SUN PHARMACEUTICALS: Sun Pharmaceuticals

was set up in 1983 and the company started off with

only 5 products to cure psychiatric illness. Sun

Pharma is known worldwide as the manufacture of

specialty Active Pharmaceuticals Ingredients andformulations. However, the company is also

concerned with chronic treatments such as cardiology, psychiatry,

neurology, gastroenterology, diabetology, and respiratory ailments. Active

Pharmaceuticals Ingredients (API) include peptides, steroids, hormones,

and anti-cancer drugs and their quality is internationally approved. The

international offices of Sun Pharmaceuticals Industries Ltd. are located in

British Virgin Islands, Russia, and Bangladesh.

There are 3 major group companies of Sun Pharmaceuticals Industries are:

Caraco Pharmaceuticals Laboratories (based in Detroit, Michigan) Sun Pharmaceuticals Industries Inc. (Michigan) Sun Pharmaceuticals (Bangladesh)

Aurobindo Pharma

Aurobindo Pharma, an India-based private

pharmaceutical company having presence

around the world. Aurobindo Pharma was set

up in the year 1986 and started its operations

in 1988-89 in Pondicherry, India. Now, the

company is headquartered at Hyderabad, India. Further, and the

pharmaceutical major markets over 180 APIs and 250 formulations

throughout these destinations. This Indian pharmaceutical major has filed

over 110 DMFs and 90 ANDAs for the USA market. So far, Aurobindo has

received 45 ANDA approvals (both final and tentative) from USA alone.Aurobindo Pharma products cover segments like

Antibiotics, Anti-Retro Virals, Gastroenterologicals, Anti-Allergics, CVS,

CNS


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CHALLENGES

Over the past decade, pharmaceutical companies have

entered a difficult period where shareholders, the market

and regulators have created significant pressures forchange within the industry. The core issues for most of

drug companies are declining productivity of in-house R &

D, patent expiration of number of block buster drugs,

increasing legal and regulatory concern, and pricing issue. Current global

financial conditions and the threat of a broad recession accelerated the

timetable for implementing transformational changes in global

organizations, as the industry confronts lower corporate stock prices and

an increasingly cost-averse customer. Leaders of the largest global

pharmaceutical companies recognize the need for transformational change

in their organizations, but will need to move swiftly to ensure sustained

growth. Transformations in the business model of larger pharmaceutical

industry spell more opportunities for Indian pharmaceutical companies.

Pharmaceutical production costs are almost 50 percent lower in India than

in western nations, while overall R&D costs are about one-eighth and

clinical trial expenses around one-tenth of western levels. Riding on better

sales in the domestic and export markets, Indian pharmaceutical industry is

expected to continue with its good performance. There are opportunities inexpanding the range of generic products as more molecule come off

patent, outsourcing, and above all, in focusing into drug discovery as more

profits come from traditional plays. At the same time, the Indian Pharmacy

Industry would have to contend with several challenges particularly the

Effects of new product patent

Drug price control

Regulatory reforms

Infrastructure development

Quality management and

Conformance to global standards.


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GROWTH

The Indian pharmaceutical market reached US$ 10.04 billion in size, with a

value-wise growth rate of 20.4 per cent over the previous years

corresponding period on a Moving Annual Total (MAT) basis for the 12months ended July 2010. Cipla maintained its leadership position in the

domestic market with 5.27 per cent share, followed by Ranbaxy. The

highest growth in the domestic market was for Mankind Pharma, which

grew 37.2 per cent. Leading companies in the domestic market such as

Sun Pharma (25.7 per cent), Abbott (25 per cent), Zydus Cadila (24.1 per

cent), Alkem Laboratories (23.3 per cent), Pfizer (23.6 per cent), GSK India

(19 per cent), Piramal Healthcare (18.6 per cent) and Lupin (18.8 per cent)

had impressive growth during July 2010, shows the data.

The pharmaceuticals industry in India will grow by over 100 per cent over

the next two years. The pharmaceutical industry is currently growing at the

rate of 12 per cent, but this will accelerate soon. The sale of all types of

medicines in the country stands at US$ 9.61 billion, which is expected to

reach around US$ 19.22 billion by 2012. India's domestic pharmaceutical

market is valued approximately at US$ 12 billion in 2010, and has shown a

strong growth of 21.3 per cent for the 12 months ending September 2010. It

estimates that over the next 10 years, the domestic market will grow to US$49 billion, at a compounded annual growth rate (CAGR) of 15 per cent. The

formulations industry is expected to prosper parallel to the pharmaceutical

industry. It is expected that the domestic formulations market in India will

grow at an annual rate of around 17 per cent in 2009-10, owing to

increasing middle class population and rapid urbanization.


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phrma industry