All major pharmaceutical companies that have operations in India are likely to benefit from the latest decision made by the Commerce Ministry in that country. The ministry accepted the Mashelkar committee’s report, according to which India will continue to allow patents on incremental innovations if the enhancements are beneficial to patients. The decision was taken amidst severe protests from generic players and health activists who fear this will not allow cheaper generic drugs to enter the market.

On the basis of 2008 sales figures, the Indian pharmaceutical market ranks 13th in the world, with sales of $7.7bn last year (an increase of 4% over 2007). The rapidly growing middle income group with higher disposable income makes it an attractive place for major pharma companies. The pharmaceutical market is expected to grow at 12.3% through 2014 surpassing many other economies in the emerging markets.

Many of these factors have led pharma majors to target the Indian market in a big way. Almost all international names, including GlaxoSmithKline (GSK), Pfizer (PFE), Sanofi-Aventis (SNY), Wyeth (WYE) and Merck (MRK) have strong presences in the country.
Apart from the potential of the Indian market, global players have also recognized the Indian pharmaceutical manufacturing industry. The industry primarily operates as a generic player. Once treated as rivals, the international players are now treating them as partners. In June, Glaxo entered into an agreement with Dr Reddy’s Laboratories (RDY) to supply several branded drugs. Apart from this, the world’s largest drug maker Pfizer agreed to a similar deal with Claris Lifesciences for 15 injectible products. Earlier, in March, Pfizer decided to sell Hyderabad-based Aurobindo Pharma’s 65 drugs worldwide.
In the biotech space, Mylan (MYL) matched up with Biocon to develop generic biotech medicines for the global market. In another deal in July, Sanofi-Aventis acquired a majority stake in Shantha Biotech.

With these acquisitions and deals, global firms seek to utilize the low cost infrastructure and expertise of the Indian companies. Though the business models of the global players and the Indian companies have been totally different, with many drugs going off-patent 2010 onwards and few new drugs in the developmental stage, it is a good business decision to treat the so called “copy cat” players as partners.
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Read the full analyst report on “RDY”
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