Review of Hyderabad Pharmaceutical Industry: an Emerging Global Pharma Hub Jayapala Reddy a V 1,* and B
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28362 Jayapala Reddy A V and B. Madhusudhan Rao / Elixir Marketing Mgmt. 76 (2014) 28362-28366 Available online at www.elixirpublishers.com (Elixir International Journal) Marketing Management Elixir Marketing Mgmt. 76 (2014) 28362-28366 Review of Hyderabad pharmaceutical industry: An emerging Global pharma hub Jayapala Reddy A V 1,* and B. Madhusudhan Rao 2 1Department of International Business, School of Management Studies, Vignan University, Vadlamudi PO, Guntur Dist, Andhra Pradesh, India/ General Manager & Head of Asia Business, Mylan Pharma, Hyderabad. 2School of Management Studies, Vignan University, Vadlamudi PO, Guntur Dist, Andhra Pradesh, India. ARTICLE INFO ABSTRACT Article history: India is one of the fastest growing pharmaceutical markets in the world and has established Received: 20 September 2014; itself as a key global hub for research & development, manufacturing of raw materials, Received in revised form: excipients, intermediates, finished dosage formulations, packaging materials, and clinical 27 October 2014; trials for both synthetic and biological drugs. This review paper discusses on how Accepted: 6 November 2014; Hyderabad which was known as a bulk drug capital transformed in to an emerging pharma global pharma hub. Business friendly government policies, visionary entrepreneurs and a Keywords large pool of knowledge base specialized to support industry has transformed Hyderabad a Hyderabad pharma industry, place for many SME’s, Indian & Foreign Multinational Pharma companies. Global pharma hub, Generic drugs © 2014 Elixir All rights reserved. Bulk drugs. Introduction revenues coming from formulations. Majority of the pharma Global Pharmaceutical Industry companies are shifting towards to formulations and hence The Global pharma market is estimated to be around USD 1 accounted for around 71% of total exports in 2013[3]. India is Trillion in 2012 and to reach USD 1.2 Trillion by 2016. The rated as 10 th largest Pharma exporter in the world. generic pharma industry contributes around USD 250 Billion As per the datamonitor reports, in Asia pacific India pharma and expected to reach to USD 430 Billion by 2016. It is market occupies a 10% share and 2% in global market [4]. estimated that by 2016, emerging markets will collectively account of almost a third of the total global market. [1] The major share of around 40% business comes from North America. It is a fact that the success of Indian pharma industry is scripted by companies that are supplying to the North American market with generic products. Indian Pharmaceutical Industry As per the BMI, the combined sales of Indian Domestic pharmaceutical industry was estimated to be worth USD 20 billion in 2013 and is expected to touch USD 36 billion by 2025. It is expected to grow with a CAGR of 17.8% [2]. Figure 2. Market share by value in Asia-Pacific 2010 Evolution of Hyderabad Pharma Industry: The evolution of pharma industry of Hyderabad in the last three decades is an inspirational one , from house of few bulk drug manufacturers the city has grown up in value chain of the industry to become pharma and biotech hub. The city is well known as bulk drug capital of India , the evolution of city into a pharma hub for bulk drugs started with Establishment of public sector pharma company Indian Drugs and Figure 1. Revenue of Indian Pharma Industry pharmaceuticals Ltd (IDPL).The first and foremost reason for Globally, India ranks third in terms of volume of production the growth of pharmaceutical industry in the state can be and fourteenth largest by value and is also expected to move up attributed to the presence of IDPL, set up in the year 1961 at the to eleventh place by 2017. As per the Pharmexcil latest report behest of India’s first Prime Minister, Pandit Jawaharlal Indian Pharma exports touched 90,000 crores ( Around USD 15 Nehru.[5] IDPL was India’s largest public sector drug maker in Billion) and slated to cross 100,000 crores in 2014 with a double the early days. The company was set up to enable the country digit growth of 15% and the majority of the pharma exports Tele: E-mail addresses: [email protected] © 2014 Elixir All rights reserved 28363 Jayapala Reddy A V and B. Madhusudhan Rao / Elixir Marketing Mgmt. 76 (2014) 28362-28366 attain self-sufficiency in life-saving drugs. Unfortunately IDPL vaccine to poor and developing countries. Hetero drugs got the is saddled with accumulated losses of more than Rs. 5000 crores license to develop and manufacture generic version of and has a negative net worth of Rs. 4816 crores[6].While IDPL Ostalmavir from Roche. It supported the world in combating provided the environment for spawning drug firms in epidemic of swine flu [8]. City based Bharath Biotech made first Hyderabad, the credit for turning the State into a breeding Indian version of Typhoid Vaccine [9]. ground for entrepreneurs should go to Standard Organics Ltd. It The entire hepatitis B vaccine development was led by K.I. was one of the first private sector companies to venture into Varaprasad Reddy of Shantha and Krishna Ella of Bharat making active pharmaceutical ingredients (APIs) for Biotech from Hyderabad in the mid-1990s. Then came the other multinationals. From here emerged Dr. Anji Reddy, founder and over-half-a-dozen manufacturers, pushing down the price of this builder of global brand Dr Reddy’s Laboratories. essential vaccine to around Rs 50 a shot in national program. Transformation Exports In a way, Standard Organics in the early 1980s and Dr Hyderabad pharma industry is a big foreign exchange Reddy’s in the early 1990s became the Spring boards for more earner for the country. It ranks first in manufacturing of bulk than two dozen entrepreneurs, who built up companies of drugs and third in formulations in the country. 40 % of the significant size. In three decades, with 2500 pharma companies country’s bulk drugs gets manufactured in Hyderabad & 44% of Hyderabad has seen the rise of pharma majors such as Dr country’s bulk drugs exports are from the city based companies. Reddy’s Laboratories, Aurobindo Pharma, Hetero Drugs, Divi’s The state pharma industry and exports are expected to grow at Laboratories, Matrix Labs (sold to Mylan Inc), MSN Labs, 20 per cent annually [10]. Natco Pharma, Granules India Limited, Virchow Labs (the only Table 1. DGCIS report on Indian Pharma exports in 2013 manufacturer of sulfamethoxazole), Neuland Labs, SMS Pharma exports from State (values in USD million) Pharma, Gland Pharma, Jupitor Biosciences, Lee Pharma, and Category Andhra % Suven Lifesciences. Due to the success of these companies, India Pradesh contribution many technocrats ventured in to their business which helped the Bulk drugs 4535.97 1996 44.0 industry to transform it as one of the highest contributor to Formulations 9749 2349 24.1 economy, exports, intellectual property and created huge Herbals 232.14 0.0 employment opportunities for all levels. Ayush 163.44 0.0 Growing up in the Value Chain – Branded generics Total Exports 14680.55 4345 29.6 formulations In value terms, Hyderabad pharma industry is worth USD 5 Retaining its no 1 position in API production the city based Billion and the state will leverage its strong position to emerge pharma companies moved up in value chain to produce generic as the next global hub of pharmaceuticals with a share of around formulations .Dr Reddy’s, Aurobindo, Hetero and Natco US$ 15-20 billion by 2020. Moving up in the value chain the Pharma, along with companies from Mumbai, Ahmedabad and city based companies are strengthening their position in generic New Delhi, have post the 1970 Patent Amendment Act (that formulations and stand as leading suppliers to international facilitated process patents), brought generic drugs to the market, markets. forcing global giants to cut prices while bringing medicines Benchmarking standards in International Business: within the reach of the public in India and developing world. Hyderabad based pharma companies have made inroads in In anti-cancer segment, the efforts of companies such as global markets especially regulated markets like North America, Natco Pharma challenging patent rights of multinationals and European Union, Japan etc. They could built an infrastructure to offering cheaper alternatives are proving beneficial to both benchmark the global quality & regulatory standards. Over 60% Indian pharma and poor patients. In at least two areas, revenues of these companies is generated from export markets Hyderabad has emerged a big supplier. First, in producing anti- and out of this the major revenues comes from regulated US & retrovirals. Hetero Drugs, Mylan and Aurobindo are key EU markets. Hyderabad based companies exploited generics contributors of such drugs to the Clinton Foundation as well as business in North American & European markets and international markets and have helped alleviate the suffering of established them as some of the leading manufacturers in these AIDS patients. For bird flu remedies too, Hetero has been a markets. major supplier, procured a licence from Roche. According to Hyderabad headquartered Dr Reddy’s is the first Indian Government estimates, AP has registered pharma exports worth Pharma company in Asia pacific (outside Japan) to be listed in close to Rs 25,000 crore and the industry is growing at about 20 NYSE in year 2001, thus setting standards in the industry for per cent [7]. highest level of transparency in corporate governance. Dr Another unique position held by Hyderabad in the national Reddy’s became the first Indian Pharma company to get 180 healthcare and pharma sector is as a major vaccine developer days exclusivity for its Antidepressant generic drug Fluoxetine and manufacturer. Companies like Shantha Biotech (now owned in the US market in year 2001. by Sanofi Pasteur), Bharat Biotech International, Biological E Apart from generics business, Dr Reddy’s laboratories and Indian Immunologicals are the leading players.