THE RISE OF INDIA’S DRUG INDUSTRY 11
TheRise of India’s Drug Industry
TheRise of India’s Drug Industry
TheIndian drug trade is one of the markets that is developing throughdiversification and exports. Markedly, the industry is escalating itsvalue chain, ensuring a change from the primary conversemanufacturing business restricted to serving the local market. Theorganization has embraced operations driven by research and exportsto enhance its universal existence as well as provide a wider rangeof value-added merchandise and facilities (Hill, 2015). Moreover,through advancement of quality supply of products and services, theindustry has enhanced leading to its extensive growth. Therefore, thebusiness depends on the dynamic role, which is carried out by theloyal government strategies in the renovation of the forthcomingimage of the drug production.
Particularly,the 2005 agreement signed by India to emphasize on the patenting ofproducts has set the whole pharmaceutical industry on a standard thatwill lead to long-term growth. The rate of value growth of the wholepharmaceutical organization has agonized in the past because ofvarious critical factors including the extensive infiltration ofgeneric products, severe competition, and a persistent period of afragmented business (Bhaumik,Driffield & Pal, 2010).Consequently, the domestic market underwent a deteriorating phase incontrast with the growing pharmaceutical market in other developingeconomies. Therefore, this led to the undisputed incorporation of anessential base of innovations value added deliveries and principlemanagement over the product-life cycles of all the drug industries inthe country. The policies are, hence, applied in the view to serve alarge market reach.
TheIndian drug business indicates an emergent sector which is growingdue to the differentiated model of drugs and a wider exportportfolio. Furthermore, the Indian drug market makes up 10% drugconsumption as compared to the general pharmaceutical market. TheIndian market, basically, accounts for growth in both the local andinternational demands as portrayed in the remarkable performance ofthe sector. Similarly, there are multiple factors that affect theorganization’s sound performance such as the growth in revenue,awareness of the hygienic aspects, the aging population, and thecampaigns towards wellness knowledge (Hill, 2015). Besides, promotinghealthy living is one of the major factors that improve performanceand can be facilitated through increasing the healthcare amenitiesand the government incentives in drug research. A good example is thelaunching of the Pharma Vision 2020 by the government of India. ThePharma Vision aims at leading India towards global leadership throughthe consistent manufacture of the medicinal products.
TheBenefits to U.S. Pharmaceutical Companies
Previously,the Indian drug business was acknowledged for reproducing multipleoriginal goods from the Western and Japanese industries. The strategywas used earlier, preceding the signing of the treaty between Indiaand the World Trade Organization (WTO). The Indian organizationsrelied upon the sale of generic medications at a low cost.Nevertheless, the agreement with WTO in 2005 secured all theintellectual property rights for the drug industries in the country(Hill, 2015). Therefore, multiple businesses in other countries feltmore secure due to the protection of their licenses and, hence, beganworking and making trade deals with the Indian firms.
WTOis recognized as the global arbitrator for business-relatedtransactions and holds the guiding agreements and transactionsamongst multiple nations in the world (Hoekman,& Mavroidis, 2015).All the governments are required to honor and adhere to thenegotiations signed by the global trading partners. The ultimate goalof WTO is to ensure that both the exporters and importers hold fairand just operations and, hence, allow the derivation of higherprofits as returns (Joseph,2015). WTOhas a duty to facilitate transparency, freedom, and flexibility ofthe trading systems all over the world. The WTO makes decisions thatare not founded on any particular state but rather engraved under anagreement reached by all the associate nations. Conversely, everynation necessitates its government to approve the treaty. Similarly,the World Trade Organization enables a conciliation forum in whichall the member nations address their business concerns.
Since2005, India signed the agreement with WTO, hence, withdrawing theirmanufacture of counterfeit products. This facilitated theestablishment of stronger partnerships amongst the Indianorganizations and their Western colleagues. Moreover, the Westernfirms progressively outsource their engineering and packingoperations to India as they do in their internal homes. Others chooseto have their plants in different places including Puerto Rico thatis generally acknowledged as a main production center for companiesaiding the U.S. market (Hill, 2015). Through subcontracting thepacking and engineering of drugs, the U.S. is remunerated fromIndia’s account with the general pharmaceutical industry.
Previously,when India had not signed the agreement with WTO contract, it used toproduce and sell generic drugs, granting the state a competitiveadvantage. With plenty of experience and competencies, India acquiredan advantage against its rivals leaving the country as aninternational proficient in the universal pharmaceutical industry.Subcontracting to India will enable the U.S. to lower the expenditurestructure and the overall pricing for the drugs. The Americancompanies will have economical engineering destinations as a resultof the reduced labor costs, which eventually leads to improvedemployment openings in the nation.
TheUnited States established two headquarters in India to administer thedefiance of the Food and Drug Administration (FDA) principles. TheFDA is necessary to protect the health system through ensuringsecurity and administration of quality medications, vaccinations, andother medical products (Pisano& Mantus, 2014).The 900 firms established in India are used to generate drugs for theU.S. market. Therefore, through the utilization of the Indian drugindustry, the U.S. enjoys lower costs of manufacture, the right touse the economical Indian pharmaceutical market, and thus, createbetter profits for the firms.
Benefitsto U.S. Consumers
TheUnited States clients will similarly benefit as the Indian drug tradeenhances in that they will have access to affordable medical productsthat were previously produced by the Indian market because of theincreased competition in the market. Additionally, the lower the drugprices, the lower the health insurance costs for the consumers (Hill,2015). The increase in competition will favor the U.S. consumerssince the local producers will be forced to offer high-quality goodsand services. The drug industry has developed into manifolds underone roof where it coordinates with all the verticals necessary forthe international market subdivision. Moreover, it incorporatesvalue-added sales as well as marketing. The Pharma industries haveresulted in the separation of the value chain with their operationscovering multiple nations to enhance their international presence.Equally, the development of biotechnology and research has enhancedin the offshoring drug market sector, hence, benefiting the U.S.customers as well as the taxpayers (Joseph,2015).Although the health cost translates to higher expenses in the US, theIndian companies exporting the drugs to US market similarly reducesthe medical cost. Therefore, this means the lesser the prices for thedrugs, the more the disposable revenue for Americans to employ onother products. Similarly, this results in the growth of the exportrevenue in India allowing the public to obtain more importations fromthe US. The development, hence, continues generating more employmentopportunities for the Americans.
WhoLosses as the Indian Drug Industry Rise?
Afterthe treaty between India and WTO was signed, multiple corporationswere established in the U.S. and became operational. As the countrysubcontracted the packaging and manufacturing facilities to India, itreduced some of its operations in various places including PuertoRico. This state completely lost its lead to collaborate with Americaon the supply of medicinal products and amenities. When the Food andDrug Administration (FDA) gave authorizations to generate drugs fortrade in the U.S., India experienced an increase in plants forproduction of drugs (Mazumdar,2013).Moreover, validity was assured to the Indian firms unlike in China,although it is still termed as a rival in the drug industry. Besides,statistics show that after the United States farmed out its packagingand services to India, the production employment decreased by 5%between the years 2008 and 2010.
Comparisonbetween the Benefits and Losses from Trade with the Indian DrugSector
Thedrug production is a major profit earner and a great marketcapitalization within the region and beyond all financial businesses.In the US, the drug organization has a high yield, which attractsinvestors and businesses looking to enter the drug industry.Furthermore, the U.S. drug production has a high net profit margin,one of the best within all business regions. The improvedproductivity acts as an indication of the industry that is notaccounted for by the industry itself (Fernando,2014).Although the drug business has high profits, the industry entailsgreat investments and holds a high operational budget. The entry feeinto the pharmaceutical market is not as tall as when the industrieshave a clear or related competitive advantage. However, it is quitedifficult for the companies to withdraw from the market due to itsspecialization.
Besides,there has been a significant rise in the total number of corporationsfunctioning in the business and the workers operating within theindustry has increased. The continuous development contributes inbuilding a drug industry with improved competition, hence, luringmore firms into the industry. The industry has been experiencing aconstant annual increase in revenues in spite of the hostile economicconditions, improved competition and the strict regulation laws thatare approved. This is in line with the constant growth trend andincome potential of the drug industry. Between the years 2000 to2010, the revenues of the drug industry almost tripled similar to thenumber of firms functioning within the industry in the same durationof time.
Additionally,the United States drug market symbolizes the opportunities providedfor nearly all the associates of the industry. In 2010, the overallU.S. drug sales were estimated to be thrice the size of the closestcompetitor. The United States holds the leading distinct marketsthrough the three core subdivisions which include the patented,generic and over-the-counter. On the contrary, although Indiamanufactures these drugs, it is not considered as the innovator.While the country indulges into the international trade ofpharmaceutical products, the industry is prohibited from exportingits drugs to participating countries. The drugs in these subsectorsmust first be accepted by the FDA before being marketed to thecustomers (LaRue,2013).The American FDA, which is broadly termed as one of the advancedmonitoring agencies in the universe, evaluates and assesses theproducts that are, thereafter, used in benchmarking for multipleforeign nations. This, therefore, implies that triumph in Americaholds main consequences on a manufactured good’s commercialsustainability elsewhere.
TheFDA is recognized for its strict criteria methods, which gives the USexclusive benefits. However, other rivals in different locations areprohibited from directly advertising their prescription drugs to thecustomers. This makes marketing a more critical tool in the US, withhuge budgets that are used in influencing the consumers. Politics significantly influences the pharmaceutical industry (LaRue,2013).In the former President Obama’s efforts to reform the healthcaresector, the US functional setting was going through extensivechanges. The new policies established, on issues concerning thegeneral drugs, biosimilars, and global healthcare hold a significantimpact on the forthcoming pharmaceutical industry of the UnitedStates. By calculating the value of the state level drug market, itis easy to illustrate the huge scale of the US market. The Bureau ofEconomic Analysis provides individual revenue data which gives areport that shows the comparisons between the US states with theirequals in drug consumption practiced in other nations. The reportsalso explain the huge measure and capabilities of the US market inthe drug industry.
TheoriesShowing the Rise of India as a Major Drug Exporter
Indiahas an absolute and competitive advantage against the rival nationsmanufacturing the generic type pharmaceuticals. The nation engages inthe manufacture of generic drugs for a lengthy period of time. Forthat reason, it has become proficient in the generic pharmaceuticalindustry. Apparently, absolute advantage refers to the generation ofa product with more efficiency than in any other nation that producesthe same product (KondalkarV. G, 2013).In accordance with Adam Smith, all states should focus on thecreation of products which they contain an absolute advantage andthereafter, sell these products in order to acquire other productsgenerated by different nations.
Inaddition, the Heckscher-Ohlin Theory illustrates the rise of theIndian drug industry suggesting that comparative advantage rises fromthe differences in the endowments from the domestic aspects. Thisdemonstrates the level in which a nation may be endowed with assetsincluding land, capital, and labor. India exhibits a lesserexpenditure in the manufacture and packaging of pharmaceuticals and,consequently, displays a general factor endowment with regard toemployment (Hill, 2015). The United States has shortages on theabundant cheap labor, which renders the state as the chief importerof products and services.
Moreover,Ramond Vernon’s Theory on the Product Lift-Cycle expounds on therise of India as a chief exporter of drugs. Vernon argued that anewly manufactured product does not have to be produced by the UnitedStates for it to be first sold in the U.S. market. The originalproduct presented might have been manufactured elsewhere at a lowercost location and thereafter exported back to the U.S. for trade, asin the case of India.
Tounderstand the reason different industries exist in the world, it isnecessary to first comprehend the mission behind their establishmentand growth. There are multiple reasons to establish an internationalbusiness partnership with India. The industries established in Indiaare motive-oriented in that they minimize costs for other countriessuch as America, through outsourcing. Some of the examples of thesesubcontracting operations include information technology services,company progression activities, back office operations, drugtranscriptions, infrastructure, and web development facilities.Subcontracting in India is growing and many corporations are pursuingits benefits. The advantages such as India’s manpower, theeducation structure, and government strategies have contributed toincreased outsourcing. The country generates brilliant students thatare skillful in all disciplines comprising the system software andfile management systems. With the available technically trained andskilled manpower, in India, the country is, hence, improving itsimage as a profitable ground to change their high-end supportservices.
Moreover,the software professionals in the state are prepared to make the mostof the global settings since their command over quantitative conceptsalongside understanding the different methods of communication inmultiple situations. Additionally, India has plenty of workforceswhich facilitate other firms to outsource particular abilities invarious regions. The Indian regime has also taken the initiative tomaintain the growth and development of the outsourcing divisionthrough the given universal business incentives and carrying out thedeals in the state.
Theoutsourcing businesses conducted in India provide firms withcost-effective services, improved efficiency, and productivity,shared risks, lower working cost, better quality, and services aswell as time for the companies to focus on other main proficiencies.Through outsourcing, the international organizations aim at reducingthe operational costs. In India, the outsourcing firms apply thenewest software, technologies, and infrastructure to provide theworldwide consumers with excellent solutions. Besides, outsourcing inIndia enables the global industries to accomplish their mission,provide consumer satisfaction as well as generating income.
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