PESTLE analysis of the pharmaceutical industry

PESTLE analysis of the pharmaceutical companyceutic intentnessThe pharmaceutic perseverance not only develops but withal produces and marts medicines licence for use as medications. Pharmaceutical companies deals in generic and steel medications. They be subject to a variety of laws and regulations regarding the letters patenting, testing and marketing of drugs.Initi ally, The Indian pharmaceutical industry grew at a precise s starting timely from 1947 to 1970, all repayable to the lack of incentives and the failure of the regimen which was unable to set-up a concrete regulatory framework.Now, the manufacturing is characterized by numerous establishmental regulations and policy changes, stiff equipment casualty controls, rigorous controls on formulations, and absence of international patent protection. During 1970, the Indian Patents cause (IPA) and the Drug terms Control Order (DPCO) were passed. Though DPCO acted as fan against pharmaceutical companies makin g free pricing illegal, it fulfil moot the goal of providing character reference drugs to the public at reasonable rates.The Introduction of the IPA, which did not recognize harvesting patents but only process patents provided a major thrust to the industry and companies which undefiled the process of reverse-engineering, began to produce bulk drugs and formulations at blueer costs. This led to towering fragmentation in the industry, due to the emergence of a snatch of small firms.India Manufactures over 400 bulk drugs and around 60,000 formulations, which ar distributed by 5,000,000 chemists all over the orbit.Indian pharmaceutical Industry is passing through a wave of consolidation, with the objective to strengthen their brand equity and dissemination in what is essentially a branded-generics market.In the founder, the festering of a home(prenominal) pharmaceutical caller-out is critically dependent on its therapeutic presence. The previous(a) and mature categorie s comparable anti-infective, vitamins, and analgesics be de-growing while new lifestyle categories kindred Cardiovascular, Central Nervous System (CNS), Anti-AIDS, Anti-Cancer and Anti Diabetic are expanding at double-digit growth rates.Various Pharmaceutical companies in IndiaRanbaxy LaboratoriesIt is Indias largest pharmaceutical firm with the returns of Rs 4,198.96 Crore (Rs 41.989 billion) in 2007Dr. Reddys LaboratoriesWith a turnover of Rs 4,162.25 Crore (Rs 41.622 billion) in 2007, it is second largest drug firm in India by sales.Ciplait generated an annual revenue of Rs 3,763.72 Crore (Rs 37.637 billion) in 2007 and make it the third among largest pharmaceutical firms. cheer Pharmaceuticals insolate pharmaceutical Industries had an overall earnings of Rs 2,463.59 Crore (Rs 24.635 billion) in 2007. lupine LabsIts total profit of Rs 2,215.52 Crore (Rs 22.155 billion) was in 2007.Aurobindo pharmaceuticalIndias sixth largest pharmaceutical participation by sales, Aurobindo posted Rs 2,080.19 Crore (Rs 20.801 billion) annual returns in 2007.GlaxoSmithKlinegWith 2007 turnover touching Rs 1,773.41 Crore (Rs 17.734 billion, GSK is Indias ordinal largest pharmaceutical firm.Cadila HealthcareCadilas earnings was Rs 1,613.00 Crore (Rs 16.13 billion) in the fiscal year 2007, establishing itself as Indias eight largest drug company.Aventis pharmaceuticalWith an annual revenue of Rs 983.80 Crore (Rs 9.838 billion) in 2007, Aventis pharmaceutical has made a induct for itself in the top ten pharmaceutical companies in IndiaIpca LaboratoriesIpca is Indias 10th largest pharmaceutical company by sales and in 2007 it had a turnover of Rs 980.44 Crore (Rs 9.804 billionPEST ANALYSISPolitical Factors thither is political uncertainty, Combination of diverse political thoughts soak up got to departher to pave together a rag-tag coalition. Hence any consistent political or economic policy cannot be expected. This muddies the investment field.The Minister in cite of th e industry had been threatening to impose even much stringent Price Control on the industry than before. Thus it is throwing many investment plans into the doldrums.DPCO, which is the record book for the industry has in effect worked contrary to the stated objectives. DPCO nullifies the market forces from encourage competitive pricing of goods dictated by the market. Now the pricing is make by the political science, based on the approved costs irrespective of the real flesh costs.The country goes in for the IPR (Intellectual Property Rights) regime which is popularly known as the Patent Act. This Act impacts the Pharmaceutical Industry the most. Thus an Indian company could not escape paying a patent fee to the craftsman of a drug by manufacturing it using a different chemic route. Indian companies went against this law and used the reverse-engineering route to invent alternate manufacturing methods. A lot of money was saved this way. This excessively encouraged competing c ompany to market their versions of the similar drug. This means that the impurities and trace elements that were found in different brands of the like substance were different both in qualification as head as in quantum.Therefore many brands of the same medicine were really different. Here Branding actually meant type and unmixedr brand actually had pure active ingredients and lesser or less toxic impurities.Product patent regime will now eliminate all this. Patented drug would be construct using the same chemical routes and would be manufactured by the inventors or licentiates using the chemicals with same specifications. Hence all the brands with the same active ingredient will not have any going in purity and impurities. The different brands will have to argue on the basis of non input-related innovations such as packaging, colour, flavours etc.Economic FactorsIndians spends a very small proportion of their income on heartynesscare. This has stunted the demand and on that pointfore the growth of the industry.Per capita income of avg. Indian as low as Rs. 12,890, therefore, spending on the healthcare takes a low priority. An Indian visits a doctor only when there is an emergency. This has led to a flourishing of unqualified doctors and spread of non-standardized medication.The Incidences of Taxes are high. attain Duty (State Central), Custom Duty, Service Tax, Profession Tax, License Fees, Royalty, Pollution head Tax, Hazardous substance (Storage Handling) license, income tax, Stamp Duty and a host of new(prenominal) levies and charges have to be paid. On an average it amounts to no less than 40-45% of the costs.The number of Registered Medical practitioners is low because of this. Due to which the moot of Pharmaceuticals is affected adversely. There are nearly 5million Medical shops. Also this affects adversely the dispersal of medicines and also adds to the distribution costs. India is a high inte pillow rate regime. Therefore the cost o f bills is double that in America which adds to the cost of goods.Adequate storage and exaltation facilities for special drugs are lacking. Studies had indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration facilities and stored drugs on a lower floor sub-optimal conditions. Thus affecting the quality of the drugs administered and of course adds to the costs.India has poor roads and railway network. Therefore, the time of transportation is higher(prenominal). This calls for higher inventory carrying costs and longer delivery time. All this adds to the uncalculated costs. Its only during the move couple of years that good quality highways have been constructed.Socio-cultural FactorsPoverty and associated malnutrition dramatically affected the incidence of Malaria and TB, preventable distempers continued to play havoc in India for decades even after they were eradicated in other countries.Poor Sanitation and colly water sources ended the life of abo ut 1 million children who were under the age of five. In India people preferred using household treatments which hand down for generations for common ailments. The use of magic/ tantrics/ hakims is still prevalent in India.Increasing pollution has added to the healthcare problem. Smoking, drinking and poor oral hygienics is still adding to the healthcare problem. Large joint families transmit communicable disease among the members.Cattle-rearing encourage diseases that are communicated by animals. Early child bearing affects the health standards of women and children. Ignorance of inoculation and vaccination has prevented the eradication of diseases like polio, chicken-pox, small-pox, mumps and measles.Technological Factors mature machines have dramatically increased the output and reduced the cost. Computerization has boosted the readiness of the Pharma Industry.Newer medication, active ingredients are being discovered. In January 2005, the Government of India had more than 10,00 0 substances for patenting.Ayurveda is now a well recognized science and hence is providing the industry with a cutting edge. Advances in Bio-engineering, Stem-cell query have inclined India a step forward.Humano-Insulin, Hepatitis B vaccines, AIDS drugs and many such molecules have given the industry a pioneering status.Newer drug delivery systems are the innovations of the day. The enormous unemployment in India prevents industries from going fully automatic as the Government as well as the Labour Unions voice complains against such establishments.Legal EnvironmentThe pharmaceutical industry is now a highly regulated and residency enforcing industry. As a result of which there are immense legal, regulatory and compliance overheads for the industry to absorb. This tends to restrict its dynamism but in recent years, government has begun to request industry proposals on regulatory overheads to encourage innovation in the face of mounting global challenges from external markets.In Pharmaceutical industry, there is huge PSU segment which is highly inefficient. The Government puts the surpluses generated by efficient units into the price equalization account of inefficient units thus unduly subsidizing them. On a long term basis this has made practically everybody inefficient.Effective the January, 2005 the Government has shifted from charging the Excise Duty on the cost of manufacturing to the MRP thereby making the finished products more costly. Just for a some supererogatory bucks the current government has made many a life saving drugs unaffordable to the poor.The Government provides extra drawbacks to some units located in specified area, providing them with subsidies that are unfair to the rest of the industry, bringing in a skewed development of the industry. As a result , Pharmaceutical units have come up at place unsuitable for a best cost manufacturing activity.S.W.O.T. Analysis of Pharmaceutical IndustryStrengthsCost of drudgery is low.Large pool of installed capacitiesEfficient technologies are present for large number of Generics.Huge amount of skilled technical manpower. accession in liberalization of government policies.OpportunitiesAging of the world population.Increasing incomes. suppuration attention towards health.New diagnoses and new social diseases. diffusion prophylactic approaches. fertilization point of market is far away.Better therapy approaches.Better delivery systems.Spreading attitude for soft medication (OTC drugs).Spreading use of Generic Drugs. globalisationEasier international trading.New markets are opening.WeaknessFragmentation of installed capacities. showtime engine room level of Capital Goods of this section.Non-availability of major intermediaries for bulk drugs.Lack of experience to influence efficiently the new patent regime.Very low key RD.Low share of India in World Pharmaceutical Production (1.2% of world production but having 16.1% of worlds population).Very low level of Biotechnology in India and also for New Drug Discovery Systems.Lack of experience in foreign Trade.Low level of strategic planning for future and also for technology forecasting.ThreatsContainment of rising health-care cost. broad(prenominal) Cost of discovering new products and fewer discoveries.Stricter registration procedures.High entry cost in newer markets.High cost of sales and marketing.Competition, particularly from generic products.More potential new drugs and more efficient therapies. fault over form process patent to product patent.To make India a potentially strong pharmaceutical hub following weakness has to be flood out withLow investments in innovative RD and lack of resources in order to compete with MNCs for New Drug Discovery and to commercialize molecules on a oecumenic basis.Lack of strong linkages between industry and academia.Low medical phthisis and healthcare spend in the countryProduction of spurious and low quality drugs tarnishes the image of industry at home and abr oad.RD efforts of Indian pharmaceutical companies hampered by lack of enabling regulatory requirement.Despite of unique strengths like expertise in process chemistry, availability of abundant and high quality talent, and growing hospital infrastructure, the country still accounts for less than 1 per centum of the US$ 130 billion in worldwide spending in pharmaceutical research and development.RemediesCRAMS Inherent competitive advantages and cost-effective manufacturing capabilities has now beget one of the most preferred destinations for Contract Research and Manufacturing Services (CRAMS). India has huge potential to tap the $20 billion CRAMS business that is expected to reach $31 billion by 2010. India has opportunity to grab this business. Pharma multinationals are also exploiting Indias competencies in the field of information technology and its strong and low cost IT skill sets by setting up centres for their global clinical data management functions in India.CRO Contract ab le researches also offer significant opportunity to the Indian pharmaceutical industry that is go a global RD hot-spot for innovative pharmaceutical companies. The global contract research opportunity was $14 billion in 2006 and was expected to reach $24 billion by 2010.Identifying opportunities enablers.To Map Indian pharmaceutical industry to confirm its full potential and to become globally competitive.Addressing global challenges that impact India pharma industry.Global alliances, Mergers and Acquisitions.Government should provide infrastructures for talent research.Providing regulatory protection.Giving pecuniary incentives to encourage innovations research.Encouraging public -private partnership in infrastructure development. object lesson of overcoming threats and grabbing new opportunities1. The lack of research and development (RD) productivity, expiring patents, generic competition and high profile product recalls are driving the mergers and acquisition (MA) activity in the sector. The Lots of mergers and acquisitions in the past shows that the Indian pharma industry is all set to take on the global markets. Nicholas Piramal has acquired 17 per cent in Biosyntech, a Canadian pharma packaging company in July 2005. small-arm in June 2005, Torrent acquired Heumann Pharma, a generic drug company that was in front a part of Pfizer. Matrixs acquisition of the Belgian firm Docpharma was the largest acquisition deal. Sun Pharmaceutical Industries has announced its plan for acquisitions in the US.Indian generic companies are increasingly fighting patent cases on these secondary patents and Resulting in preferably generic entry hence contributing to affordability of drugs in developed countriesIndian companies still continues to market and export generic drugs which are off patent. US is the ideal destination for Indian companies. In US alone, major blockbuster drugs are going off patent in next few years. Further it is estimated that generic market can reach US $ 80 billion in coming few years in repute terms and Indian companies stand a good chance of tapping a major chunk of this pie.2. Lupin being among the top three Indian pharmaceutical companies by 2007 and aimed at achieving the US$ 1 billion mark. In order to compete with the foreign players, Indian pharma companies have started alter RD activities, entering the global generics market, venturing into contract research and started exploring segments like herbals and ayurveda while have already established foreign pharma companies established RD centres and clinical essay centres in India to cut drug delivery costs. Lupin too made significant investments in RD, infrastructure, exports, herbal markets and other therapeutic segments to compete effectively with domestic and global pharma majors. According to Lupins top management, As the country switches on to the product regime, radical changes are expected to affect the pharmaceutical sector. A deep-rooted shift in bu siness policy has interpreted place within the company by placing a strong idiom on RD to create proprietary intellectual property. The budget for this activity was stepped up substantially during the year to ensure that the company has a complete portfolio of products to take on the patent regime.3. The downfall of many companies is due to not ever-changing with the style of marketing. The analysis of Indian companies revealed that their progress is basically from the new products. Cipla has shown a tremendous growth in the market only due to steering on the new product hence they became No. 1 in 2004. Similarly, the Sun Pharmaceuticals have shown a phenomenal growth by adopting same strategy. This has resulted in their occupying 5th position in 2004. The new product succeeder rate is going down because the companies are more interested in introducing new products and generating volume sales and not brand building. There are very few products which could have registered more tha n 1 Crore sales. The current scenario in the pharmaceutical industry is to launch new product then get some market share and if the response is good, pick up the brand and build the same in subsequent years.This has given dividend to companies like Ranbaxy, Cadila, Cipla, Sun Pharmaceuticals.