Prospect of Global Market
With the World market for pharmaceutical
topping US$ 250 billion and expected to reach US$ 350 billion in the year
2000 Companies are making feverish efforts to catch a sizeable portion
of this multibillion dollar pie. The leading pharmaceutical companies from
USA, UK, Germany and Switzerland came to India with latest technologies
and resources which supported considerable improvement in the discovery
of new formulations apart from increase. The pharmaceutical industry made
a humble beginning in terms of export in the early 60's and the export
spurted from Rs. 8 million in 1965-66 to Rs. 8432.7 million in 1990-91,
registering an annual average growth rate of over 40% for last five-year
period, which from thereon, managed a trend of an annual average growth
rate of over 30% at least for next five years. From a stage of import dependence,
Indian pharmaceutical industry has now reached commanding heights as a
result from intensive research and technology development which enabled
more efficient and better quality of products on comparative cost advantage.
It is anticipated exports of both
bulk drugs and formulations. particularly those that are off-patent will
get a boost in the years to come. The reasons are many like -
-
Better margins due to lower production
costs
-
No excise duty, sales tax/other tax
burden
-
Tax free profits
-
Cheaper Bank finance
-
Increased market-base
-
No price control on exports
-
High tariff protection
-
Creation of international market reputation.
IMPACT OF GATE
With the advent of GATT, the Indian
Pharmaceutical companies will have the right to patent products as well
as processes, which in future would give access to International technology,
R&D and global marketing. The most alarming results arising form the
GATT accord would be hike in drug prices and the cut-throat competition
from the indigenous drug companies. Above all, India will be in a transitional
period of 10 years after adopting TRIPS and before it provides product
patents. This transitional period will be enough for the Indian drug companies
to develop their own Know-how and R&D centres to cope with global competition.
TRADE BALANCE
With the progress of Indian Pharmaceutical
industry, the Import Export trade balance of Drugs & Pharmaceuticals
showed predominance of imports till 1987-88, which turned positive in the
90's.A surprising fact is that India is still a net importer of Bulk drug
even to-day. In fact, India has lost foreign exchange to the tune of Rs.12
billion approximately between 80's and 90's on account of Bulk drugs import
alone, which roughly equals US$ 400 million at today's exchange rate. This
harsh reality is usually will hidden as the trade balance is normally calculated
on the basis of total imports and exports of Pharmaceutical industry, whereas,
the total forex earnings from formulations are to the tune of Rs.12 billion
between 80's to 90's. Thus India has lost the total forex earnings from
formulation export to the import of bulk during this ten year period. After
having wipe out the earlier forex losses of India in this field, it is
imperative that the growth in bulk drug should outpace the growth of Imports
in order to become a net forex earner in this class. The percentage share
of formulation to total export, which was as high as 83% in 1982-83, had
drastically fallen since 1986-87 in favour of Bulk drugs, whose share to
total export in 1992-93 had increased as high as 61%. The favourable shift
in relative share of Bulk Drug's export vis-à-vis the export of
formulation implies a positive development of the pharmaceutical industry
reflecting the increasing demand for Indian Bulk Drugs in global market.
Since the last 4-5 years the ratio of Bulk drugs to formulations has stabilised
at around 60% for Bulk Drugs and 40% for formulation as depicted in the
following table
In addition, the import component
of raw materials/intermediate chemicals for Bulk Drugs manufacture should
be brought down drastically, as it is felt is felt import substitution
couplet with export promotion is the only way to achieve the first step
to Globalization.
INDIAN EXPORTERS AND EXPORT
BASKET
The Export Import Bank of India
(EXIM) however had brought out some idea about sectoral composition of
exporters and their relative contribution to exports
Twenty three companies accounted for
73% of the drugs and pharmaceuticals exports of the large scale sector.
In the small scale sector six firms emerged as major exporters with share
estimated at around 60% On a closer scrutiny of export trend, a few select
product-ranges like Antibiotics, Anti-TB drugs, Analgesics/Antipyretics
and few drug intermediates have been able to make an organised and systematic
break through in the international market in terms of high growth rate
on a reasonably high value turnover. The unstable and erratic export trend
is market in case of Sulpha drugs and Anaesthetic/Pharmaceutical Aids.
But most important of all is the continuous loss of export of Expectorant
by 20% in the last three years.
EXPORT MARKET
The relative success of Indian Joint
ventures in Asian regions or in Africa had already built up Indian reputation
of good manufacturing base. However, the export trend by region substantiates
that the export products are now moving towards the direction of developed
countries as against India's earlier bias towards Asian and East European
region. The major destination of Indian Export in 90's are mainly former
Soviet Union (25%) West Germany (13%), USA(10%), Switzerland (4%) &
UK (3%).
FUTURE PROSPECTS
To achieve globally competitive
export strategy, Indian companies should tie-up with Western Companies
to have a global reach. India must therefore concentrate on exports to
developed as well as developing countries. The global generics market offers
substantial opportunity for Indian companies. In most European countries,
this generics market is growing faster as more and more branded products
coming off patent protection. Therefore, there is need to develop distinct
export strategies for each of the key markets. |