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Introduction

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Performance of Pharmaceutical Companies in India

Part of the book series: Contributions to Economics ((CE))

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Abstract

This chapter presents an overview of the Indian Pharmaceutical Industry and traces its evolution and growth. From the review of policies and the analysis of the aggregate data, we conclude that the patent law of 1970 and the knowl-edge spillover from the public sector units provided the necessary impetus for the growth of the industry. Presently, the structure of industry looks highly competi-tive with the top twenty firms capturing about eighty percent of the market and negligible barrier to entry. However, contrary to the conventional economic wis-dom evidence also suggests that it is one of the most profitable industries. The co-existence of low concentration and high profit earning that is observed can be attributed to firm specific factors like its efficiency, returns from R&D, marketing related outlays and earning from global market.

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Notes

  1. 1.

    Ernst and Young Report (2005)

  2. 2.

    It has the highest number of US approved plants outside the USA, which indicates a good manufacturing practice at par with global standards among domestic players.

  3. 3.

    The industry now accounts for about 8 % of the world’s production by volume, placing it in fourth place in the international market (Ernst and Young Report 2005). It is the largest producer in the global generic market with its exports destined to around 175 countries including the highly regulated markets of the US, Europe, Japan, and Australia. The country can supply drugs at a very low price in the international market and is an important source of essential drugs to the World Health Organization (WHO) and other underdeveloped countries. It has the highest number of US-approved plants outside the USA (FICCI Report 2005) which indicates good manufacturing practice at par with global standards among domestic players.

  4. 4.

    Except for those produced by the recombinant DNA technology, those requiring in-vivo uses of nucleic acid and specific cell/tissue targeted formulations.

  5. 5.

    Industrial organization literature explains profitability differences by factors external to the firm, such as the demand and technology characteristics of the product market, see e.g. Church and Ware (2000)

  6. 6.

    See Schweitzer S O (1997) for a detailed discussion on various issues of the pharmaceutical industry.

  7. 7.

    Pradhan (2002b); Bhadhuri and Ray (2001).

  8. 8.

    See Chap. 3 for a detailed discussion on the review of literature on the efficiency of firms.

  9. 9.

    Being a relatively recent technique the empirical application of Meta-Frontier approach to efficiency analysis is, however, limited (see Das et al. 2007; Bhandari and Ray 2007 for the application of such a method in the Indian case).

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  1. Centre De Sciences Humaines (CSH), New Delhi, India

    Mainak Mazumdar

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Mazumdar, M. (2013). Introduction. In: Performance of Pharmaceutical Companies in India. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2876-4_1

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