Certificate course in Pharmaceutical Intellectual

Property Rights (CPIPR)

THE PHARMACEUTICAL BUSINESS

Chapter Title Pages

1 Understanding innovator v/s generics 4-9
2 Understanding the API and formulation business 10 - 15
3 Understanding pharmaceutical supply chain 16 - 19
4 Understanding the pharmaceutical markets 20 - 42
5 Indian Pharma industry 43 - 46
6 Pharmaceutical mergers and acquisitions 47 - 58
7 Product selection criterias in generic drug industry 59 - 62
Appendix I List of Indian Pharma companies 63 - 64

**The contents of the module are only for educational purpose and should
not be considered as a legal advice.

© Pharma Literati Centre of Excellence of Pharma education -1-

 Certificate course in Pharmaceutical Intellectual
Property Rights (CPIPR)

List of figures
Figure Details Page
1 Pharmaceutical supply chain 16
2 Global pharma market growth 21
3 Growth for different therapeutic areas 21
4 Growth markets till 2020 22
5 Differences between NDA and ANDA requirements 31
6 Typical ANDA review process 32

© Pharma Literati Centre of Excellence of Pharma education -2-

 Certificate course in Pharmaceutical Intellectual
Property Rights (CPIPR)
INTRODUCTION TO THE MODULE:
This module is designed to give basic understanding about the pharmaceutical
business.

 Chapter 1 details about the innovator and generics, the differences

between them and the significance of the generic drugs.

 Chapter 2 details about the active pharmaceutical ingredients (API) and

formulations.

 Chapter 3 details about the pharmaceutical supply chain from production

of the medicines by pharmaceutical companies to consumption by patients.

 Chapter 4 details about the pharmaceutical markets like regulated markets

and emerging markets.

 Chapter 5 details about the Indian pharmaceutical industry.

 Chapter 6 details about the pharmaceutical mergers and acquisitions in

the world and Indian industry.

 Chapter 7 details about the product selection criterias in generic drug

industry.

Moreover, the entire list of Indian pharmacutical companies and their websites is
provided.

© Pharma Literati Centre of Excellence of Pharma education -3-

 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Pharmaceutical Industry Subsectors:

The pharmaceutical industry is broadly divided into major verticals like:
Originator (Innovator) chemically synthesized drugs and biotechnology-
derived drugs are developed as a result of extensive research and
development (R&D) and clinical trials in both humans and animals. The
originator relies on patents and other forms of intellectual property rights to
justify the investment required to bring a product to market.

Generic drugs are duplicative copies of originator chemically-synthesized

drugs that contain the same active ingredient, are identical in strength,
dosage form, and route of administration. The prices of generic drugs are
typically lower than the prices of originator drugs.

Over-the-Counter (OTC) drugs are distinguished from originator and generic

drugs in that consumers do not need a prescription to purchase the
drug. OTC drugs are considered by regulators to be safe for self-diagnosis
and self-medication.

Active Pharmaceutical Ingredients (APIs) also called as bulk drugs.

Medication, in dosage form, is composed of active pharmaceutical ingredients
(APIs) and excipients. APIs are the ingredients that make drugs effective.

Excipients are inert substances that give a medication its form, such as
cornstarch (to make a tablet) or sterile water (to make a liquid) and serve as a
delivery vehicle to transport the active ingredient to the site in the body where
the drug is intended to exert its action.

Biosimilars, or Follow-on Biologics, are versions of biological products that

reference the originator product in applications submitted to a regulatory
body.

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 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Brand drugs V/S generic drugs

Innovator companies Generic companies
Activities Discover their own drugs, Rely on innovator’s
conduct clinical trials and products and medicines
then launch their own drugs. that are identical to the
available drugs showing
bioequivalence.
Costs of the drug Is comparatively higher as Generic manufacturers do
development the companies are involved not incur the cost of drug
in the discovery of new discovery. Sometimes,
drugs. The cost of the reverse-engineering is
development of new drugs is used to develop
over $1 billion dollars and bioequivalent versions to
requires more than 12 years existing drugs. Generic
(on an average). manufacturers also do not
bear the burden of proving
the safety and efficacy of
the drugs through clinical
trials, since the brand
name company has
already conducted these
trials.
Nature of the The companies involved in These companies are
companies new drug development are mid-size companies.
usually cash rich companies Some of these companies
which can afford the are huge players eyeing
investment for the drug to be innovator companies
discovery. producing their own
drugs.
Companies also MNCs, Big Pharma players, Generic players.
called as Multinational companies,
Brand name companies.

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 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Innovator companies Generic companies

Filing of the Usually called as New drug Usually called as
product with application in United states Abbreviated new drug
regulatory agency and other major markets. application/ Similar
product/ Equivalent
product/ Generic product
in the major markets.
IPR activities Innovator companies rely Generic companies are
heavily on the intellectual involved mostly into
property rights protection so preparing non-infringing
as to avoid the competition products and lesser IPR
and recover the huge cost of Related activities.
drug development.
Examples Pfizer, Non-Indian companies
GlaxoSmithKline, Mylan,
Bristol-Myers-Squibb, Teva,
Boehringer Ingelheim, Sandoz,
AstraZeneca, Ratiopharma,
Eisai, Apotex,
Elli Lilly, Impax,
Merck, Watson,
Novo Nordisk, Hospira,
Novartis, Actavis,
Sanofi, Arrow generics,
Abbott, Stada,
Takeda, Zentiva,
Daiichi Sankyo,
Celgene corporation. Most of the Indian
companies are generic
Unfortunately, none of the companies. The key
Indian pharma companies players include
have ever discovered a new Dr. Reddy’s lab,
drug. Hence, none of the Sun Pharma,

© Pharma Literati Centre of Excellence of Pharma education -6-

 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Innovator companies Generic companies

company is Indian in the list. Cipla,
Glenmark,
Torrent Pharma,
Lupin Pharma,
Zydus cadila,
Aurobindo,
Wockhardt
(Detailed list as included
as appendix)

A same company may be working in different verticals to produce different

drugs e.g. a company working in both formulations and APIs is called usually
as vertically integrated company.

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 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Some facts about generic medicines1

Generic Medicines: Equivalent versions of trusted medicines
A generic medicine is a medicine that is developed to be the same as a
medicine that has already been authorised (the ‘reference medicine’).

A generic medicine contains the same active substance(s) as the reference

medicine, and it is used at the same dose(s) to treat the same disease(s) as
the reference medicine. However, the name of the medicine, its appearance
(such as color or shape) and its packaging can be different from those of the
reference medicine.

A generic medicine is marketed in compliance with international patent law. It

is identified either by its internationally approved non-proprietary scientific
name (INN) or by its own brand name.

Generic Medicines: Quality medicines at affordable prices

A generic medicine provides the same quality, safety and efficacy as the
original brand name product and undergoes strict scrutiny before it is licensed
and given market approval by the national regulatory authorities.
A generic medicine is typically 20% to 90% less expensive than the brand-
name original. In addition, the availability of lower-priced generic medicines
brings down the price of originator drugs through market competition,
producing even further savings to patients.

Generic Medicines: Strict observance of bioequivalence.

The key factor in creating a generic medicine is establishing bioequivalence.
Bioequivalence means that, when compared scientifically, the generic
medicine and the originator product demonstrate essentially the same rate
and extent of biological availability of the active substance in the body when
administered in the same dose. In simple terms, the generic medicine and the
original product must be equally effective.

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 CHAPTER 1: UNDERSTANDING INNOVATOR V/S GENERICS

Generic Medicines: Benefiting society

In an era when increasing demands are being made on healthcare services,
generic medicines provide a major benefit to society by ensuring patient
access to quality, safe and effective medicines while reducing the cost of
pharmaceutical care.

Generic Medicines: Bringing economic sense to pharmaceutical care

Increasing the availability and range of generic medicines on the market is
essential for pharmaceutical care. Allowing effective competition between
generic medicines and patent-expired original brands is crucial to lowering
pharmaceutical costs and stimulating innovation.

Generic Medicines: Contributing to growth and employment

The generic medicines industry operates advanced research laboratories and
production plants run by highly skilled personnel. Companies typically invest
6-16% of their revenues (and in some cases up to 30%) into researching and
developing new products.

Generic Medicines: Committed to the future

Ageing populations and rapidly rising treatment costs are causing
governments throughout the world to look again at the sustainability of their
healthcare provision. Economically priced generic medicines provide a cost-
effective means of controlling the fastest growing budget item in healthcare or
pharmaceuticals.

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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

Pharmaceutical manufacturing occurs in two general steps. First, firms convert

raw materials into Active Pharmaceutical Ingredients (APIs). API production is a
highly sophisticated, technically demanding chemical and biochemical
fermentation and/or synthesis process. APIs constitute a significant portion of the
total cost for a drug. For example, on average, 40-50% of the cost of goods sold
for generic oral solids comes from APIs. The average API profit margin is less
than 10%. In fact, many large bulk API exporters from India work with a 3%
margin on exported products1.

An active pharmaceutical ingredient (API) is the substance in a pharmaceutical

drug. The similar terms like active ingredient or bulk active or bulk drug are also
used in medicine. Some medications may contain more than one active
ingredient. The traditional word for the API is pharmacon or pharmakon (from
Greek: adapted from pharmacos) which originally denoted a magical substance
or drug. API may be defined as “Any substance or combination of substances
used in a finished pharmaceutical product, intended to furnish pharmacological
activity or to otherwise have direct effect in the diagnosis, cure, mitigation,
treatment or prevention of disease, or to have direct effect in restoring, correcting
or modifying physiological functions in human beings.”2

While a definition of starting material applicable to all situations cannot be given,

the following criteria for defining a starting material may be helpful3:
a. It is incorporated into the new drug substance as an important structural
element.
b. It is commercially available.

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08082011.pdf
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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

c. It is a compound whose name, chemical structure, chemical and physical

characteristics and properties and impurity profile are well defined in the
chemical literature.
d. It is obtained by commonly known procedures (this applies principally to
starting materials extracted from plants and animals and to semi-synthetic
antibiotics).

APIs include substances manufactured by processes such as

(1) chemical synthesis;
(2) fermentation;
(3) recombinant DNA or other biotechnology methods;
(4) isolation/recovery from natural sources; or
(5) any combination of above processes.

API process development involves selection, preliminary design and scale-up of

the equipment used to carry out the recipe for producing the desired form of the
drug substance.

Generally speaking, the API market is very competitive with many producers. As
a result, API manufacturers specialize and target their manufacturing based on a
combination of the market opportunities and firm skills. Several regulatory
authorities are involved to ensure that firms manufacture APIs and final
formulations in a quality manner. The geographic location of the manufacturer
and market as well as the financing source determines which regulatory agencies
are involved. Driven by lower costs, API manufacturing has slowly been shifting
from the historical leaders in Western countries to newer firms in India and
China4.

Active Pharmaceutical Ingredients (APIs) are integral components of both the

quality and the cost of pharmaceutical finished dosage forms.

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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

US Drug master files (DMF)

A Drug Master File (DMF) is a submission to the US Food & Drug Administration
[USFDA] of information, usually concerning the Chemistry, Manufacturing and
Controls (CMC) of a component of a drug product, to permit the FDA to review
this information in support of a third party's submission.

The information contained in the DMF may be used to support an Investigational

New Drug Application (IND), a New Drug Application (NDA), an Abbreviated New
Drug Application (ANDA), another DMF, an Export Application, or amendments
and supplements to any of these. A DMF is NOT a substitute for an IND, NDA,
ANDA, or Export Application. It is not approved or disapproved. Technical
contents of a DMF are reviewed only in connection with the review of an IND,
NDA, ANDA, or an Export Application5.

TYPES OF DMFs
The types of DMFs are:
Type of DMF Details
Type I Manufacturing Site, Facilities, Operating Procedures, and
Personnel (no longer applicable)
Type II Drug Substance, Drug Substance Intermediate, and Material
Used in Their Preparation, or Drug Product
Type III Packaging Material

Type IV Excipient, Colorant, Flavor, Essence, or Material Used in Their

Preparation
Type V FDA Accepted Reference Information

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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

Formulations or finished dosage forms

The second step in pharmaceutical manufacturing is the final formulation of the
drugs. Unlike the chemical business of API production, final formulations belong
to the manufacturing sector6.

Bulk drugs are the active pharmaceutical ingredients (APIs), which are used to
manufacture formulations. Whereas, formulations are the end-products of the
medicine manufacturing process and can take the form of tablets, capsules,
injectable or syrups, and can be administered directly to patients. The aim of the
pharmaceutical development is to design a quality finished product and its
manufacturing process to consistently deliver the intended performance of the
product.

Formulation can be defined as an integral part of activities in the phases of

drug/biomaterials discovery, development and manufacturing. Formulation will
ensure that a pharmacologically active drug can be synthesized and a
medicament can be produced, and it can be delivered by or to a subject, and it is
administered in a desired amount via the route from where it most optimally
reaches its physiological and pharmacological site of action and it is effective
there within the most optimal time window in order to achieve the therapeutic
effect with minimal undesired effects7.

A quality formulation should be developed considering following factors 8:

 Intended use in clinical setting, route of administration, dosage form,
delivery systems;
 Dosage strength(s);

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ali1%3B7087/publishedcontent/publish/programmes/pharma/documents/survey_on_pharmaseutical_formu
lation/report_on_formulation_research_final_26_10_1.pdf
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Guideline.pdf

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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

 Container closure system;

 Therapeutic moiety release or delivery and attributes affecting
pharmacokinetic characteristics (e.g., dissolution, aerodynamic
performance) appropriate to the drug product dosage form being
developed;
 Drug product quality criteria (e.g., sterility, purity, stability and drug release)
appropriate for the intended marketed product.

Final formulations require different skills and equipment than does API
manufacturing. Economies of scale matter, but less so than for API
manufacturing as manufacturers can produce fifty or more final formulations in a
single plant with adaptable equipment. Profit margins for final formulations
average 20-30%9.

Formulation development involves10:

Preformulation:
It involves the scientific methods of materials research which deals with the
physicochemical properties of drug substance and its compatibility with potential
excipient materials. The important properties of active drug and its form to be
studied include hydrofobicity and acidicity/basicity characteristics, solubility,
particle size, crystal structure and polymorphism which affect dissolution as well
as compatibility with the excipients.

Preclinical formulation:
It includes research activities revealing the interaction of drug substance with
suitable excipients in order to achieve useable (commonly as solutions)
formulations for cell based assays and experimental animal studies. The one of
the challenges includes the selection of usable formulations of safety and
9
Id
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ali1%3B7087/publishedcontent/publish/programmes/pharma/documents/survey_on_pharmaseutical_formu
lation/report_on_formulation_research_final_26_10_1.pdf

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 CHAPTER 2: UNDERSTANDING THE API AND FORMULATION BUSINESS

toxicology studies where high exposure (high administered doses) are needed,
intravenous administration of solution as needed in pharmacokinetic and safety
studies, and the preparation of a prototype formulation for proof-of-concept
studies especially when the administration route is different from the oral or
parenteral route.

Clinical study formulation

It consists of gradual development of preparations which are applicable to
studies of tolerability, safety and pharmacokinetics of a new chemical entity or
the clinical proof-of-principle studies of new forms of marketed drugs.

Manufacturability:
It is the important aspect in pharmaceutical formulation, and this includes
Development, Scaleup, Process Validation, Transition and Documentation and
transfer to (Contract) Manufacturing.

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 CHAPTER 3: UNDERSTANDING PHARMACEUTICAL SUPPLY CHAIN

CHAPTER 3: UNDERSTANDING PHARMACEUTICAL SUPPLY CHAIN

GENERIC PHAMACEUTICAL INNOVATORS

DRUGS COMPANIES (BRAND DRUGS)

WHOLESALERS

PHARMACIES HOSPITALS

PATIENTS

REIMBURSEMENT PRESCRIPTION

INSURANCE DOCTORS

FIGURE 1: PHARMACEUTICAL SUPPLY CHAIN

The supply chain ranges from production of the medicines by pharmaceutical
companies to consumption by patients.

The main supply channel for prescription medicines runs from the
pharmaceutical company through wholesalers and pharmacies to the patients
(retail sale). In general, medicines are prescribed by medical doctors and
reimbursed by the insurance or health system1.

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 CHAPTER 3: UNDERSTANDING PHARMACEUTICAL SUPPLY CHAIN

Producers
The sector is characterized primarily by two types of producers: originator
companies and generic companies. Both types of companies sometimes buy
active pharmaceutical ingredients (APIs) from specialised (upstream) companies.
The exact size of the upstream market and the frequency of purchase by
pharmaceuticals producers are unknown at the moment.

Originator companies carry out research into new pharmaceuticals, develop them
from the laboratory to marketing authorisation and sell them on the market.
These companies can range from very large multinationals to small
manufacturing entities (SMEs) concentrating on certain niche products. Their
products are largely patent-protected. In general the business model of originator
companies is based on research into, and the development of, new chemical
entities (NCEs) and the incremental improvement of chemical entities already on
the market. Furthermore, many originator companies are active or intend to
become involved in research into and production of biopharmaceuticals in the
immediate future. Large originator companies focus on the whole life cycle,
meaning research and development, promotion and sales of their innovations.
SMEs often lack the resources to put their innovations on the market and
therefore focus on licensing or selling their innovations.

Generic companies produce and sell pharmaceutical products which have do not
have an exclusivity status. The business model of generic companies is aimed at
the development of a medicine which is identical or equivalent to successful
originator products. Generic companies market their products as soon as the
originator product encounters loss of exclusivity. The products are sold at a much
lower price than the original product.

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 CHAPTER 3: UNDERSTANDING PHARMACEUTICAL SUPPLY CHAIN

Distribution
The distribution business for prescription medicines is highly sophisticated. This
is due to a particular need to ensure constant supply to retailers/pharmacists, as
well as because of special needs for specific products.

 Wholesale
The wholesalers carry and distribute a range of products and are able to
deliver all medicines used in their geographical area within a short period of
time. They carry full stock-holding responsibility.

Some wholesalers supply a more restricted range of prescription medicines,

focusing on the distribution of high-value and high-volume products. The
number of medicines stocked by short-line wholesalers can vary substantially,
with some holding a very small number of medicines for distribution to a
specific group of pharmacies.

The wholesale channel is mostly used by community pharmacies. Hospitals

more often buy directly from pharmaceutical companies, following a tender
process for example, but they may also purchase part of their requirements
via wholesalers.

 Retail
Retailers of prescription medicines are typically community pharmacies. Other
channels of supply include self-dispensing doctors, hospital pharmacies, and,
for non-prescription products, pharmacy outlets, medicine stores,
supermarkets and petrol stations.

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 CHAPTER 3: UNDERSTANDING PHARMACEUTICAL SUPPLY CHAIN

Health insurance:
Health insurance is insurance against the risk of incurring medical expenses
among individuals. By estimating the overall risk of health care expenses among
a targeted group, an insurer can develop a routine finance structure, such as a
monthly premium or payroll tax, to ensure that money is available to pay for the
health care benefits specified in the insurance agreement. The benefit is
administered by a central organization such as a government agency, private
business, or not-for-profit entity.

National health insurance (sometimes called statutory health insurance) is health

insurance that insures a national population for the costs of health care and
usually is instituted as a program of healthcare reform. It is enforced by law. It
may be administered by the public sector, the private sector, or a combination of
both. Funding mechanisms vary with the particular program and country.
National or Statutory health insurance does not equate to government run or
government financed health care, but is usually established by national
legislation. In some countries, such as Australia's Medicare system or the UK's
NHS, contributions to the NHI or SHI system are made via taxation and therefore
are not optional even though membership of the health scheme it finances is. In
practice of course, most people paying for NHI will join the insurance scheme.
Where the NHI scheme involves a choice of multiple insurance funds, the rates
of contributions may vary and the person has to choose which insurance fund to
belong to. In the United States, the Patient Protection and Affordable Care Act
includes a "health insurance mandate" that produces the same effect as NHI or
SHI, though relies more heavily on the private market than their public sector
(Medicare, Medicaid, and S-CHIP) than most countries.

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

Pharmaceutical industry usually categorizes different markets based on the
market size, regulations in the country, economical conditions of the country and
the growth opportunities available. There is no global terminology, but the
markets are usually categorized as Regulated markets, Semi-regulated or
emerging markets and rest of the world.

Market Category of market 2016 market size**

USA Regulated market 461.7 US$Bn
Europe Regulated market 151.8 US$Bn (Top 5)
Canada Regulated market 19.3 US$Bn
Japan Regulated market 90.1 US$Bn
Brazil Semi-regulated or emerging markets 26.9 US$Bn
Russia Semi-regulated or emerging markets 11.6 US$Bn
India Semi-regulated or emerging markets 17.4 US$Bn
China Semi-regulated or emerging markets 116.7 US$Bn
South Korea Semi-regulated or emerging markets 13.0 US$Bn
Australia Semi-regulated or emerging markets 13.5 US$Bn
ROW Rest of the world countries 112.4 US$Bn
Global 1104.6 US$Bn
**As per IMS Market Prognosis, Oct 2016.

ROW (Rest of the world countries): Among them the major ones are
Latin American geographies like Venezuela, Peru.
Asian geographies like Philippines, Malaysia, Singapore.
Countries from Central and Eastern Europe.
African countries, Australia, New Zealand.

We’ll study major markets, the industry therein and characteristics of them.

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

The value of the global pharmaceutical market is expected to touch $ 1.5 trillion
by 2021 as per latest IMS report.

FIGURE 2: GLOBAL PHARMA MARKET GROWTH

FIGURE 3: GROWTH FOR DIFFERENT THERAPEUTIC AREAS

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

Another report by Deallus consulting 1 : provides an interesting pattern for the

growth markets.

FIGURE 4: GROWTH MARKETS TILL 2020

Emerging pharmaceutical markets:

The robust growth in the pharmaceutical markets of emerging world economies
has outpaced the overall growth of the global pharmaceutical market. The
emerging markets are being driven by rapidly growing economies of these
countries, increasing per capita income, increasing prevalence of lifestyle
diseases due to rapid urbanization, and low-cost factors.

The global pharmaceutical market experienced exponential growth over the past
decade but is now witnessing a slump. This slump is attributed to saturation in
key markets such as United States and Western Europe, patent expiry of key
drug formulations and a static economy. On the other hand, many growing
economies in the developing regions of Asia and Latin America are witnessing a
continuous high growth rate in the pharmaceutical sector. In the coming years,

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

these markets are expected to continue their robust growth owing to various
factors such as increasing prevalence of lifestyle diseases, rise in spending on
healthcare and increased access and affordability to healthcare services. This
seismic shift in the pharmaceutical markets of the world, away from the major
developed powers of the U.S., Japan, France, Germany, Italy, United Kingdom,
Spain and Canada to a set of new, dynamic, fast-growing emerging economies
has created new dynamics.

The growth in pharmaceutical markets in developing countries with emerging

economies (E7 countries - countries like Brazil, Russia, China, India, Turkey,
Mexico, and Indonesia) has outpaced the overall growth of the global
pharmaceutical market. The factors including rapidly growing economies of these
countries, increasing per capita income, increasing prevalence of lifestyle
diseases, and low-cost are driving the pharmaceutical markets in these countries
with a fast pace.

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

US pharmaceutical market:
The United States is the world’s largest market for pharmaceuticals and the world
leader in biopharmaceutical research. U.S. firms conduct 80 percent of the
world’s research and development in biotechnology.

Source: Evaluate Pharma – August 2016

Indian Generic companies selling the generic products in US includes,

Dr. Reddy’s Labs, Sun Pharma, Cipla, Glenmark, Lupin Pharma, Alembic, Zydus,
Aurobindo, Wockhardt, Macleods Pharma, Ajanta Pharma, Alkem, USV, Emcure,
Orchid, Torrent.

 USFDA: In the United States, new pharmaceutical products must be approved

by the Food and Drug Administration (FDA) as being both safe and effective. The

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FDA is responsible for protecting and promoting public health through the
regulation and supervision of food safety, tobacco products, dietary supplements,
prescription and over-the-counter pharmaceutical drugs (medications), vaccines,
biopharmaceuticals, blood transfusions, medical devices, electromagnetic
radiation emitting devices (ERED), and veterinary products. The FDA provides
information about approved drugs at the Orange Book site.

Visit http://www.fda.gov/Drugs/default.htm for details.

 Orange book:
The publication Approved Drug Products with Therapeutic Equivalence
Evaluations (the List, commonly known as the Orange Book) identifies drug
products approved on the basis of safety and effectiveness by the Food and
Drug Administration (FDA). The Approved Drug Products list first appeared as a
print publication in 1980. With the 25th edition (2005), PDF versions of Annual
Edition and the Cumulative Supplement became available. The Orange Book
Search was added to the FDA website on October 31, 1997. It can be accessed
at http://www.accessdata.fda.gov/scripts/cder/ob/default.cfm

The search option includes

1. Search by active ingredient (name of the drug)
2. Search by proprietary name (brand name of the drug)
3. Search by applicant holder (name of the company)
4. Search by patent (patent number)
5. Search by application number (of the product)

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Example of details available on orange book site for product:

Active Ingredient: SILDENAFIL CITRATE

Dosage Form; Route: TABLET; ORAL

Proprietary Name: REVATIO

Applicant: PFIZER

Strength: EQ 20MG BASE

Application Number: N021845

Product Number: 001

Approval Date: Jun 3, 2005

Reference Listed Drug Yes

RX/OTC/DISCN: RX

TE Code:

The site also provides for data exclusivity and patent data.

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Types of drug applications in US:

1. Investigational New Drug (IND):
Current Federal law requires that a drug be the subject of an approved marketing
application before it is transported or distributed across state lines. Because a
sponsor will probably want to ship the investigational drug to clinical investigators
in many states, it must seek an exemption from that legal requirement. The IND
is the means through which the sponsor technically obtains this exemption from
the FDA.

2. New Drug Application (NDA):

When the sponsor of a new drug believes that enough evidence on the drug's
safety and effectiveness has been obtained to meet FDA's requirements for
marketing approval, the sponsor submits to FDA a new drug application (NDA).
The application must contain data from specific technical viewpoints for review,
including chemistry, pharmacology, medical, biopharmaceutics, and statistics. If
the NDA is approved, the product may be marketed in the United States. For
internal tracking purposes, all NDA's are assigned an NDA number.

3. Abbreviated New Drug Application (ANDA):

An Abbreviated New Drug Application (ANDA) contains data that, when
submitted to FDA's Center for Drug Evaluation and Research, Office of Generic
Drugs, provides for the review and ultimate approval of a generic drug product.
Generic drug applications are called "abbreviated" because they are generally
not required to include preclinical (animal) and clinical (human) data to establish
safety and effectiveness. Instead, a generic applicant must scientifically
demonstrate that its product is bioequivalent (i.e., performs in the same manner
as the innovator drug). The innovator drug is also called as reference listed drug
(RLD). Once approved, an applicant may manufacture and market the generic
drug product to provide a safe, effective, low cost alternative to the American
public.

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One-way scientists demonstrate bioequivalence is to measure the time it takes

the generic drug to reach the bloodstream in 24 to 36 healthy, volunteers. This
gives them the rate of absorption, or bioavailability, of the generic drug, which
they can then compare to that of the innovator drug. The generic version must
deliver the same amount of active ingredients into a patient's bloodstream in the
same amount of time as the innovator drug.

4. Over-the-Counter Drugs (OTC):

Over-the-counter (OTC) drugs play an increasingly vital role in America's health
care system. OTC drug products are those drugs that are available to consumers
without a prescription. There are more than 80 therapeutic categories of OTC
drugs, ranging from acne drug products to weight control drug products. As with
prescription drugs, CDER oversees OTC drugs to ensure that they are properly
labeled and that their benefits outweigh their risks.

5. Biologic License Application (BLA):

Biological products are approved for marketing under the provisions of the Public
Health Service (PHS) Act. The Act requires a firm who manufactures a biologic
for sale in interstate commerce to hold a license for the product. A biologics
license application is a submission that contains specific information on the
manufacturing processes, chemistry, pharmacology, clinical pharmacology and
the medical affects of the biologic product. If the information provided meets FDA
requirements, the application is approved and a license is issued allowing the
firm to market the product.

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Specialty products and 505 b (2) applications:

The 505(b) (2) regulatory pathway is defined in The Federal Food Drug and
Cosmetics Act as an NDA containing investigations of safety and effectiveness
that are being relied upon for approval and were not conducted by or for the
applicant, and for which the applicant has not obtained a right of reference.
These applications differ from the typical NDA, in that they allow a sponsor to rely,
at least in part, on the FDA’s findings of safety and/or effectiveness for a
previously approved drug (the “reference drug”).

The 505(b) (2) approval route can be utilized for a wide range of products,
especially for those that represent a limited change from a previously approved
drug. The following are examples of changes to approved drugs which would be
appropriate to submit as 505(b) (2) applications:
 Changes in dosage form, strength, route of administration, formulation, dosing
regimen, or indication.
 A new combination product where the active ingredients have been previously
approved.
 Change to an active ingredient (e.g., different salt, ester complex, chelate, etc).
 New molecular entity when studies have been conducted by other sponsors
and published information is pertinent to the application (e.g., a pro-drug or active
metabolite of an approved drug).
 Change from an Rx indication to an OTC indication.
 Change to an OTC monograph drug (e.g., non-monograph indication, new
dosage form).
 Drugs with naturally derived or recombinant (i.e, biological) active ingredients
where additional limited clinical data is necessary to show the ingredient is the
same as the ingredient in the reference drug.
 Bioinequivalence for drug products where the rate and or extent of absorption
exceed or are otherwise different from the standards for bioequivalence
compared to a listed drug. Additional studies might be required to document the
safety and efficacy at the different rate and extend of delivery.

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Abbreviated new drug applications (ANDA) details:

An Abbreviated New Drug Application (ANDA) is an application for a U.S. generic
drug approval for an existing licensed medication or approved drug.

A generic drug product is one that is comparable to an innovator drug product in

dosage form, strength, route of administration, quality, performance
characteristics and intended use. All approved products, both innovator and
generic, are listed in FDA's Approved Drug Products with Therapeutic
Equivalence Evaluations (Orange Book).

The bioequivalence of a drug can be demonstrated by comparing drugs

dissolution or transdermal drug absorption in case of topically active drug, in
case of systemically active drug blood concentration of those drugs is compared
with innovator drugs.

Using bioequivalence as the basis for approving generic copies of drug products
was established by the Drug Price Competition and Patent Term Restoration Act
of 1984, also known as the Hatch-Waxman Act. This Act expedites the
availability of less costly generic drugs by permitting FDA to approve applications
to market generic versions of brand-name drugs without conducting costly and
duplicative clinical trials. At the same time, the brand-name companies can apply
for up to five additional years longer patent protection for the new medicines they
developed to make up for time lost while their products were going through FDA's
approval process. Innovator-name drugs are subject to the same bioequivalence
tests as generics upon reformulation.

An Abbreviated New Drug Application (ANDA) is submitted to the FDA when

seeking review and approval for a generic drug product. If approved, the generic
drug may be manufactured and sold in the U.S. market.

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Bioavailability (BA) and bioequivalence (BE) studies provide important

information in the overall set of data that ensure the availability of safe and
effective medicines to patients and practitioners. BA and BE measures are
frequently expressed in systemic exposure measures, such as area under the
plasma concentration-time curve (AUC) and maximum concentration (Cmax).
These measures of systemic exposure are assumed to relate in some way to
safety and efficacy outcomes that may be expressed in biomarkers, surrogate
endpoints, or clinical benefit endpoints.

Differences between NDA and ANDA requirements2:

FIGURE 5: DIFFERENCES BETWEEN NDA AND ANDA REQUIREMENTS

2
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A typical ANDA review process3 is summarized as:

FIGURE 6: A TYPICAL ANDA REVIEW PROCESS

3
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European pharmaceutical market:

Unlike the U.S, the European generics market is quite diverse and complex.
Regulations, competitive landscape and generic penetration vary across markets.
Whilst the US is still the most important market in terms of the total value of
pharmaceutical sales, the value of EU pharmaceutical production surpasses that
of the US. This is reflected in the EU’s strong position in international trade of
pharmaceuticals. The European Union (EU) has experienced closer market
integration through the removal of trade barriers, the establishment of a single
market. With the aim of enhancing quality of life along with industry
competitiveness and R&D capability, many European directives have been
adopted to achieve a single EU-wide pharmaceutical market.

Despite four decades of Community level attempts at convergence, European

pharmaceuticals remain 25 separate national markets rather than a single
“internal” market. While some of the European markets, such as the U.K,
Germany and Netherlands are characterized by relatively high generic
penetration, other key markets like France, Italy and Spain have low generic
usage at around 25%.

With respect to the intellectual property, both national patent system and the
European patent System provide patent protection. Patents granted by the
European patent office become a bundle of patents enforceable in the
designated states, which are each subject to national rules.

Medicines can be authorized in the European Union by using following

procedures:
 Centralized authorization procedure
 National authorization procedures
 Decentralized procedure
 Mutual-recognition procedure

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1. Centralized authorization procedure

http://www.emea.europa.eu/htms/human/epar/a.htm
The European Medicines Agency is responsible for the centralized procedure
(also known as the 'Community authorization procedure'). This procedure results
in a single marketing authorization (called a 'Community marketing authorization')
that is valid across the European Union, as well as in the EEA/EFTA states
Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for
human medicines that are:
 derived from biotechnology processes, such as genetic engineering;
 intended for the treatment of HIV/Aids, cancer, diabetes,
neurodegenerative disorders or autoimmune diseases and other
immune dysfunctions;
 officially designated 'orphan medicines' (medicines used for rare
diseases).

For medicines that do not fall within these categories (the 'mandatory scope'),
companies have the option of submitting an application for a centralized
marketing authorization to the European Medicines Agency, as long as the
medicine concerned is a significant therapeutic, scientific or technical innovation,
or if its authorization would be in the interest of public health.

Applications through the centralized procedure are submitted directly to the

European Medicines Agency. Evaluation by the Agency's relevant scientific
committee takes up to 210 days, at the end of which the committee adopts an
opinion on whether the medicine should be marketed or not. This opinion is then
transmitted to the European Commission, which has the ultimate authority for
making decisions on marketing authorizations in the EU.

Once a Community marketing authorization has been granted, the marketing-

authorization holder can begin to make the medicine available to patients and
healthcare professionals in all EU countries.

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2. National authorization procedures

Each EU Member State has its own procedures for the authorization, within their
own territory, of medicinal products that fall outside the scope of the centralized
procedure.

National regulatory agencies in Europe:

Country Name
Austria Austrian Agency for Health and Food Safety
Belgium Federal Agency for Medicines and Health Products
Bulgaria Bulgarian Drug Agency
Cyprus Ministry of Health - Pharmaceutical Services
Czech Republic State Institute for Drug Control
Denmark Danish Health and Medicines Authority
Estonia State Agency of Medicines
Finland Finnish Medicines Agency
National Agency for the Safety of Medicine and Health
France
Products
Germany Federal Institute for Drugs and Medical Devices
Germany Paul Ehrlich Institute
Greece National Organization for Medicines
Hungary National Institute of Pharmacy
Iceland Icelandic Medicines Agency
Ireland Irish Medicines Board
Italy Italian Medicines Agency
Latvia State Agency of Medicines
Liechtenstein Office of Health / Department of Pharmaceuticals
Lithuania State Medicines Control Agency
Luxembourg Ministry of Health
Malta Medicines Authority
Netherlands Medicines Evaluation Board

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Country Name
Netherlands Healthcare Inspectorate
Norway Norwegian Medicines Agency
Office for Registration of Medicinal Products, Medical
Poland
Devices and Biocidal Products
Poland Main Pharmaceutical Inspectorate
Portugal National Authority of Medicines and Health Products
Romania National Medicines Agency
Slovakia State Institute for Drug Control
Agency for Medicinal Products and Medical Devices of the
Slovenia
Republic of Slovenia
Spain Spanish Agency for Medicines and Health Products
Sweden Medical Products Agency
United Kingdom Medicines and Healthcare Products Regulatory Agency
TABLE 1: NATIONAL REGULATORY AGENCIES IN EUROPE

3. Decentralized procedure
Using the decentralized procedure, companies may apply for simultaneous
authorization in more than one EU country of medicinal products that have not
yet been authorized in any EU country and that do not fall within the mandatory
scope of the centralized procedure.

4. Mutual-recognition procedure (http://www.hma.eu/mri.html)

In the mutual-recognition procedure, a medicine is first authorized in one EU
Member State, in accordance with the national procedures of that country.
Following this, further marketing authorizations can be sought from other EU
countries in a procedure whereby the countries concerned agree to recognize the
validity of the original, national marketing authorization.
In some cases, disputes arising in these procedures can be referred to the
European Medicines Agency for arbitration.

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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

Source: Evaluate Pharma – August 2016

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Japanese pharmaceutical market:

Japan is the second-largest individual pharmaceutical market in the world. It
accounts for less than 10% of the total global pharma market. The country’s
pharma market is expected to grow annually by ~2.2%.

As per recent GlobalData report, Japan’s pharmaceutical market is projected to

reach $72.0 billion in 2021, increasing at a Compound Annual Growth Rate
(CAGR) of 0.3%. The medical device market was valued at $56 billion in 2016
and is projected to grow at a CAGR of 7.4% to $80 billion in 2021. These positive
growth trends can be primarily attributed to:
 An increasingly elderly population
 Universal health coverage
 Government initiatives

Indian companies operating in Japan4

The first Indian generics company to make in-roads into Japan was Ranbaxy
Laboratories Ltd (now wholly owned by domestic innovator Daiichi Sankyo). In
2002, Ranbaxy acquired a 50% stake in Nihon Pharmaceutical Industry, a
generic subsidiary of Japanese innovator Nippon Chemiphar. In January 2009,
the two companies announced that they will terminate their relationship, Nippon
Chemiphar noting two months later that it will take steps to assure the quality and
continuous supply of the products manufactured by Ranbaxy.

Hyderabad-based Dr Reddy’s is currently considering enlarging its opportunities

in Japan, with the possible establishment of a local office in Tokyo or Osaka.

Zydus Cadila, based in Ahmedabad, opened a fully owned subsidiary called

Zydus Pharma in Tokyo in August 2006, and acquired the small Japanese
generic company Nippon Universal Pharmaceutical the following April. The first

4
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 CHAPTER 4: UNDERSTANDING THE PHARMACEUTICAL MARKETS

product of this venture has already been completed, in-licensing the hypertension
treatment methyldopa (brand name Aldomet) from Japanese innovator Banyu, a
subsidiary of Merck & Co.

Torrent Pharmaceuticals, also based in Ahmedabad, opened a fully-owned

subsidiary in Yokohama in April 2006, only to exit from the Japanese market two
years later.

Source: Evaluate Pharma – August 2016

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How the company dynamics have changed over the years?

Source: Hardman & Co Life Sciences Research

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Canadian pharmaceutical market:

Canada is a leading market for U.S. pharmaceutical exporters and among the top
10 pharmaceutical markets globally. The market is supported by a growing
elderly population, high per capita pharmaceutical spending and an advanced
regulatory system.

Canada has a universal health care system that covers all citizens and, as a
result, the majority of the country’s health care spending comes from the
government. On average, public healthcare expenditure accounts for around
70% of Canada’s total, while private health insurance companies contribute
around 12%.

Brand-name products account for 77% of Canadian sales and 34% of

prescriptions. Generics account for the rest (as per IMS Pharmafocus 2020).

The Canadian pharmaceutical market is set to grow from $22.6 billion in 2016 to
around $25 billion by 2021, according to research and consulting firm GlobalData.

In 2016, the value of the generic pharmaceutical market was $6.2 billion, with
generic drugs accounting for around 70% of prescriptions in Canada, compared
with 89% in the US. However, generic drug sales account for only 22.4% of the
overall pharmaceutical market. The use of generic medicines saved nearly $20
billion for the government in 2016, and GlobalData expects the market to
continue to grow as the government promotes generics usage and as quality
perception improves among patients.

In 2016, the top ten pharmaceutical companies accounted for half of total
Canadian pharmaceutical sales including both prescription and non-prescription
medicines (IMS Pharmafocus 2021).

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Rank Leading Companies Total Sales ($ billions) Market Share (%)

1 Johnson & Johnson 2.93 11.4

2 Novartis 1.24 4.8

3 Teva/Cobalt/Actavis 1.19 4.6

4 Apotex 1.19 4.6

5 Merck 1.14 4.4

6 Pfizer/Hospira 1.06 4.1

7 AstraZeneca 0.93 3.6

8 Roche 0.88 3.4

9 Gilead 0.88 3.4

10 AbbVie 0.86 3.4

Source: IMS Pharmafocus 2021

Leading Pharmaceutical Companies in Canada in 2016

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 CHAPTER 5: INDIAN PHARMACEUTICAL INDUSTRY

CHAPTER 5: INDIAN PHARMACEUTICAL INDUSTRY

The Indian pharmaceuticals market is the third largest in terms of volume and
thirteenth largest in terms of value, as per a report by Equity Master. India is the
largest provider of generic drugs globally with the Indian generics accounting for
20 per cent of global exports in terms of volume. Of late, consolidation has
become an important characteristic of the Indian pharmaceutical market as the
industry is highly fragmented.

The government started to encourage the growth of drug manufacturing by

Indian companies in the early 1960s, and with the Patents Act in 1970. However,
economic liberalization in 90s enabled the industry to become what it is today.
This patent act removed composition patents from food and drugs, and though it
kept process patents, these were shortened to a period of five to seven years.
The lack of patent protection made the Indian market undesirable to the
multinational companies that had dominated the market, and while they streamed
out. Indian companies carved a niche in both the Indian and world markets with
their expertise in reverse-engineering new processes for manufacturing drugs at
low costs. Although some of the larger companies have taken baby steps
towards drug innovation, the industry as a whole has been following this
business model until the present.

Indian pharmaceutical and biopharmaceutical industries are research based

industries, where there is always necessity of new technologies, new drugs, and
improvements in the processes to avoid undesirable substances and alterations
in the formulation strategies for the betterment of drug profile. Indian
pharmaceutical and biopharmaceutical industries are basically generic industries
viz. making copycat of the off-patented molecules. The industries grew basically
in the non-regulated markets and through reverse engineering technologies in
research. The industries have progressed through the value-added ladder of
pharmaceutical production as a result of its domestic policies as well as the
presence of supportive factor conditions, namely, the pool of scientific excellence

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 CHAPTER 5: INDIAN PHARMACEUTICAL INDUSTRY

available at low cost, and the large domestic demand for drugs which enables
economic viability in the scale intensive active pharmaceutical ingredient (API)
production stage.

The industry suffers from various weaknesses:

 Low investments in innovative R&D and lack of resources to compete with
MNCs for New Drug Discovery Research and to commercialize molecules on a
worldwide basis.
 Lack of strong linkages between industry and academia.
 Low medical expenditure and healthcare spend in the country
 Production of spurious and low quality drugs tarnishes the image of industry at
home and abroad.

Indian pharmaceutical industry is undergoing fast paced changes. The Indian

Generics market is witnessing rapid growth opening up immense opportunities
for firms. This is further triggered by the fact that generics more and more drugs
are going off patent in the coming few years which is close to 15% of the total
prescription market of the US. The Indian pharmaceutical companies have been
doing extremely well in markets such as US and Europe, notable among these
being Sun pharma, Dr. Reddy’s Labs, Wockhardt, Cipla, Nicholas Piramal and
Lupin. The companies have their strategies in place to leverage opportunities
and appropriate values existing in formulations, bulk drugs, generics, Novel Drug
Delivery Systems, New Chemical Entities, and Biotechnology etc. The industry
ranks fourth globally in terms of volume and in terms of value, it is ranked
thirteenth. The industry has thrived so far on reverse engineering skills exploiting
the lack of process patent in the country. This has resulted in the Indian
pharmaceutical players offering their products at some of the lowest prices in the
world. The quality of the products is reflected in the fact that India has the highest
number of manufacturing plants approved by US FDA, which is next only to that
in the US. Multinational companies have traditionally dominated the industry,
which is another trend seeing a reversal. Currently, it is the Indian companies

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 CHAPTER 5: INDIAN PHARMACEUTICAL INDUSTRY

which are dominating the marketplace with the local players dominating a
number of key therapeutic segments. The market is also very fragmented with
about 30,000 entities and the organized sector consisting of about 300 entities.
Consolidation is increasing in the industry with many local players building a
global outlook and also growing inorganically through mergers and acquisitions.
The top ten companies make up for more than a third of the market.

The Indian pharma industry, which is expected to grow over 15 per cent per
annum between 2015 and 2020, will outperform the global pharma industry,
which is set to grow at an annual rate of 5 per cent between the same period.
The market is expected to grow to US$ 55 billion by 2020, thereby emerging as
the sixth largest pharmaceutical market globally by absolute size, as stated by Mr
Arun Singh, Indian Ambassador to the US.

Besides the domestic market, Indian pharma companies also have a large chunk
of their revenues coming from exports. While some are focusing on the generics
market in the US, Europe and semi-regulated markets, others are focusing on
custom manufacturing for innovator companies. Biopharmaceuticals is also
increasingly becoming an area of interest given the complexity in manufacture
and limited competition.

The drug price control order (DPCO) continues to be a menace for the industry.
There are three tiers of regulations - on bulk drugs, on formulations and on
overall profitability. This has made the profitability of the sector susceptible to the
whims and fancies of the pricing authority.

The R&D spends of the top five companies is about 5% to 10% of revenues. This
ratio is still way below the global average of 15% to 20% of sales. Indian
companies have adopted various strategies for their R&D efforts. Some have
entered into collaboration and partnership agreements with innovator companies;
others have out-licensed their molecules for milestone payments. Hiving off R&D

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units into separate companies has also become a preferred option for many
Indian pharma players. That said, given that the research pipelines of Big
Pharma are drying up, they have now begun to dabble in generics.

The Indian pharmaceutical market size is expected to grow to US$ 100 billion by
2025, driven by increasing consumer spending, rapid urbanization, and raising
healthcare insurance among others. Going forward, better growth in domestic
sales would also depend on the ability of companies to align their product
portfolio towards chronic therapies for diseases such as such as cardiovascular,
anti-diabetes, anti-depressants and anti-cancers that are on the rise.

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 CHAPTER 6: PHARMACEUTICAL MERGERS AND ACQUISITIONS:

CHAPTER 6: PHARMACEUTICAL MERGERS AND ACQUISITIONS:

The pharmaceutical industry is rapidly changing. Consolidation is the new
mantra for the industry. With this change, the business strategies used by the
multinational pharmaceutical companies are also changing. This chapter
summarizes the merger and acquisition activity in the pharmaceutical
industry. The different models used by multinational companies joining hands
with the generic companies are included. The chapter further outlines the
implications of this model on the different intellectual property aspect including
Patent filings, Patent oppositions, Patent litigations, Patent litigation
settlements, Patent Portfolio, Transfer of Rights.

Introduction:
“Generics are generics.
And innovators are innovators.
And never the twain shall meet.”2
That’s the traditional approach of looking at pharmaceutical industry.
Innovators, the true multinational pharmaceutical companies discover the so
called new drugs with the proven clinical efficiency through clinical trials. MNC
companies always protected their inventions through patents. Generics, on
the other hand relied on the clinical data obtained from the innovators.
Generic products are also called as copycats as these are copies of brand-
name drugs that have exactly the same dosage, intended use, effects, route
of administration, risks, safety, and strength as the original drug.

Difficulties faced by Multinational pharmaceutical companies

Come the 21st century and the world pharmaceutical industry has been rapidly
changing. Globalization, increased competitiveness and the fight for global
market shares created new challenges for multinational pharmaceutical
companies5. The patent expiration has been an especially troubling and
powerful problem in the last decade. Some of the big brands have gone off
patent to directly face the generic competition.

The problems are further complicated by steadily declining growth in key

markets like US7. New product pipelines have been disappointing for years,

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 CHAPTER 6: PHARMACEUTICAL MERGERS AND ACQUISITIONS:

as well, and there is no sign that drug discovery is going to become easier
anytime soon. The investments involved in the drug discovery process have
been huge and thus it makes it quite highly risky business. The
pharmaceutical companies are not in a position to invest heavily into R&D and
marketing and sales activities in the endeavor to bring new products to the
global markets and materialize them properly5.

Changing market dynamics and consumer preference is another difficulty

faced by multinational companies. The increasing awareness about generic
products has resulted in the decrease in the sale of the branded products.
The pharmaceutical companies are thus struggling to satisfy long-term and
ever-changing market needs and customers' expectations.

The opportunities ahead

At least one opportunity offers grounds for hope: the emerging markets,
particularly Brazil, Russia, India, China, Mexico, Turkey and South Korea 4. In
2008, the market size was estimated at around US$ 96 Billion, and it is
expected that high growth in these markets will help these countries increase
their share in global pharma market. For most Big Pharma; these markets
currently contribute to less than 5% of their sales. The presence of Big-
pharma in these markets is negligible.

However, exploiting the opportunity is no simple for big pharma. Obviously a

marketing organization has to be put in place. These markets are different
from developed nations in that the markets have been dominated by the
presence of generic products. Further, the growth is considerably higher
{According to IMS, the "pharmerging" markets (South Korea, Mexico, Turkey
and the BRIC nations viz. Brazil, Russia, India and China) have potential to
grow from USD 91 billion in 2008 to USD 185 billion by 2013 at a compound
annual growth rate of 16%.}, the competition much smaller, and brand plays a
key role in consumer choice. This is because of the consumer preference and
the lower income of the population as compared to the developed nations.
Multinationals cannot simply take the same innovation-heavy portfolio that is
successful in developed markets and expect similar penetration.

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Many pharma companies are now realizing that a lot of future growth is likely
to occur in these emerging markets outside their core markets, and are now
placing focus on these rapidly growing areas. To grab these opportunities, the
big pharma companies are pursuing a branded-generic strategy primarily to
establish their footprint in emerging markets and also to capture the generic
market in the developed countries. The business strategies have been a
combination of different routes to gain the market.

The Business strategies of pharmaceutical companies:

1. Mergers and acquisitions9
Mergers and acquisitions have been the mantra of pharmaceutical companies
since long. In as early as 1970’s, Warner Lambert had a big acquisition in the
form of Parke Davis. The trend has still been followed with the recent
acquisition of Wyeth by Pfizer in the year 2009.

There have been strategic changes in recent time. Earlier, the big pharma
were involved in acquisition of a competitor with different product portfolio.
The trend has not only been limited to big pharma. But, in recent times, bigger
generic companies are acquiring smaller companies. This can be seen from
table 6. Mid size Indian generic companies had been on the acquisition spree
in recent times (table 7).

2. Generic arms
Another strategy followed by multinational pharmaceutical companies has
been the creation of generic arms.

Novartis has maintained one of the largest generics businesses in the world,
Sandoz, since it was formed by the merger of Ciba-Geigy and Sandoz in
19961. The Switzerland-based firm has always considered Sandoz
strategically as a generic arm, and acquisition of Austria-based Ebewe
Pharma, a specialist in generic injectables, does not represent a new
direction. Pfizer formed an established products division to enter generics
Greenstone. Recently, Sanofi Aventis plans to launch 15 new generic

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products in rural India, under its new Prayas marketing initiative being rolled
out through its Hoechst brand.

3. Acquisitions of generic companies

Acquisition of generic companies by multinational companies mostly
innovators is the latest trend in this league. In June 2008, Japanese drug
company Daiichi Sankyo acquired India's Ranbaxy. In July 2008, UK-based
GlaxoSmithKline (GSK) acquired a 16% stake in South Africa-based Aspen.
GSK acquired the branded generics business of US-based Bristol Myers
Squibb in Lebanon, Jordan, Syria, Libya and Yemen. Hospira recently
acquired Orchid Chemicals and Pharmaceuticals’ generic injectables
business1.

Sanofi-Aventis’ strategy explains this in detail. In October 2008, French major

Sanofi-Aventis acquired Czech Republic-based Zentiva. In April 2009, Sanofi
bought Medley, of Brazil and Mexico-based Kendrick. For Sanofi, Zentiva not
only boosted the company to leading place among global generics players, it
also provided a platform for growth in the emerging markets of Central and
Eastern Europe, Turkey and Russia. The Kendrick acquisition firmly
established Sanofi in the growing Mexico market. The purchase of Brazil's
Medley instantly made Sanofi the biggest generics player in Latin America 1.

4. Authorized generics
There were roughly 25 authorized generics (AG) launched in 2009 in US
market for the pharmaceutical products10. Also called as authorized copy or
brand-in bottle or branded generic or pseudo generic or flanking generic.
These are prescription drugs produced by brand companies under a New
Drug Application (NDA) and authorized to be marketed as generics under
private label. The authorized generics are launched through a generic arm or
through a tie-up with other generic companies. With Authorized Generics,
consumers benefit from the brand-identical product experience as well as the
additional cost savings a second generic competitor provides during the 180-
day exclusivity period. Pfizer has a generic arm Greenstone which markets
authorized generic products. Prasco laboratories is the company which

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recognizes itself as a specialized authorized generic company. Further,

companies like Winthrop medicines, Barr laboratories, and Par pharma are
the preferred generic companies which launch the authorized generics.

5. Tie-up with generic companies or licensing

Another trend in recent years has been the tie up with generic companies or
licensing of the products from generic players.

Pfizer acquired the rights to market 55 solid oral dose products and five sterile
injectable products in more than 70 emerging markets through its May 2009
deal with Aurobindo. Pfizer announced another deal with Aurobindo, as well
as a deal with Indian injectable generics specialist Claris Life sciences.

GlaxoSmithKline later announced a license and supply agreement with India's

Strides Arcolab and Onco Therapies. In June 2009, GSK announced
marketing agreement with India's Dr. Reddy's Laboratories. The Dr. Reddy's
deal allowed GSK to sell generics made by Dr. Reddy's in emerging markets
around the world.

Intellectual property implications of business strategies of

pharmaceutical companies:
a. Patent filings
The 'duality' of model being generics and branded would surely help to
streamline the patent filings. Today, as the numbers of generic players are
more, there seems to be overcrowding of patent applications, mostly
defensive publications. The number is huge today. The ‘duality’ of model will
reduce the number of patent filings. This will help to have quality applications
with original research. The channeling of business would help for the business
to concentrate on the focused areas of research.

The broader geographic reach of the combined entity would help in increasing
the number of patent filings in various countries. The patent filings in the
emerging markets including South Korea, Mexico, Turkey, Brazil, India,

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Russia, and China are already on a growing path. These markets will see
more activity in the patent filings in the coming year.
b. Patent oppositions
The filing of patent oppositions should decrease with this kind of business
model. The consolidation of the industry and the tie-ups should result in less
number of patent oppositions. The opposition proceedings are usually initiated
by generic players. The tie-ups will surely make the number of patent
oppositions coming down.

Surprisingly, the number of patent oppositions may grow in some markets

wherein the patent systems are weak. The broader access of the markets to
multinational companies would help them to track the patents in the particular
country and also to file oppositions.

Gleevec case in India is a prime example in this context. Section 3 (d) of

Indian patent law was the basis for the case.
"(d) the mere discovery of a new form of a known substance which does not
result in the enhancement of the known efficacy of that substance or the mere
discovery of any new property or new use for a known substance or of the
mere use of a known process, machine or apparatus unless such known
process results in a new product or employs at least one new reactant.”
In 1998 Novartis filed an application in the Chennai Patent Office for a patent
on Imatinib Mesylate (Gleevec®). Pre-Grant opposition was filed by Cancer
Patients Aid Association. In January 2006 the Chennai Patent office rejected
Novartis’ patent application on the ground that the application claimed 'only a
new form of an old drug'.

This is a case fought in India, which is emerging market. As the multinational

companies would broaden their geographic presence in emerging markets,
the patent oppositions are likely to happen. This would specifically be more in
the countries where the patent systems are weak.

c. Patent litigations

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The Novartis-Sandoz arrangement bears out the above point although

Sandoz is one of the biggest generic manufacturers, it files much fewer patent
challenges than the other generics in the big league, including Ranbaxy2. The
future course of patent litigations may be decided by the positioning of the
pharmaceutical companies and the arrangement with the innovator
companies.

Traditionally, the patent litigations have been concentrated in developed

markets like USA, UK, Germany and other European countries. With the
global presence of the combined entities, the patent litigations in the emerging
markets will be a new trend.

d. Patent litigation settlements8

The 'duality' of model being generics and branded will make it easier to find
common ground and 'middle path' solutions between the innovators and
generics through patent litigation settlements. The patent litigation settlements
are increasing and one of the causes being the duality of model. The number
of settlements in 2009 reached an all-time high of 54 in US market for
pharmaceutical products10.

Immediately following news of the proposed take over by Daiichi Sankyo,

Pfizer and Ranbaxy announced a settlement in relation to a patent challenge
over Pfizer’s multibillion dollar and most heavily litigated drug, Lipitor.
Although one is not certain of the extent to which the proposed takeover
speeded up the settlement, one might hazard a guess that with parent
Daiichi’s pervasive 'innovator' cloak, Ranbaxy’s aggressive patent challenge
days may be coming to an end.2

European Commission’s pharmaceutical sector inquiry report found close to

700 cases of patent litigation between originator companies and generic
companies in relation to the medicines investigated. Out of these, 223 were
reported as settled, 149 cases were reported as litigation in which the court
reached a final judgment, and the remaining are either pending or withdrawn3.

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e.Patent portfolio
The broader geographic reach of the combined entity would help the patent
portfolio for a particular product broad. There would be stiff pressure to keep
the product out of generic reach and have more number of patent filings. The
patent protection through generic, specific compounds, salts, enantiomers,
polymorphs, method of treatment, composition, process, purity, intermediates,
and combinations would be sought. The consolidation may result in
accumulation of the patent portfolio with certain groups.

The patent portfolio would be on the focused areas of the combined entities.
The duplication of research would be avoided and more valuable portfolio
would be created.

f. Transfer of rights10
Lanning G. Bryer10 elaborates how the intellectual property rights of the
acquired company need to be transferred into the name of the new owner in
each jurisdiction where such rights exist.
The change of ownership is critical to protect the ongoing validity and
enforcement of intellectual property rights for several reasons.
 If a change of ownership is not promptly recorded, a misconception can
arise in the marketplace as to the identity of the actual owner, leading
to a possible loss of rights where a trademark no longer functions as a
true indication of origin.
 The new owner may not be able to prosecute infringements, file
oppositions or attend to renewals or annuity payments. Furthermore,
the right of the patent owner to obtain damages for acts of infringement
which occurred before the transfer documents were recorded may be
lost in certain jurisdictions.
 In certain jurisdictions, there are time limits after which it may be too
late to affect proper recordal of an assignment.

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 The failure or delay in recording a transfer of ownership may result in a

possible loss of royalties. The resulting loss of royalties may not be
recoverable.
 The license recordals and registered user entries will no longer be
current and may affect the validity of the use by a licensee and/or
governmental approval for foreign exchange authorizations for
remission of royalties.
 Finally, in the event an “equitable transfer” occurs without the requisite
official change of “record ownership” at the relevant patent and
trademark offices throughout the world, the new owner will encounter
enormous difficulties when confronted with the maintenance, sale,
enforcement, hypothecation, licensing and/or use of the intellectual
property rights.

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The future ahead:

 The consolidation phase.
The consolidation phase though mergers and acquisitions would continue in
the pharmaceutical industry. The changed market dynamics and the shifting
of the market growth from regulated markets to semi-regulated or non-
regulated markets would result in small value acquisitions with market specific
strategies against the big value acquisitions in the earlier days. The future
may see innovator and generics fighting in one market and joining hands in
the other market.

 Antitrust law and intellectual property6.

Robert Pitofsky, the current Chairman of the FTC, noted in a speech
regarding intellectual property rights and antitrust law, that “the age-old
balance between antitrust enforcement and intellectual property protection
has begun to tip in favor of the latter” which the pharmaceutical industry
exploits in attempting to lengthen the patent life of their brand name drugs.

The mergers and acquisitions have been subject to the assessment of

competition commissions like US Federal Trade Commission (USFTC) and
European competition committee.

Both E.U. and U.S. authorities have been trying to achieve the same ends –
to give due attention to the dynamic effects of mergers and ensure that
innovation is not inhibited. This is particularly crucial in the pharmaceutical
industry in view of the role of product innovation in the leading firm’s
strategies, the size of R&D expenditures often needed, especially at the
development stage, and the time it takes for pipeline products to reach the
market.

In pre 2003 scenario in US market, the innovator settled the litigation with the
generic firm, so as to delay the generic entry in US market.

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Later on the generic firm provided value to the innovator that is distinct from
delayed entry. The additional value takes several forms, including intellectual
property, product development, manufacturing, supply, inventory, and
promotion.

In US, the Hart-Scott-Rodino Act established the federal premerger

notification program, which provides the FTC and the Department of Justice
with information about large mergers and acquisitions before they occur. The
parties to certain proposed transactions must submit premerger notification to
the FTC and DOJ. Premerger notification involves information about each
company’s business. This may be useful in keeping a check on mergers and
acquisitions and the possible tie-ups for the anti-competitive tie ups.

Summary:
The joining of hands of multinational innovator companies with generic
companies will surely impact the intellectual property strategies of both the
innovator companies and the generic players. The line between innovators
and generic companies is getting thinner and thinner as the time passes.
Rightly, we can say

“Some Generics are also innovators.

And some innovators are also generics.
And you can not distinguish the two.”

The intellectual property strategies are an important part in the mergers and
acquisitions and it should be considered before the activity itself. Overall,
these are changing the industry dynamics and would provide a unique,
competitive scenario in the developing markets.

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References:
1. Pharma enters emerging markets via generics. 07 October 2009
http://www.icis.com/Articles/2009/10/12/9253207/pharma-enters-emerging-
markets-via-generics.html

2. Ranbaxy-Daiichi merger: An emerging Ardhnarishwar model? 2008-07-09

http://sify.com/finance/ranbaxy-daiichi-merger-an-emerging-ardhnarishwar-
model-news-default-jegrU0jfcae.html

3. The European Commission’s Pharmaceutical Sector Inquiry Report: 2009

4. Pharma 2020: The vision. Which path will you take?

PriceWaterHouseCoopers report.

5. Dragan Kesič; Strategic analysis of the world pharmaceutical industry;

Management, Vol. 14, 2009, 1, 59-76.

6. Lara J. Glasgow; Stretching the limits of intellectual property rights: has the
pharmaceutical industry gone too far? IDEA - The Journal of Law and
Technology; Volume 41, Number 2, 2001. 227-258.

7. Kathleen Jaeger; America’s generic pharmaceutical industry: Opportunities

and challenges in 2006 and beyond; Journal of Generic Medicines. Vol. 4,
No. 1. 15–22. October 2006.

8. C. Scott Hemphill; Drug patent settlements between rivals: A survey;

Working paper available at www.ssrn.com/abstract=969492; March 12, 2007.

9. Eleanor J. Morgan; Innovation and merger decisions in the pharmaceutical

industry; Review of Industrial Organization 19: 181–197, 2001.

10. Pharmaceuticals: Analyzing Litigation Success Rates; RBC Capitals

market report. January 15, 2010

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 CHAPTER 7: PRODUCT SELECTION CRITERIAS IN GENERIC INDUSTRY

CHAPTER 7: PRODUCT SELECTION CRITERIAS IN GENERIC INDUSTRY

Product selection in the generic drug industry is important as this drives the
entire business planning, product development, R & D activities and sales
forecast. Product selection or identification is usually the first step in the whole
generic product development cycle.

1
The first step of the generics development process starts at the very beginning
of the value chain, with product selection. In the generics industry, timing is of the
essence as once a project is submitted for development; it can take an average
of five to six years before the product reaches the market. This process typically
includes two to three years for development in addition to two to three years for
regulatory approval. As generic products increase in their level of complexity and
sophistication, however, this development process can extend even further.

Although the expiry of a compound’s basic patent is generally understood as the

starting signal for generic competition, both innovators and generic companies
are increasingly seeking to patent their products, formulations and processes
throughout the development process, in order to create greater barriers to
generic entry. As a result, generic companies need to be innovative in the
product development process by using novel methods, formulations and
processes that are not in infringement of any existing intellectual property

Product selection usually involves different resources across the departments

that work together to select the product. The different teams involved include
business team, sales team, R & D team (Formulations as well as analytical),
clinical/ bioequivalence team, manufacturing team, intellectual property rights
team, regulatory team, strategic planning team and top management.

1
http://www.sandoz.com/our_products/quality_generics/generics_development.shtml

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Product selection is dependent on various parameters. Based on the complexity

of the product, nature of the product, company interest and other factors one or
more may or may not be involved in the product selection exercise.
Positive attributes for selection of Negative attributes for non-selection
molecule of molecule
Higher sales value. Lesser sales value.
Growing market for molecule. Degrading market for molecule.
Good potential in the future. Lesser potential in the future.
Higher profit margins. Lesser profit margins.
Lesser competition for the same Higher competition for the same
molecule. molecule.
Lesser competition for the molecule Higher competition for the molecule
from other molecules in the same from other molecules in the same
therapeutic category. therapeutic category.
Easy availability of the API Non-availability of the API

Other factors which need to be considered include:

 R & D and development costs involved:
The research and development or product development cost involved for the
product is essential for selection of the product. The sales projections for the
product and revenue estimations are to be compared vis-à-vis the product
development and registration of the product.

 Regional presence of the company:

The presence of the company in particular market and the potential of the
product in the particular market are also considered for selection. Every company
may not be present in all the geographies. The cost of the sales in different
countries varies. Also, in regulated markets the cost of registration of the product
with the regulatory agency is much higher as compared to smaller markets.

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 Technologies involved and the capabilities available in the organization:

The manufacturing capabilities of the organization e.g. dosage forms like tablets,
capsules, injectables, liquids, semisolids (creams, ointments, suppositories),
ophthalmic products, nasal products and others.

 Patent issues related to the molecules:

A molecule which is patented may not be subject to genericization. It is thus
necessary to understand, whether the molecule is patented or not. In some
countries, the regulatory agencies do not approve the generic product before the
expiry of the patent. In such case, the generic company can develop the product;
file it with the regulatory agencies. However, it can not launch the product as
there is no product approval in place from the regulatory agencies.
There are options available to bypass a valid patent. These are usually available
through court proceedings
- Patent non infringement: Patent non infringement is applicable in cases
wherein, the product does not fall within the scope of the claims of a patent.
We would study in detail the concept of claims, scope of the claims and
infringement and non-infringement.
- Patent invalidation: Patent invalidation involves arguments that the patent is
not valid as it was granted wrongly. This is a legal process.

 Regulatory issues:
The selection of the product also depends upon the regulatory framework of the
country of interest.
e.g. Some countries require the generic product be manufactured in their own
country. In such cases, the product has to be manufactured in that country
through own plant or through loan-license. Some countries require the
bioavailability studies being carried out in their countries. The generic products
for many complex products like proteins, peptides, and biotechnology based
products are not approved in most of the countries.
These factors need to be considered during the selection of the product.

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 CHAPTER 7: PRODUCT SELECTION CRITERIAS IN GENERIC INDUSTRY

Obtaining market authorization for a new medicine can be a highly complex

process, particularly given the large number of worldwide regulatory authorities
involved. Away from the relatively harmonized regulatory environment in Europe,
authorization is often more complex in other parts of the world. For many markets,
such as in Asia or South America for example, no international regulatory
authority exists that coordinates the local authorities in each country and
harmonizes there respective processes. As a result, each country is dealt with
individually, which compounds the level of effort and work involved. In other
countries, there are few or even no patent restrictions, allowing generic
competition to start soon after the launch of the reference product by the
innovator company.

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 APPENDIX I: LIST OF INDIAN PHARMACEUTICAL COMPANIES

APPENDIX I: LIST OF INDIAN PHARMACEUTICAL COMPANIES

SN Company name Website

1. Ajanta pharma http://www.ajantapharma.com/
2. Alembic http://www.alembicpharmaceuticals.com/
3. Alkem http://www.alkemlabs.com/
4. Arch Pharma labs www.archpharmalabs.com/
5. Astron http://www.astron-research.com/
6. Aurobindo www.aurobindo.com/
7. Bal Pharma www.balpharma.com
8. Bharat Serums and Vaccines www.bharatserums.com/
9. Biocon www.biocon.com/
10. Cadila Healthcare www.cadilapharma.com/
11. Cipla www.cipla.com/en
12. Claris Life Sciences www.clarislifesciences.com/
13. Dishman Group www.dishmangroup.com/
14. Divi’s Laboratories www.divislabs.com/
15. Dr. Reddy’s lab www.drreddys.com/
16. Emcure www.emcure.com
17. FDC Limited www.fdcindia.com/
18. Granules India www.granulesindia.com/
19. Glenmark www.glenmarkpharma.com/
20. GVK Biosciences www.gvkbio.com/
21. Hetero http://www.heteroworld.com/
22. Hikal pharma www.hikal.com/pharma/index.htm
23. Indoco remedies www.indoco.com/m
24. Ind-swift laboratories www.indswiftlabs.com/
25. Intas www.intaspharma.com/
26. Inventia healthcare www.inventiahealthcare.com/
27. Ipca www.ipcalabs.com/

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 APPENDIX I: LIST OF INDIAN PHARMACEUTICAL COMPANIES

SN Company name Website

28. JB Chemicals & Pharma www.jbcpl.com/
29. Jubilant Organosys www.jubl.com/
30. Lupin www.lupin.com/
31. Lyka labs www.lykalabs.com/
32. Macleods www.macleodspharma.com/
33. Matrix (Mylan) Laboratories www.mylan.in/
34. MSN laboratories www.msnlabs.com/
35. Natco pharma www.natcopharma.co.in/
36. Nectar Life Sciences www.neclife.com/
37. Neuland laboratories www.neulandlabs.com/
38. Orchid chemicals www.orchidpharma.com/
39. Panacea Biotec www.panaceabiotec.com/
40. Plethico Pharmaceuticals www.plethico.com/new
41. RPG life sciences www.rpglifesciences.com/
42. Reliance Life Sciences www.rellife.com/
43. Rubicon pharma www.rubicon.co.in/
44. Serum institute of India www.seruminstitute.com/
45. Strides Arcolab www.stridesarco.com/
46. Sun Pharma www.sunpharma.com/
47. Suven Life Sciences www.suven.com/
48. Torrent Pharma www.torrentpharma.com/
49. Troikaa Pharma www.troikaa.com/
50. Unichem www.unichemlabs.com/
51. Unimark remedies www.unimarkremedies.com/
52. USV www.usvindia.com/
53. Venus Remedies www.venusremedies.com/
54. Wockhardt www.wockhardt.com/
55. Zydus Cadila www.zyduscadila.com/

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