India

Supply

Higher for traditional therapeutic segments, this is typical of a developing market.

Relatively lower for lifestyle segment.
Demand
Very high for certain therapeutic segments. Will change as life expectancy, literacy
increases.
Barriers to entry
Licensing, distribution network, patents, plant approval by regulatory authority.
Bargaining power of Distributors are increasingly pushing generic products in a bid to earn higher margins.
suppliers
Bargaining power of High, a fragmented industry has ensured that there is widespread competition in
buyers
almost all product segments. Currently, the domestic market is also protected by the
DPCO.
Competition
High. Very fragmented industry with the top 300 (of 24,000 manufacturing units)
players accounting for large chunk of sales. Top 20 companies account for 60% of
the IPM sales.

Government : the government has also put in place mechanisms such as the Drug Price Control Order and
the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines.

Porter's Five Forces are: 1) Threats of entry posed by new or potential competitors; 2) Degree of rivalry among
existing firms; 3) Bargaining power of buyers; 4) Bargaining power of suppliers and 5) Closeness of substitute
products.
Below

is

an

anlysis

of

the

Pharmaceutical

Industry

using

the

above

named

forces:

1. Threats of entry posed by new or potential competitor (LOW)

High entry barriers due to costs associated with research & development of new drugs (i.e. years of
investment in R&D for a drug that may/may not work)
Government regulation (i.e. FDA)
The threat of entry posed by new or potential competitor is a LOW competitive force due to the above
entry barriers & regulatory constraints.
2. Degree of rivalry among existing firms (HIGH)

High rivalry among main companies in the industry. For example the current rivalry in the erectile dysfunction
space where Bayer & GlaxoSmithKline claim that Levitra works faster or Eli Lilly & ICOS claim that Cialis works
longer than Pfizers Viagra

The degree of rivalry among existing firms is a HIGH competitive force

3. Bargaining power of buyers (MEDIUM)

Hospitals & other health care organizations buy in bulk quantities and exert pressure on
pharmaceutical companies to keep prices in check
Regular patients have lost bargaining power due to price increases in generic drugs
The bargaining power of buyers is a MEDIUM competitive force.
4. Bargaining power of suppliers (LOW)
Sales for the pharmaceutical industry concentrate in a handful of large players and that has decreased
the bargaining power of suppliers.

The bargaining power of suppliers is a LOW competitive force

5. Closeness of substitute products (HIGH)
Demand for generic versus brand name drugs has increased because of the costs
Generic drug companies do not have the high costs associated with the research & development of
new drugs and that allows them to sell at cheaper prices
The closeness of substitute products is a HIGH competitive force
Overall and based on the above analysis of Porters Five Forces, we can conclude that the pharmaceutical
industry is not attractive for new entrants.

VENEZUELA:
Threat of Competition High :
The pharmaceutical industry is very competitive especially in the generic drugs market. When
a product is still patented, competition relies on product innovation which is very expensive
and time consuming. Instead, an increasing amount of companies are focusing on acquiring
smaller firms with patents to widen their product portfolio and obtain higher profits. Once a
patent expires, generics can claim 85% of the market share in just 10 weeks of expiration. The
market then becomes very price competitive as generics often sell at 60% below original
prices.
Threat of New Entrants Moderate :
The industry is very capital intensive as developing and launching a new drug requires a lot of
expertise and funding. Only a small percentage of drugs that are produced are approved every
year and this risk of failure acts as a barrier to entry for new entrants. However, being a new
entrant in the generic drug market is easier as they imitate an existing drug.
Threat of Substitutes Moderate :
Before a patent expires the threat of substitutes is very low as there arent many other
alternative drugs available. However, in the generic market the threat of substitutes is high as
there will be different types of the same drug readily available.
Power of Suppliers Low :
The power of suppliers in the pharmaceutical industry is low. Most pharmaceutical suppliers
specialize in the products that they produce and there is significant competition in the market.
In fact, most pharmaceutical suppliers are dependent on the companies whose sourcing needs
they meet. For this reason, the power of the suppliers is not a major factor in analyzing the
industrys competitive environment.
Power of Buyers Low :
Typically, consumers in the pharmaceutical industry have very few choices when it comes to
making their choices for their pharmaceutical decisions. This is especially the case when it
comes to drug lines that are patented by a particular company. In this situation, doctors have
very few choices when it comes to deciding which drugs to prescribe. For this reason, the
power of buyers is low in this industry, but in the future we could see price ceilings
implemented by governments that could shift some power to buyers in the future.