StatsGuru: 8-April-2013

Indian pharma is high on profit, low on R&D

The Indian pharmaceutical sector is in the news, with generic makers (largely Indian) winning a series of administrative and judicial victories against patent-holders (all MNCs). As Table 1 shows, the pharma industry has been hit by the recession of 2007-08, but still makes steady profits overall. As Table 2 shows, the five largest do a little better then the norm - noticeably better for Cipla, and much better for Sun Pharma. MNC pharma companies, on the other hand, as Table 3 shows, are more variable, with Ranbaxy - now an MNC - losing money while Glaxo and Novartis easily do better than the norm for the whole industry. Indian pharma companies have also successfully held off the challenge of MNCs, as Table 4 reveals. The market share for MNCs in India has not noticeably changed for several years. (Click on graphic)

However, it is clear that there are important differences between Indian companies, Indian branches of pharma MNCs, and MNCs' head offices when it comes to spending. Table 5 shows the five Indian companies that spend the most on research and development as a proportion of their sales. The amount they spend is clearly not very much - especially when seen together with Table 6, which reveals what the six largest MNCs in the US spend on R&D. Indian companies are unable to break out of the copy-and-produce trap. There is an intriguing difference, brought out in Table 7, between Indian pharma and Indian branches of pharma MNCs. While the latter spent even less on R&D than Indian companies - naturally - both increased after patent rules were modernised. However, Indian companies have reduced the proportion noticeably since 2007-08, while Indian branches of MNCs have kept increasing it.