Industry evolution in the India biopharmaceutical sector

Abstract

The Indian biopharmaceutical industry has become one of the world’s leading producers of medicines and their raw materials. While until the 1970s there were only a handful of firms making primitive drugs, today the industry has more than 2000 firms (and many more unlisted and small scale entities), across the value chain, with annual exports of $12.6 billion. The growth of the industry is particularly noteworthy considering that other emerging economies, including Brazil and Korea, despite their concerted initiatives, had limited success in developing their own biopharmaceutical industries. There has been a substantial entry of entrepreneurs into the Indian biopharmaceutical industry and these new entrants have managed to build capabilities to compete internationally. The Indian experience can provide rare insights to how entrepreneurship, human capital and policies interact to create successful knowledge-based industries in emerging economies that aspire to catch up with advanced economies. Preliminary discussions with industry veterans suggest that a few key mechanisms and government policies were influential in spurring entry and building vital capabilities. Although restrictions on imports created a need for domestic production of pharmaceuticals, local chemists needed considerable training on research in cost effective processes to produce pharmaceuticals developed by foreign giants. For relevant training, government labs and pioneering firms looked to technical partnerships with foreign firms. Subsequently, many researchers from such local organizations left to work for new firms or establish their ventures (spinoffs). Firms also had to develop significant marketing capability before they could sell in lucrative foreign markets and according to our sources some effective strategies were to forge partnerships with foreign distributors and to appoint non-resident Indians as import agents. With India’s entry to WTO in 1995 and subsequent accession to TRIPS, research in drug discovery has become increasingly important for sustained growth of the industry. Some firms are actively exploring drug discovery and doing contract research with multinational firms. Both contract research and hiring expatriates with research experience in biological sciences are on the rise, and are said to be key conduits for gathering know-how on biotechnology. Through this study, we would like to shed light about the trends in entrepreneurship in the Indian biopharmaceutical and life sciences industry. By studying the influence of mechanisms for capability development we would like to know the mechanisms that firms in emerging economies can exploit at the time of entry and also for subsequent growth through wider product and geographic scope. We also aims to study the moderating effects of government policies on firm capability development and the opportunity they offer to synthesize perspectives in capabilities and institutions to provide a more nuanced comprehension of entrepreneurship and firm growth in emerging economies. This paper, would help us understand the impetus behind the substantial entry into the Indian biopharmaceutical industry, how the entrants in the industry built capabilities to be competitive internationally and what was unique about the Indian experience that can provide rare insights to how entrepreneurship, human capital and policies interact to create successful knowledge-based industries in emerging economies that aspire to catch up with advanced economies