Growing pharmaceutical industry
India’s Pharmaceutical Industry stands fourth in terms of volume and 13th in terms of value. It is valued at over $13 billion (Rs 52,000 crore). While it is export driven, the domestic sector has also done well in recent times.
In the first half of 2006-07, the domestic formulations segment grew by 12.7 per cent, driven by fast-growing lifestyle ailments such as gastro-intestinal disorders, diabetes and cardiovascular diseases. The drivers continue to be the global generics opportunity and the emerging contract research and manufacturing services (CRAMS).
Significant M&A transactions were witnessed last year. The largest was Sun Pharmaceutical’s acquisition of Israel-based Taro Pharmaceuticals for $448 million (Rs 1,792 crore) and Wockhardt’s acquisition of Francebased Negma.
Domestic players expanded into newer therapeutic areas by acquiring smaller pharmaceutical companies: Cadila’s acquisition of Liva Pharma and the acquisition of API business of Runwals Group by the NASDAQ-listed AMRI, among others.
The healthcare services sector offers tremendous growth opportunity as India has 15 per cent of the world’s population, but one of the worst healthcare infrastructure facilities and the lowest spend on healthcare at 5 per cent of the GDP.
Corporate impact | | “Increased government spending on healthcare is bound to make an impact in more ways than one. The SMEs and bulk drug suppliers will benefit from increased volumes”
— Satish Reddy |
Dr Reddy’s: Positive mainly on account of the measure to promote outsourcing of research for which the FM has allowed a weighted deduction of 125 per cent on any payment made to companies engaged in R&D
- Ranbaxy: Will benefit from exemption of excise duty for anti-AIDS and life-saving drugs and from the weighted deduction of 125 per cent. The reduction in excise duty is also a positive
- Cipla: To benefit from higher outlays for HIV and from the measure to promote outsourcing of research for which the Finance Minister has allowed a weighted deduction of 125 per cent on any payment made to companies engaged in R&D
- Apollo Hospitals: Benefits from the move to grant a five-year tax holiday to new hospitals that are set up in Tier-II and Tier-III towns, as the company has active plans. There are no specific numbers but its Chairman Prathap C. Reddy is keen to set the pace in this space
Sectoral imapct - Reduction in excise duty to 8 per cent from 16 per cent on all drugs and in customs duty on life-saving drugs to 5 per cent will reduce manufacturing costs and make drugs more affordable
- The five-year tax holiday for new hospitals (except in certain large urban settlements) will provide incentive to set up new hospitals and result in better healthcare system in smaller cities
- Weighted deduction of 125 per cent to significantly benefit the outsourcing of R&D in the pharmaceutical sector
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