India’s advanced capacity in health innovation
Private firms, mostly local, are the key set of actors in health innovation in India. Although there are around 10,000 registered local companies (EIU, 2007), the organized sector is relatively small and comprises around 300 large and medium sized firms, which account for 70 per cent of the entire market. Nine out of the top ten companies as of 2007 are local companies and they hold approximately 30 per cent of the entire market (KPMG, 2006). According to the Department of Commerce figures, formulations constitute around 80 per cent of India’s total pharmaceutical production and APIs make up for the remaining 20 per cent (also see EIU, 2007 and Mckinsey, 2007). Dr. Reddy’s Laboratories is the largest player in the Indian pharmaceutical sector with a market share of 10 per cent, followed closely by Ranbaxy, Cipla, Aurobindo and the rest of the firms in the top ten category (Figure 3.1). The drugs are distributed mainly through retail outlets and physicians maintain a large amount of influence on the introduction of new drugs/substitution of existing drugs through other brand generics. Drug companies employ large marketing forces to penetrate local markets through institutional sales and private sales. Figure 3.1 shows the market structure as well as therapeutic categories for the formulations market. The API market, not represented in the figure, is far more fragmented. In addition to pharmaceutical firms, the sector has numerous biotechnology and other health technology firms, many of which focus extensively on innovative health services delivery.