Can patented drugs falls under dpco

Industry compact: India is the world's generic pharmacy

Market developments and trends

The pharmaceutical industry is one of the strongest export sectors in India

The Indian pharmaceutical industry is the third largest in Asia after Japan and the PR of China and has developed into one of the strongest export sectors in India in recent years. In particular for generics (imitations of original drugs with the same active ingredients), the country is in the top range worldwide. The research institute Business Monitor International (BMI) estimates the total sales of the pharmaceutical industry for the year 2018 at around 20.9 billion US dollars (US $). By 2022, total sales are expected to increase at an average growth rate of 8.6 percent to US $ 28.9 billion.

Development of the pharmaceutical market in India (in billion US $, change in percent) *)

2017 2018 Change 2018/17
Total sales of pharmaceutical companies 19,2 20,9 8,9
Exports 14,1 15,4 9,2
Imports 1,7 1,8 5,9
Health expenditure (GA) 131,8 147,9 12,2
Government's share of GA in% 30,4 31,8 4,6

* Estimates

Source: Business Monitor International, press release, June 2019

Nonetheless, growth is likely to lag behind the double-digit rates of the past. The competition among generic manufacturers has increased, including from Chinese producers. In terms of safety and quality control, prohibitions on the approval of various drugs put a strain on the industry. A total of around 174 drugs are said to have been reviewed by the US FDA in 2018. The USA is the largest buyer of Indian pharmaceuticals, with a third of all exports destined for North America.

Domestic sales are expected to increase

Several factors also point to an increasing demand in the Indian domestic market. In addition to age-related diseases, diseases of civilization are on the rise. In addition, more and more Indians are spending a growing part of their income on better medical care. The most important sales segment in Germany are remedies for acute illnesses. Chronic diseases, however, are on the rise. The demand for drugs against diabetes and gastric and intestinal ulcers is growing fastest.

However, the growing demand is countered by the fact that the majority of the population has poor access to health care. In addition, there is the low prevalence of health insurance and a weak regulatory environment. Reforms are poorly designed and are often not properly implemented, complain several managing directors in discussions with Germany Trade & Invest. In the short term, the business of German pharmaceutical suppliers is likely to be difficult, as customers are very price-sensitive, especially for high-quality prescription products. More and more drugs are subject to government price caps, although the price level is very low anyway. A week-long antibiotic therapy often costs less than one euro, painkillers usually only a few cents.

Prescription drug segment dominates the market

Prescription drug sales in India will benefit from robust growth drivers in the years to come. In 2018, prescription drugs accounted for around 85.7 percent of total sales. Despite government efforts to reduce healthcare costs, the rapidly growing population and increasing exposure to chronic diseases will ensure that prescription drugs remain the dominant market segment.

Development of sales in the pharmaceutical industry (in billion US $; change in percent)

2017 2018 Change 2018/17
Prescription drugs 16,4 17,9 9,1
Over-the-counter drugs (OTC) 2,8 3,0 7,1
Total medication sales 19,2 20,9 8,9

* Estimates

Source: Business Monitor International, June 2019

The Indian market for non-prescription drugs, so-called over-the-counter drugs (OTC), is becoming increasingly attractive for a large part of the population. In particular, Indians who live in rural areas and have little access to medical care often have no choice but to resort to OTC drugs. You can hardly afford doctor visits or the higher prescription drug fees. With this in mind, some of the largest drug manufacturers such as Sun Pharmaceuticals, Dr. Reddy's and Glenmark in a portfolio of OTC products in India.

India is the world's largest producer of generics

Patented drugs play a minor role in the overall Indian market and generated the equivalent of around US $ 2.1 billion in 2018. More than 80 percent of drugs sold are generics. The South Asian country is the largest manufacturer of copycat medical products in the world. Generic drug sales were approximately $ 15.8 billion in 2018. Market researchers from BMI are forecasting an increase to US $ 21.7 billion by 2022. The growth prospects remain positive: In order to increase access to medicines for its own population, India must cut costs more and rely on generics. That depresses the growth in sales of patented drugs.

Most of the drugs are sold through pharmacies

The Ministry of Health and five state-owned companies, the so-called Central Public Sector Enterprises (CPSEs), are responsible for procurement for the public health system. The state market is of only limited interest to German manufacturers, as state-owned companies are very price-sensitive and around 98 percent of the cases buy generics from Indian own production. For more information, see the Ministry's website at http://pharmaceuticals.gov.in/cpses.

The majority of drugs, around 90 percent, are sold through pharmacies. The health infrastructure is heavily geared towards urban areas. Almost 75 percent of pharmacies, 60 percent of hospitals and 80 percent of doctors are in urban centers. The sale of drugs is concentrated in the metropolitan areas. The four largest cities Mumbai, New Delhi, Kolkata and Channai account for around a quarter of the industry's turnover. Accordingly, there is higher sales potential for German companies in urban regions.

Share of counterfeit drugs is increasing

The World Health Organization (WHO) assumes that 10 percent of all drugs traded worldwide are counterfeits and mostly come from the PRC or India. In India, drugs are counterfeited that are urgently needed but very expensive, such as antibiotics, drugs for chemotherapy, malaria, tuberculosis and AIDS. The demand is high and the drugs can be easily sold worldwide via the Internet.

Business practice

Approval for medicinal products is subject to various regulatory authorities

The Indian pharmaceutical market is subject to extensive government control. There are different regulatory authorities that are responsible for approving drugs. According to industry experts, the approval process is often opaque, inefficient and time-consuming.

The main regulatory body in India is the Central Drug Standard Control Organization (CDSCO). She works under the supervision and guidance of the Indian Ministry of Health and the Drug Controller General of India (DCGI). In addition to the DCGI, CDSCO and the Ministry of Health, the Department of Biotechnology, the Ministry of Science and Technology and the Ministry of the Environment can be involved in the approval process.

In India, the manufacture, quality and marketing of pharmaceuticals are regulated in accordance with the Drugs and Cosmetics Act of 1945. Other acts include the Pharmacy Act of 1948, the Drugs and Magic Remedies Act of 1954, and the Drug Price Control Order (DPCO) of 1995, as well as various other Chemicals and Petrochemicals Department directives. Several changes have been made to most legislative proposals in recent years. For more information, please visit: http://pharmaceuticals.gov.in/act.

Health insurance is not very common

In India, public health care is considered to be inadequate, with a lack of medical staff and hospitals. Those who can afford it can be treated privately. Such treatments are not affordable for the poorest sections of the population.

Of the estimated US $ 147.9 billion spent on health care in 2017, just 31.8 percent went to government spending. The patients bear the majority (68.2 percent) of the costs themselves. Around 7 percent of all Indians are driven into poverty every year due to the costs of illness. Only around 5 to 10 percent of the population should be insured.

The government under Prime Minister Narendra Modi wants to change that and has announced the largest state-funded health care program in the world. For around 500 million needy Indians, health costs of up to the equivalent of 7,600 euros per year are to be covered for hospital visits. So far, 27 million people have been registered under the program, reports the government agency National Health Authority, which is responsible for the implementation of "Modicare". However, secondary health services such as over-the-counter medicines are not covered. The costs for outpatient care and important medicines must still be borne by yourself.

The middle and upper classes, on the other hand, are either insured with a company or private health insurance company or pay for medication out of their own pocket if necessary. Insurance companies such as Apollo Munich Easy Health and Religare Health Insurance offer insurance for families and corporate employees. They give the policyholder access to certain, comparatively well-equipped private hospitals in India. Usually, insurance companies only pay for medication in the case of inpatient, not outpatient treatment. Officially, apart from upper price limits, there are no regulations or mechanisms for co-payment and reimbursement of drug costs.

Price caps curb sales by pharmaceutical companies

The National Pharmaceutical Pricing Authority (NPPA, http://www.nppaindia.nic.in/en) has the task of setting drug prices. The "Essentiality of Drugs" is one of the most important principles in the country. This is about the provision of essential medicines, in sufficient quantities and at "reasonable prices". According to several newspaper articles, more than 800 price caps were set for drugs, including active ingredients such as insulin, aspirin and penicillin, by 2018. In the last published official list of the NPPA from 2015, around 376 preparations are subject to state price control.

Companies can set a minimum sale price for drugs that are not under price control. The NPPA only intervenes in cases where pharmaceuticals generate significant sales and / or the annual price increases by 10 percent. The price controls decided by the NPPA led to a slowdown in the growth rates of companies.

Reform program is intended to attract investment

The Indian government announced on June 20th, 2016 that it would relax the regulation for foreign direct investment for brownfield projects in the pharmaceutical industry. In the past, government approval was required from a stake of 49 percent. Now their approval is no longer necessary with a participation of up to 74 percent. New Delhi already allows 100 percent participation for greenfield investments. This should continue to drive investment in the industry in the long run.

Patent protection is and will remain a problem in the Indian pharmaceutical industry

The protection of intellectual property is a particularly sensitive issue in the negotiations for a free trade agreement between the EU and India. India has so far refused to expand patent protection. The last changes were made in 2005, when the legal framework for the production of generics in India was made more difficult. However, the authorities had a certain leeway. According to the regulation, compulsory licenses can be issued three years after a patent has been granted under certain criteria in order to be able to copy a pharmaceutical. Furthermore, companies could bring inexpensive alternatives to innovative drugs on the market as long as the manufacturing process was different.

Detailed information on business and tax law is available at http://www.gtai.de/recht as well as on import regulations, customs duties and non-tariff trade barriers at http://www.gtai.de/zoll.

Contact addresses

The "Industry Compact" series provides analyzes of important key sectors in the German export economy. Further country reports on the pharmaceutical sector and other industries can be found at http://www.gtai.de/branche-kompakt.

Contact person for the pharmaceutical industry: Beate Voell; Email: [email protected]