Legal Environment

Indian Pharmaceutical Industry

Courts

Supreme Court

High Court

District Court

Other tribunals

Company Law Board

Competition Commission of

India

Consumer Protection

Forum

Tax Tribunal

Others

Overview: Legal Environment, India

Laws are generally formulated to solve one or more of the following purposes:

To protect companies from unfair competition To protect consumers from unfair business practices To protect the interests of society from unregulated business behaviour

Structure: Indian Legal System

Evolution over the years

Early years: Indian market share was dominated by the presence of foreign companies.

99% of all drug related patents were by foreign companies.

The Turning Point, 1970: The introduction of Government control in the industry via the Indian Patent Act (IPA) of 1970.

Scrapped product patents altogether. Resulted in massive growth of local pharmaceutical companies.

1995 – WTO and the TRIPS Agreement: Introduced global minimum standards for protecting and enforcing nearly all forms of intellectual property rights (IPR), including those for patents.

Reintroduced product patents & extended protection periods to 20 years.

End of reverse-engineering , the core competence of the industry. Increase in prices of Life Saving Drugs.

Pharmaceutical Industry:Legal Aspects

Indian Laws influencing Marketing Practices

◦ The Drugs and Magic Remedies (Objectionable Advertisements) Act 1954

◦ The Indecent Representation of Women (Prohibition) Act, 1986 ◦ Consumer Protection Act, 1986

Drug Laws Prevailing in India

◦ The Drugs and Cosmetics Act 1940◦ The Pharmacy Act 1948◦ The Drugs and Magic Remedies (Objectionable Advertisements) Act

1954◦ The Narcotic Drugs and Psychotropic Substances Act, 1985

Major Laws & Regulations

In the pharmaceutical and healthcare industries, a complex web of

decision-making determines the nature of the transaction for which the direct customer of pharmaceutical industry (i.e. doctor) is responsible.

Use of medical representatives for marketing products to physicians and to exert some influence over others in the hierarchy of decision makers has been a time-tested tradition.

Aggressive marketing i.e. showering medical practitioners with expensive gifts, in return for them prescribing their drugs to patients.

Unethical practices are rampant due to the absence of any government agency to deal with this problem.

Marketing Processes & Challenges

After the implementation of the WTO-Trips Agreement, the Indian Pharmaceutical Industry has made a move to increase their R&D effort to remain competitive in the post-TRIPS environment.

Indian pharmaceutical companies are also moving in new markets aggressively, e.g. Africa & South America by the means of mergers, acquisitions & associations.

Realizing that they stand at a disadvantage w.r.t International Pharma giants in the new patent regime, Indian companies have actively started to form alliances with international pharmaceutical companies to minimize the effect of new patent regime on their drug portfolios.

Trends-Current and Future

Future Perspectives

2006 2008 2010 2012

Growth Story 9.5 11.8 13.4 15.9

13579

11131517

Sale

s,

EU

R (

bn

)

Source: Global Insight, VCI: Forecast: DB Research

Cipla have realized huge opportunity in Generic drug market as Governments are under pressure to curtail escalating healthcare expenses.

Major target market is rural India, given the low prices of drugs such as for AIDS that are available at half the price of their international versions.

Strong promotion drives in Rural India can ensure huge profits for Cipla.

Firm Focus – Cipla

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