Basic Knowledge of Pharmaceutical Industry

Part 1: Basic Knowledge of Pharmaceutical Industry

Pharmaceutical Industry is defined as the industry which are related to medicinal drugs or their preparations, manufacturing, use and sale.

The pharmaceutical industry involves in discovering, research, development, production and marketing of drugs and medicinal products.

Drugs and medicinal products include
  • All medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes
  • Substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals,
  • All substances intended for use as components of a drug including empty gelatin capsules
  • Devices (Such as medical devices) intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals

Types of Drugs on nature of development:

Pharmaceutical companies deal in two types of medications i.e. Generic and Branded Medications.

Branded Drugs: These are the drugs promoted by pharmaceutical company who research, discover, develop and patent it. Innovator pharmaceutical company promote that discovered molecule by proving it a brand name other than its generic name or International Non-proprietary Names (INN).
Research and development is highly invested project and require minimum of 5-7 years to reach a drug into market after a new molecule discovered. Cost of research and development increases the cost of Branded Drugs.

Generic Drugs: After expiry of patent of branded drugs, pharmaceutical manufacturers other than innovator of that molecule, are allowed to manufacture it and sell it to the market. All products of that molecule other than innovator’s branded drug are fall under Generic drugs and manufacturers of generic drugs are named as Generic pharmaceutical manufacturers.
Generic drugs doesn’t involve cost of research and development of that molecule so it cost less to manufacturers so they are low in price as compare to branded drugs.

Other than Generic drugs and Branded Drugs, medical devices, surgical products, cosmetics and other products are also sold by pharmaceutical companies. In India, a different concept of selling is popular i.e. Branded Generics. Branded Generics are the generic drugs which are sold by affixing a brand name to it. That’s the reason in Indian pharmaceutical market, all drugs have brand name on it and make it difficult to find out difference between generic drugs and branded drugs.

In markets like USA, only branded drugs have Brand name mentioned at drug’s packing other than generic name. Remaining all other products will have only generic or International Non-proprietary Names (INN) on products packing.

Types of Drugs on nature of sell:

Drugs can be divided into two categories depend at how we can sell a drug.
  • Prescription
  • Over the Counter (OTC)
Irrespective of any type of drug whether it is a branded drugs or generic drugs, drug can be sold out only either against prescription or as an OTC drugs.

Prescription Drugs: These drugs have serious side effects if taken without supervision of registered medical practitioner. Hence these drugs can be sold out only against prescription of registered medical practitioner only.

Check out: Prescription drug list in India here

Over the Counter Drugs: Some drugs with time have been proven to be effective without any serious side effects. Hence these medicines are allowed to be sold by pharmacies and chemist without prescription of registered medical practitioner. The drugs that can be sold without prescription of registered medical practitioner is known as Over the Counter (OTC) drugs.

We have use ‘Drug’ word at some places and some places we have used word ‘Medicine’. There are some difference between Drugs and Medicines. Check out Difference between Drug and Medicine Here

Pharmaceutical Market Size:

According to research by Some Business Research Companies, the global pharmaceutical market was worth $934.8 billion in 2017 and expected to reach $1170 billion till 2021 and growing at rate of 5-6%.

As per IBEF, Indian pharmaceutical sector is expected to grow to US$ 100 billion and medical device market expected to grow US$ 25 billion by 2025. Pharmaceuticals exports from India stood at US$ 19.14 billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020). Pharmaceutical exports include bulk drugs, intermediates, drug formulations, biologicals, Ayush & herbal products and surgical. India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03 billion) in 2019, growing 9.8 per cent year-on-year (in Rs) from Rs 129,015 crore (US$ 18.12 billion) in 2018.

Growth Opportunities:

Pharmaceutical industry is one of top global markets in world. It is also one of the major industries having least affected by covid-19. The Indian pharma industry has been growing at a compounded annual growth rate (CAGR) of more than 15% over the last five years and has significant growth opportunities. Medicine spending in India is projected to grow 9-12 per cent over the next five years.

Marketing and Selling types in Pharmaceutical Industry:

Different types of marketing are carried out by pharmaceutical companies to conduct business. Some common ways are as follow:
  • Branded Drugs Marketing
  • Generic Drugs Marketing
  • Pharma PCD/Franchise Marketing
  • OTC Drugs marketing
  • Institutional Supply i.e. corporate hospitals, dispensaries, pharmacy chains etc.
  • Online Pharmacies

Branded Drugs Marketing: Pharmaceutical company innovate a new molecule, apply for patent and market it with monopoly for that molecule.

Generic Drugs Marketing: After expiration of patent of a molecule, other pharmaceutical companies are also allowed to manufacture or market that molecule. When Other pharmaceutical companies manufacture and market an off patented molecule come under generic drugs marketing.

Pharmaceutical Franchise Marketing: In above two ways, pharmaceutical sell through by appointing own sales team but if a pharmaceutical company (whether branded drugs or generic drugs) appoints or associates with an individual or group for marketing, promotion and distribution of their products by providing them all commercial rights regarding products and company at assigned territory at monopoly basis is come under Pharmaceutical Franchise Marketing.
Throughout course our concentration will be at pharma franchise marketing which is some times termed as PCD (Propaganda cum Distribution).

Over the Counter (OTC) Drugs Marketing: Drugs and medicines are chemical entity and regulated through certain regulations and acts. Medicines are sold under prescription of registered medical practitioners only. But some medicines having less side effects are allowed to sell without prescription. These are known as OTC drugs.
Prescription drugs (Branded or Generics) advertisements are prohibited and can only be sold by convincing drugs to prescribe their medicines but OTC drugs can be advertised through different channel (traditional media or digital marketing) along with prescription generation.

Institution Sales: There are number of dispensaries, corporate and government hospitals or research centers, pharmacy chain stores etc who directly purchase medicines from pharmaceutical company through tenders or bids or any process. Pharmaceutical companies also sell their pharmaceutical products through supply directly to institutions.

Online Pharmacies: Internet or online pharmacies is growing at decent speed and making presence in pharmaceutical industry. Pharmaceutical companies have started to recognize this form of selling pharmaceutical products. There are same rules and regulation for selling pharmaceutical products online like retail drug license, GST number, and valid prescription for prescription drugs etc.


Next: Chapter 1: What is Pharma Franchise? Pharma Franchise Model, Benefits, Profitability Ratio (Profit Margins) etc

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