Power- Pack

Pharma

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• Indian Pharma Overview :3

•Global Market Trends : 8

• Growth Drivers (2000 to 2015) : 14

• Key Concerns : 29

•Future Growth : 43
 Indian Pharma: Overview

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 Indian pharma industry has grown around 6 times between 2002-3 to
2016-17 but still constitute only 3.5% of the global pharma market

INDIAN PHARMA : SIZE AND GROWTH

Segment 2003 2017

Domestic $3.9bn $16.5 bn
Formulation
Global Pharma industry
Formulation $1.4 bn $13 bn : $ 1110 bn
Exports

Bulk-Drugs $1.1 bn $ 6.7 bn

Exports

Total $6.1 bn $36.2 bn

Source: Director General of Foreign Trade

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 Regulated markets has been the driver of growth though
Semi-regulated markets also grew at a healthy rate.

Formulation exports by India (2011-12 to 2016-17)

Source: DGFT
 US constitutes 71.4% of India’s exports to regulated markets.

India's pharmaceutical exports : Share of various countries in regulated market

2015-16

2016-17

Source: DGFT
 Indian pharma industry is fragmented and the top 10 players
put together have only 43% market share.

DOMESTIC MARKET SHARE IN % OF THE TOP 10 PLAYERS

Source: Industry
 GLOBAL MARKET TRENDS

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 Size of global pharma industry was $1115 bn in 2015.

Trend in global pharmaceutical sales

Source: IMS Health

GLOBAL MARKET: TOP THERAPEUTIC CATEGORIES (2014)

Source: IMS Health

 North America, US and Japan (Regulated markets) contribute to 75%
of the global pharma industry

REGION-WISE SHARE

Region % Share of the Global

Pharma Market

North America 36.2

Europe 23.1

Japan 11.7

Asia, Africa and Australia 17.5

Latin America 7.5

Source: IMS Health

 Top 10 global players have about 35% share.

Top corporations by market share (2016)

Source: IMS Health

 Global companies are heavily dependent on a few
drugs for bulk of their revenues

HIGH DEPENDENCE ON SPECIFIC DRUGS

Drug Drug
Sales in Company contribution
Company Drug $bn Sales in $bn In % Ailment
Arthritis and
Abbott Humira 11.8 20.4 58% Spondylitis
Sanofi Lantus 10.3 40 26% Blood Sugar
Pfizer Seretide 8.7 44.9 19% Asthma
Crestor Cholesterol (Crestor)
Astrazene and and Acidity
ca Nexium 16.2 33.3 49% (Nexium)
Gilead Sovaldi 9.4 23.7 40% Hepatitis - C
 Reason for Faster Growth between
2000 to 2015

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 Global generics market grew at a healthy pace between
2011-12 to 2014-15.
Generic Market Growth
• The stupendous growth during 2011-12 to 2014-15 was characterised by
blockbuster drugs going off-patent which created opportunities for Indian
players.
• From 2011-12 to 2014-15, drugs worth ~$200 billion went off-patents
•Such patent losses and subsequent launch of generic versions helps boost both
revenue and profitability of Indian players.
•For e.g., loss of patent on Abilify (Aripiprazole - the drug had global sales close to
$9.3 billion in 2014) in April 2015 enabled Alembic Pharmaceuticals Ltd and Torrent
Pharmaceutical Ltd to launch their generic versions in the first quarter of 2015-
16. This translated into a strong 47% growth in Alembic's international generics
revenue during the quarter. Similarly Torrent's US market revenue grew by an
estimated 231% during the quarter.
 Rising healthcare costs to drive preference for generic drugs in
regulated markets.

HEALTH CARE SPEND IN REGULATED MARKETS

% of GDP
•Slowdown since the financial crisis in
2008-09 has forced developed countries to
cut pharma costs
• Consequently, many countries started
opting for generic medicines to save on
healthcare cost and some of them
mandated cost cuts across medicines.

Source: World Bank, Crisil Research

 India has a very low manufacturing costs compared to US
and Europe.

Cost of manufacturing drugs in India, China, Europe and the US

 India has large US FDA approved facilities, skilled
manpower and process chemistry skills.

US FDA APPROVED FACILITIES

•India has the highest number of US FDA (US Food and Drug
Administration) approved facilities outside the US.
•As per DMF fillings data of 2015-16 , there are 9,808 active
manufacturing units [both formulation and active pharmaceutical
ingredient (API) facilities] - foreign and domestic - registered with the US
FDA.
• About 3600 (37%) registered units are estimated to be present in India
alone.
•A large approved manufacturing base provides Indian companies the
opportunity to supply to the lucrative regulated markets.
•In addition, the country also has skilled manpower and advanced
process chemistry skills.
 Indian companies have been getting around 30% of the
global ANDA approvals every year since 2008.

ANDA APPROVALS

Source: US FDA
 India has the largest number of ANDA approvals after
US but low penetration in generics market.

COUNTRY WISE ANDA APPROVALS (UPTO 2016-17)

•Despite large no. of ANDA

approvals, India’s market
share in US generics market
is only 6%
• This indicates under
penetration and huge
potential.

Source: US FDA
 Apart from large ones, Indian mid-size pharma companies
are also flocking US through ANDA approvals.

Small-, mid-sized Indian formulators flock also going for

ANDA approvals
•Over the last few years, many Indian companies - mostly small- and mid-sized
players - invested in US FDA approved facilities to capitalise on the generic
drugs opportunity.
•Indian companies, which traditionally used the contract manufacturing route
to access regulated markets, have simultaneously obtained ANDA approvals
for a direct entry into the retail segment.
•These late entrants accounted for about 44% of approvals received by the
Indian pharmaceutical companies in the 5 year period between 2010 to 2015
 Indian companies were able to get para IV filings for
significant percentage of their ANDA approvals.

PARA IV FILING AS % OF ANDA APPROVAL

Para IV Filings as Percentage of Total
ANDA Approvals

Source: Company Filings

 Gains during the exclusivity period can be significant, on
revenues and margins.

FINANCIAL PERFORMANCE DURING THE 180 DAY EXCLUSIVITY

PERIOD

Source: Company Reports, Crisil Research

 India accounted for nearly 45 – 50% of US Drug Master Filings
since 2005

DMF filings (global vs India)

Source: USFDA
India is considerably ahead of its competitors in terms of the total
number of DMFs.

Country-wise DMF filings (Cumulative from 2009 to 2015)

Indian bulk-drug companies are making in-roads in patented bulk-drug
market.

Increasing innovator confidence

•In addition to a high number of DMFs, India's proposition in the bulk

drugs industry is also reflected in the innovator confidence that it enjoys.

•Companies such as Piramal Enterprises, Divi's Labs, Dishman Pharma,

Shasun Pharma, Jubilant Lifesciences, Aurobindo Pharma etc, supply

bulk drugs for patented products to large and mid-sized pharmaceutical

players in regulated markets.

 Indian bulk-drug companies are making in-roads in patented
bulk-drug market.

Major Deals between large global companies and Indian bulk drugs
players
 India is better positioned in the medium term
compared to China.

CHINA VS INDIA

Though China’s manufacturing cost is comparable to that of India’s,

we have an advantage because of

•US FDA approved facilities,

•large number of DMFs, (India – 48% and China – 20%)

•skilled manpower

•Advanced process chemistry skills.

 KEY CONCERNS AND REASONS
FOR RECENT SLOW-DOWN

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SLOW-DOWN IN EXPORTS
As against robust 18% CAGR
FORMULATION EXPORTS
reported from 2010-11 to 2013-

14, exports are estimated to

have risen at just 7.2% CAGR

between 2013-14 and 2016-17

on account of growth

slowdown in 2014-15 and

2016-17.

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DECREASE IN NUMBER OF DRUGS GOING OFF-PATENT

• Between 2012-17, about $195 bn worth of drugs went off-patent while the

best years were between 2012-14.

• While between 2017-22, only $130 bn worth of drugs is expected to go

off-patent.

• This represents a 33% drop in the value of drugs going off-patents which

limits the opportunity of growth for Indian players.

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QUICKER ANDA APPROVALS
The US FDA has started collecting a GDUFA
fee from generic drug manufacturers to
• help the agency increase its staff and
resources to cope with the rising number
of ANDA application backlogs, and
• improve the quality of oversight on
generic drug manufacturers globally.
Due to GDUFA, the number of ANDA
approvals have become quicker and gone up
which is putting the price pressure on

Source: USFDA Generics..

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NUMBER OF COMPANIES GETTING ANDA APPROVALS

Source: USFDA
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RISE IN US FDA REGULATORY ACTIONS

•Due to GDUFA, the number of

inspections have gone up.

•This has increased the number of

warning letters and import alerts

which in turn adversely

impacted US exports growth.

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 WHOLESALER CONSOLIDATION

• Indian pharma companies predominantly

MARKET SHARE OF
WHOLESALERS IN US use wholesalers to sell in US.
• About a decade ago, USA had more than
10 distributors contributing to about 80 per
cent of the USA's generic market.
• But due to consolidation, currently 3
players control about 85% of the generic
market and have higher bargaining power.
• Indian players are put under pricing
pressure due to this consolidation.

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PATENT LITIGATION
•Though India follow Product Patent from 2005, two clauses of the intellectual
property right (IPR)laws in India remain a significant area of contention between
foreign drug companies and generic Indian producers:
• Ever-greening (For example: patent revocation for Gleevec.)
• Compulsory licences for already patented drugs (in case of lifesaving
drugs). For example: compulsory licence granted to Natco for Nexavar.
• There have been many intellectual property right (IPR)-related cases in the
country involving drugs of MNCs.

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PATENT LITIGATION

Source: Industry, Crisil Research

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PATENT LITIGATION
•This has resulted in the intervention of the US government.
•In order to protect the interests of US companies, the US government reviewed
India's intellectual property (IP) policies and placed it in the "inadequate list" (the
US special 301 watch list).
•This list tracks countries with inadequate IPR laws, deemed detrimental to US
companies.
•In order to address this issue, India agreed to set up a bilateral mechanism on IP
rights through the US-India trade policy forum and drafted a new draft national
IP policy.
•Unfavourable outcomes from continued litigation against MNCs will dissuade
them from bringing innovative medicines to India.
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PRICING INTERVENTIONS
• Government impose pricing restrictions from time to time on various drugs by
including them in the list of National List of Essential Medicines (NLEM)
• For example, on July 10, 2014, the government issued a notification capping prices of 50
bulk drugs (108 formulation packs) in the cardiovascular and anti-diabetic segments. This
was followed by the March 25, 2015 notification, which brought 57 formulation packs -
including anti-diabetic combination drugs, antibiotics, cardiovascular combination drugs,
insulin, etc. - under price control.

•In 2016-17, formulations that constitute nearly 16% of the total market by value
have been brought under price control.
•Such pricing orders amplify the risks posed to chronic care drugs and will have
around 100 basis points impact on the overall industry.

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BAN ON FIXED DOSE COMBINATIONS
• Fixed Dose Combinations (FCDs) are two or more drugs contained in a single
dosage form, such as a capsule or tablet.
• An example of a fixed-dose combination HIV drug is Atripla (a combination
of efavirenz, emtricitabine, and tenofovir).
• In March 2016, Supreme Court banned 344 FDC drugs due to safety concerns.
• The ban covered about 6,000 brands from major pharma houses including
Pfizer Ltd, Wockhardt Ltd, Alkem Laboratories Ltd, Cipla Ltd, Sanofi India Ltd,
and Sun Pharmaceutical Industries Ltd.
• This constitutes around 3-4% of the domestic pharma market.

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GOVERNMENT’S PROPOSAL ON PRESCRIBING MEDICINES BY
ONLY GENERIC NAMES
•Prime
. Minister Narendra Modi’s announced in April 2017, that there could be
a law mandating doctors to prescribe medicines with their generic names
instead of brand names.
•Union health ministry also asked the medical community to follow a 2016
notification by the Medical Council of India (MCI) that mandates doctors to
prescribe medicines by generic names.
• The WHO defines a “generic” as a bioequivalent to a branded drug.
• So, instead of writing ‘Allegra’ ‘Agimfast’, ‘Alafree’, doctors might have to
prescribe it with the molecule name, i.e. Fexofenadine.
• Aims to bring down the medicine costs for patients and break the doctor-drug
company nexus.
•It has resurrected the ghost for the Indian pharma market dominated by
branded generics.

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CONCERNS ABOUT PRESCRIBING ONLY GENERIC NAMES
• Profitability of the large companies may take a hit.
••. The onus of what patients should consume will shift from doctors to chemists.
Chemists are unregulated and have no obligation, ethical or commercial, on
what they sell patients, they have pointed out.
•Drug companies also say various regulations need to be put in place to qualify
medicines as generics as per the norms laid down by the WHO.
•One key requirement for generic makers is to submit bio-equivalence (BE)
studies. A BE study is a process where companies have to test their generic
products as against the innovator’s product for their effectiveness.
•According to IDMA only 15% of the products of various brands will be bio
equivalent. The rest might just be ‘similar’ products,”
•Unless the safety and efficacy of similar products are not proven, they cannot
be interchangeable.

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 Future Growth

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 Indian pharma is expected to become $50 bn by 2020-21

FUTURE GROWTH OUTLOOK

Segment 2016-17 2020-21

Domestic $16.5 bn $ 22 bn
Formulation

Formulation $13 bn $17bn to

Exports $17.5 bn

Bulk-Drug $ 6.7 bn $9.5 bn to

Exports $10 bn

Total $36.2 bn $50 bn

Source: DGFT