GROUP NO.

8 Akansha Vaish Sachchidanand Yadav Sandeep Agrahari Sharad Gupta Shruti Rauniyar Tanmay Nayak

 Incorporated in the year 1935 by Dr. K. A. Hamied. Presently the Chairman and MD is Dr. Yusuf k. Hamied. Over the past 77 years, emerged as one of the most respected names in

pharmaceutical industry, not just in India but worldwide. It is one of the largest generic pharmaceutical company with a presence in over 170 countries and is innovating tremendously in R&D.
Specialised and renowned for making affordable, world-class medicines

that meet the needs of patients across therapies and offer services like consulting, plant engineering, technical know-how transfer and support.

 Vision: To make India self-reliant and self-sufficient country in

healthcare.
Cipla has 34 state-of-the-art manufacturing facilities that make Active

Pharmaceutical Ingredients (APIs) and formulations, which has been approved by major international Regulatory Agencies. Cipla is listed in BSE, NSE & Luxembourg stock exchange. Turnover- USD 1.4billion with 20,000 employees.

Milestones
1960- Cipla pioneered API manufacturing in the country and

helped to lay the foundation for the bulk drug industry in India.
1970- They spearheaded the New Patent Law by which an Indian

pharmaceutical company was allowed to manufacture a patented product which enabled Indian companies for the first time to manufacture any medicines and make them available and affordable for Indians.
1978- Cipla is the pathfinder of inhalation therapy in India with the

manufacturer of Metered-Dose Inhaler (MDI), at the time when country was ceased in importing supplies. Hence, now it has the worlds largest range of inhaled medication and devices.

Milestones (Cont).
1994- Deferiprone was launched, the worlds first oral iron chelator

which revolutionized the treatment for thalassemia and provided option to the patients that was affordable, painless and convenient. 1996- First transparent dry powder inhaler which was simple and easy to use changed the face of inhalation therapy in India.
2001- Cipla was the initiator to access HIV treatment by making

antiretrovirals (ARVs) available at less than a Dollar a Day. Cost of treatment dramatically fell from $12,000 per patient per year to $300 per patient per year. This was a revolutionary HIV treatment for the world which saved millions of lives.
2012-Cipla by reducing prices of cancer drugs, penetrated and made

world-class medicines affordable and accessible to cancer patients.

Board Of Directors
Founder-Dr. K.A.Hamied (1898-1972) Chairman & Managing Director - Dr. Yusuf K Hamied Joint Managing Director- Mr. M.K. Hamied Whole-time Director- Mr. S. Radhakrishnan Non-Executive Directors:

-Dr. H.R.Manchanda -Mr.Ramesh Shroff -Mr. V.C.Kotwal -Mr. M.R.Raghavan -Mr. Pankaj Patel -Dr. Ranjan Pai

Global Business
Exports include raw materials, intermediates, prescription drugs,

OTC and veterinary products. Cipla has partnerships/alliances for product development, technical support and marketing, and help several developing countries in their quest for self-reliance. The company deals with uncompromising quality standards in all products and services, across the world.

Research & Development

Focuses towards development of new products, improving existing products as well as drug delivery systems and expanding product applications. Hundreds of scientists work on all facets of pharmaceutical development and technology. In-house R&D forms the backbone of its operations. With almost 5-6% of the company turnover being invested towards R&D each year, Their strategy focuses on: Developing new drug formulations for existing and newer drug substances. Improving processes for existing API and formulation products. Tie-ups with independent research teams to develop new products.

Research & Development (Cont)

Strengthening the intellectual property, patenting of new products, drug

delivery systems and medical devices, mainly in the area of respiratory medicine. Conducting clinical and bio-equivalence studies for obtaining regulatory approvals for new products and services. In addition, for international business R&D team works with the strategic partners to file Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs) in US, and seek marketing authorizations in Europe and file product registration in other jurisdictions.

Patents & Product Development

Cipla owns about 100 patents. Patent filing includes drug

substances, drug products, platform technologies, IP on polymorphs & crystallinity, and medical devices. 139 DMFs, 87 registered ANDAs and 25 ANDAs under review in the US. About 1000 DMFs for a total of 101 APIs; 49 COS approved. Over 700 marketing authorizations in Europe. Over 10,000 product registrations globally. 49 products pre-qualified by World Health Organization (WHO). Supported 2 NDA filings for our partners and have 16 NDAs of Their own.

Cipla has over 2000 products in 65 therapeutic categories available in over 40 dosage forms covering a wide spectrum of diseases ranging from communicable, non-communicable, common and emerging diseases etc. with world-class quality maintenance in all of the products and services., including: Liposome Injection Microsphere Injection Topical Delivery System Inhalation Technology: - Metered-Dose Inhaler - Dry Powder Inhaler & Respiratory Solutions Nasal Drug Delivery Ophthalmic Solutions

Innovation (Cont)
Hormone Injection Nanotechnology Melt Extrusion & Hot Melt Granulation Particle Engineering Pre-filled Syringe

API Development: Cipla was among the first Indian companies to develop and manufacture Active Pharmaceutical Ingredients (APIs), the vital raw material for making the drug products which helps laying foundation for the pharmaceutical industry in India.

Platform Technologies
Cipla has made strategic investments in common platform technologies in sustained release and combination products and also key platforms to enhance drug delivery system capabilities. These technologies enhance the drugs safety and its efficacy. adoption and development of a range of platform technologies such as: Nanotechnology Microsphere Liposomal technology Hot Melt Extrusion, etc.

Capacities
Annual Manufacturing Capacities: Tablets and Capsules- 18 Billion units Aerosols MDI- 100 Million units Repulse- 400 Million units Lyophilised Injections- 20 Million units Pre-filled Syringes- 45 Million units Form Fill Seal Eye Drops- 75 Million units UNIMS- 60 Million units Oral Liquids- 35 Million units APIs- 800 Tons

Collaborations
Collaboration with others in industry, government , non-government organizations and healthcare providers is the strategy to develop a diversified global business, and deliver more products of value through: Joint ventures in Manufacturing & Technology Marketing and Distribution collaborations Know-how transfer Products, Process, New Developments Quality Management Turnkey Projects camps Training Plant Engineering Contract Manufacturing

Corporate Social Responsibility

The Cipla Palliative Care and Training Centre in Pune continues to

provide holistic care to cancer patients and their families free of cost and has also given treatment, comfort, solace to more than 7,700 patients. The focus of Cipla Palliative Care Centre is to reach out to more cancer patients who need Palliative Care and to integrate Palliative medicine with curative therapy. It extends support to Manavya, a Pune-based organization which runs a home for children with HIV infection. On the occasion of Ciplas Platinum Jubilee in 2010,Cipla Foundation was set up with the contribution of Rs. 5 core which prominently aims to provide care and financial support to people in need of healthcare and education in India. Humanitarian effort to support cancer patients and relieve their burden, Cipla has come up by reducing the prices of cancer drugs and making world-class medicines accessible to patients in India.

CSR

(Contd)

Cipla serves over million poor, aged patients in slums and villages which

works closely with several reputed non-profit organizations (such as Drugs for Neglected Diseases Initiative, Medicines Sans Frontiers and the Clinton Foundation) in order to make drugs for malaria, HIV/AIDS and other diseases, and caters through various educational and welfare activities(healthcare education, improvement of community infrastructure, scholarships, etc.) in communities surrounding of companys factories, both directly and through charitable Trusts.

Financial Summary

Performance Review (2011-12)

The Companys revenue from operations during the financial year

2011-12 amounted to 7075crore against 6399crore in the previous year recording a growth of more than 10%. The domestic turnover increased by 14% from 2822crore in the previous financial year to 3213 core in the financial year under review. Total exports increased by 10% during the year. Profit after tax of the Company increased by 17% to 1124crore from 960crore in the previous financial year. During the year operating margin increased by about 2% and it was primarily due to reduction in material cost from 47% to 42% on account of improved realisations, reduction in input costs of certain product categories and changes in the product mix. Dividend of 2 per share on 80,29,21,357 equity shares of 2 each for the year 2011-12 amounting to 160.58 core was recommended by the directors.

Financial Data

Revenue Of Cipla
8,000.00 7,000.00 6,000.00 5,000.00 4,000.00 Rs (Crore)-> 3,000.00 2,000.00 1,000.00 0.00 2007 Revenue

2008

2009

2010

2011

2012

2013

Year ->

Growth Of Cipla
25.00% 20.00% Growth 15.00% 10.00%

Percent->

5.00% 0.00% 2007

2008

2009

2010 Year->

2011

2012

2013

Market Cap
35,000.00 30,000.00 Market Cap (Rs Crore)-> 25,000.00 20,000.00 Market Cap 15,000.00 10,000.00 5,000.00 0.00 2007

2008

2009 Year->

2010

2011

2012

2013

Business Model Business model consists of what a business does, and how it makes
money doing those things. It is the method of doing business by which a company can sustain itself and is clear about how a company generates revenues and identifies where it is positioned in the value chain. Business models are dynamic and develop in response to changing industry conditions. The firm is therefore not immune to external environment and has to adjust its strategies appropriately to sustain its revenue.

Analysing Ciplas Business Model

Over the years, Cipla has improved from a sales turnover of

Rs. 1.5 crores in 1972 to Rs. 3213 in 2012 and recorded this steady increase. There are certain internal competitive advantages(what a firm does best and better than others),and is a major sub component of any firm in Business Model Institute definition. A firm can attain two basic types of competitive advantage: -low cost or -differentiation These combined with the target audience of a firm, lead to three generic competitive approaches cost leadership, differentiation and focus. Focus can be either cost focus or differentiation focus.

Low cost
Ciplas model entails the reverse engineering of new processes for the

mass production of high quality drugs at low cost due to the absence of product patents. It costs about $1.2billion to bring new pharmaceutical products to the market (GSK 2007). Cipla simply reverse engineered the process. As a result Cipla had a low cost business model. Cipla also enjoys relative cheap labour and high skilled manpower in India. Therefore, it can produce drugs much cheaper than those produced by the patent owners. A notable example of is the Cipla brand of anti-retroviral combination which was sold in year 2000, for $800 per patient per annum. On the other hand, big brand names sold the same combination for about $12,000 per patient per annum. Cipla further reduced the price to about $300 per patient per annum and subsequently around $140(Greene 2007). The low cost model is therefore enabled because Cipla need not invest in R & D and testing of these drugs.

Business scopeExpanding to other countries

Over the last three years, Cipla has forayed into developed markets of

US and Europe using specifically developed generic drugs and marketing them through tie-ups with generic MNC majors such as Andrx. In year 2005, Cipla's R&D was primarily aimed at developing new processes and generic drugs and hence remained at about 4% of sales. Ciplas drugs are sold in over 100 countries, it has not made any overseas acquisitions. Exports which were negligible a few decades ago are now in excess of almost 50% of turnover.

Why is there a need for Change?

World Trade Organization (WTO) Regulations

-The 2005 enactment of the Trade Related Intellectual Property Rights (TRIPS) agreement signed by India, led to the reinstatement of the patent law for the first time since 1972. -As a result, the reverse engineering which underpinned the Indian industry expansion is now illegal. -This has led to the need for Indian generic companies to change their business models. -Cipla and other Indian generics are being forced to adapt its business model because of the recent changes in its environment.

 Patents expiring

Contd.

-Until the mid-1990s when India signed the WTO agreement, many leading Indian pharmaceutical companies relied on the domestic market alone. -Since 2002, lot of patents were lost. As a result, Indian generics are taking advantage of the global generics market and expanding to developed countries. -Cipla is well positioned as it has a competitive edge of low cost manufacturing and advance chemistry capabilities.
Return of Multinational pharma companies to India

-Many of the foreign MNCs that fled India as a result of the former conditions are now returning to India to become full-fledged research based multinationals.

How will Ciplas Business Model Change?

There are three strategies open to Indian firms as they make steps to respond to institutional and market changes and maintain their market share: 1. Exit strategy: Exit the market by divesting the business. 2. Defensive strategy: targeted at the defence, protection and consolidation of the firms position in the domestic market in the same product market domains. 3. A bold, assertive and aggressive strategy of leveraging the current stock of capabilities and dynamically building new capabilities to expand geographically through internationalization. Cipla is presently carrying out a defensive strategy by expanding domestic sales and also expanding to other countries through its partnerships.

Contd.
More strategic partnerships
The industry is changing its model from its reverse engineering

model to a consolidation model where companies can pool resources together with other domestic and foreign firms. Cipla has formed Ciplagenpharm with an Australian company after entering into agreement in 1997. Cipla also went into a research alliance with Avesthagen, a Bangalore-based biotech company to develop bio therapeutic products. Cipla tied up with Morton Grove Teva/Ivax, AkomWatson, and Sandoz /Eon for the US market. In the UK with NeoLabs,and with Medpro in South Africa.

Contd
More R & D spending

Cipla is rising up the value chain from being a pure reverse

engineering firm focused on the domestic market and it is moving towards basic research driven, export oriented global presence, and enlarging its market reach. Ciplas R & D now includes development of new drug formulations, patenting of newer processes and products of the domestic and international markets and development of new products specifically for exports. More Exports Cipla was engaged mostly in sales to its domestic market and recently this has changed, as Cipla is reducing its overdependence on the domestic business by generating strong consistent growth in export markets. Cipla has also begun to export its products to developed countries.

The Pharmaceutical industry in India

World's 3rd-largest in terms of volume and stands

14th in terms of value. A large number of patent expirations continue to offer strong growth prospects for generic players in the developed markets . Competitive pressures in the domestic market are likely to sustain as MNCs become aggressive and domestic companies leverage on their expanded field force

Contd..

Contd..
The

Indian pharmaceuticals market characteristics that make it unique.

has

Branded generics dominate, making up for 70 to 80

per cent of the retail market. Local players have enjoyed a dominant position driven by formulation development capabilities and early investments. Price levels are low, driven by intense competition.

Contd
India Pharma Company grew at rapid rate after

1990 and spurred in 2000 primarily by market demand in North America & Europe.

 85% of these formulations were sold in India

Contd

while over 60% of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market are small-tomedium enterprises; 250 of the largest companies control 70% of the Indian market. The number of purely Indian pharma companies is fairly low. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labor in India at lowest cost.

Contd
Most pharma companies operating in India,

even the multinationals, employ Indians almost exclusively from the lowest ranks to high level management. The Indian Pharmaceutical Industry today is in the front rank of Indias science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured.

Contd
International companies associated with this

sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.

Contd
Following the de-licensing of the

pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug dully approved by the Drug Control Authority. Technologically strong and totally self-reliant, the pharmaceutical industry in India has low costs of production, low R&D costs, innovative scientific manpower, strength of national laboratories and an increasing balance of trade.

Features of Indian Pharma Sector

Size of the Industry

Turnover is approx $22 bn USD Expected to grow US$ 36.7 billion by 2015. The Industry is quite fragmented and comprises

of nearly 10,500 units with majority of them in unorganized sector. India is among the top 20 pharmaceutical exporting countries and the exports have grown very significantly at a CAGR of around 19% . Indian drugs are exported to around 200 countries in the world with highly regulated markets of USA,UK market.

Market Share

Ranbaxy Labs, 8.3%

Cipla, 7.6%

others, 41.7%

Dr Reddys Labs, 7.3%

Lupin, 5.8%

Aurobindo Pharm, 4.6%

Sun Pharma, 4.3%

Cadila Health, 3.4%

Orchid Chemical, 1.9% Divis Labs, 2.0% Torrent Pharma, 2.2% Ipca Labs, 2.5% GlaxoSmithKline, 2.6% Jubilant Life, 2.9% Wockhardt, 2.8%

Market Share
Market Cap of all the industry is Rs. 355,000

Cr. Out of the 10,500, about 300400 units are categorized as belonging to medium to large organized sector with the top 10 manufacturers accounting for approx 50% of the market share. As regards the Bulk drugs component of the industry, the market is around Rs 42,000crores giving it a share of around 50% of the total domestic market. This gives the Indian Bulk Drug industry a share of about 9% of the global bulk drug

Contd
In terms of the global market, India currently

holds a modest 1-2% share, but it has been growing at approximately 15% per year. India gained its foothold on the global scene with its innovatively engineered generic drugs and active pharmaceutical ingredients (API), and it is now seeking to become a major player in outsourced clinical research as well as contract manufacturing and research.

Contd.
There are 74 U.S. FDA-approved

manufacturing facilities in India, more than in any other country outside the U.S, and in 2005, almost 20% of all Abbreviated New Drug Applications (ANDA) to the FDA are expected to be filed by Indian companies. Growth in other fields notwithstanding, generics are still a large part of the picture. The Indian pharmaceutical industry has become the third largest producer in the world and is poised to grow into an industry of $ 20 billion in 2015 from the current turnover of $ 12 billion.

Contd
The leading 250 pharmaceutical companies

control 70% of the market. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations.

Contd
The Pharmaceutical Industry, with its rich

scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.

World Pharmaceutical market

Steps to strengthen the industry

Indian companies need to attain the right

product-mix for sustained future growth. Core competencies will play an important role in determining the future of many Indian pharmaceutical companies in the post product-patent regime after 2005. Indian companies, in an effort to consolidate their position, will have to increasingly look at merger and acquisition options of either companies or products.

Contd
This would help them to offset loss of new

product options, improve their R&D efforts and improve distribution to penetrate markets. Research and development has always taken the back seat amongst Indian pharmaceutical companies. In order to stay competitive in the future, Indian companies will have to refocus and invest heavily in R&D.

Contd
The Indian pharmaceutical industry also

needs to take advantage of the recent advances in biotechnology and information technology. The future of the industry will be determined by how well it markets its products to several regions and distributes risks, its forward and backward integration capabilities, its R&D, its consolidation through mergers and acquisitions, co-marketing and licensing agreements.

Growth
Patent expires are expected to peak out in 2012,

expecting that growth momentum would sustain as most of Indian companies have a fairly well spread out product pipeline till 2014 The quality of the filings by major Indian companies has also significantly improved over the years with complex molecules, non-orals. Global pharmaceutical markets are in the midst of major discontinuities. While growth in developed markets will slow down, emerging markets will become increasingly important in the coming decade.

Contd
The Indian drug exports grew at 17 per cent per

annum during 2008-2012 Expect drug exports to touch USD 17-18 billion by March 2015. The growth in exports was driven by a sharp rise in the market for generic products in both the developed and developing countries. The Indian pharma companies with their price competitiveness and expertise in reverse engineering skills exploited the generic opportunity.

Contd
Generic drugs will continue to dominate the Indian

drug export growth story. This is because developed countries are switching to generic mode to rein in their health care cost. Till date only 20-22 per cent of the Japanese market is on generic mode. Hence, there is enough scope for Indian pharma companies to exploit the market Many developing countries like Latin America and Africa are increasing their exposure to generic drugs due to ageing population, rising income levels, increasing lifestyle diseases and low penetration of modern medicines

Contd..

Contd..
The Domestic formulations market, has grown steadily at CAGR of 14- 15% over the past five years.

Contd

Import and Export

Import in 2012

Export in 2012

Key Growth Driver

1. Rising household income levels leading to

higher expenditure on healthcare. Growing economy: Growth rate of 6-7% Rising income levels have underpinned the step-up in growth trajectories. Growth in Income level.

2009- $3200, 2010-$3500, 2011-$3700

Contd
2.

Improving healthcare infrastructure

Several leading players are beginning to focus on new

and emerging opportunities. The pace of innovation in business models has been unprecedented. The launch of branded generics businesses and significant expansion of market coverage by multinationals illustrates it. So, the expectations from the India businesses have risen and aspirations have become bolder.

Contd
3. Innovation:

the need for innovation is still strong and if for some disease we have treatments, the cure itself is still a long way. What comes on the market today is the result of 15 years or so of investment.

Contd
4. Addressing global markets
According to the IMSxv, the international industry is

expected to grow at least by 14% The Indian market alone is expected to reach over $55 billion by 2020 according to Mc Kinsey. China could grow even more rapidly and reach circa $80 billion by 2020xvi. However if addressing global markets is a necessity, there is a significant price pressure attached to it.

Contd
5. Greater health insurance coverage

Contd..

Contd..

Contd..

Contd

Segmentation of Industry

Key Therapeutic Segments

Anti-bacterials

Gastro-intestinals
Anti-asthmatics Nutritional supplements Allergic Rhinitis therapy Anti-pyretic medicines Surfactant therapy for premature babies Chelation therapy

Therapeutic Segmentation of Industry

General segmentation of industry

Generic Generics Branded Generics API(Active Pharmaceutical Ingredients ) OTC (Over the Counter )

Generic Generics
a drug product that is comparable to

brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use They are also called as bulk drugs.

Branded Generics
They the Branded form of medicines which are

produced by the company names. The generic medicines when sold by a certain brand name the composing drug comes in this category. Eg:- Asthalin

API(Active Pharmaceutical Ingredients )

The are also a category of generic drugs but

cannot be consumed independently, they have to be a part of a composition. They are generally traded between various companies.

OTC (Over the Counter )

These kind of drugs are those drugs which can

be sold over the counter. That is doctors prescription is not required for the chemist to sell it. Eg:- Crocin, saradon, i-pill etc.

Behavioral Segmentation
Short term patient
There are the type patients which avail the

pharmaceutical product only for small duration.

Recurring or acute patients
These types of patients are a regular consumer of

the medical products.

Benefit Segmentation
Deficient market
This segment of market focuses of the products

which provides supplements for various product deficiencies.

Critical care market
This market focuses on the products and services

which provide protection against foreign body .

Health benefit market
This section of the market revolves around the

products and services which provide superior health benefits.

Terminology (Specific to pharmaceutical industry)

Big Pharma Top 10 global Pharmaceutical

companies based on 2008 sales. Big Pharma is also used to describe companies with revenues in excess of $3 billion per year Blockbuster Drug a drug that achieves annual revenues of over US 1 billion dollars at a global level IMS Health Company that provides pharmaceutical intelligence, information and consulting services to the healthcare market

Contd
SIPOC diagram - a tool used by a team to identify all

relevant elements of a process improvement project before work begins. It helps define a complex project that may not be well scoped ABBREVIATED NEW DRUG APPLICATION (ANDA) An Abbreviated New Drug Application (ANDA) contains data that, when submitted to FDA's Center for Drug Evaluation and Research, Office of Generic Drugs, provides for the review and ultimate approval of a generic drug product in the US. Generic drug applications are called "abbreviated" because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and effectiveness. Instead, a generic applicant must scientifically demonstrate that its product is bioequivalent. Once approved, an applicant may manufacture and market the generic drug product.

Contd
ACTIVE PHARMACEUTICAL INGREDIENT (API)

- An active pharmaceutical ingredient is any component that provides pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body of man or animals. BIOAVAILABILITY - The rate and extent at which an active pharmaceutical ingredient is absorbed (both speed and amount) by the body when introduced in a given dosage form (capsule, tablet, injectable, suppository, etc).

Contd
BIOEQUIVALENCE - Two medicines are

bioequivalent when they contain the same amount of an identical active pharmaceutical ingredient, and when their bioavailability is the same when administered in equal doses under equal conditions. Strict scientific criteria exist for running bioequivalence studies. BIOGENERIC/BIOSIMILAR PRODUCT - An offpatent biological medicinal product which is produced by manufacturers other than the originator and which is similar to the originator product. Biogenerics are sometimes called biosimilar or followon biologic products because biological products produced by different manufacturers are not strictly identical, but similar. Once approved by the competent authorities, biosimilar/biogeneric products are not significantly different in terms of quality, safety and efficacy from the originator product.

Contd
BIOLOGIC LICENSE APPLICATION (BLA) - Biological products

are approved for marketing in the US under the provisions of the Public Health Service (PHS) Act. The Act requires a firm who manufactures a biologic for sale in interstate commerce to hold a license for the product. A biologics license application is a submission that contains specific information on the manufacturing processes, chemistry, pharmacology, clinical pharmacology and the medical affects of the biologic product. If the information provided meets FDA requirements, the application is approved and a license is issued allowing the firm to market the product. BIOLOGIC PRODUCT - A biologic product is any virus, serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product applicable to the prevention, treatment, or cure of diseases or injuries. Biologic products are a subset of drug products distinguished by their manufacturing processes (biological process vs. chemical process). In general, the term "drugs" includes biologic products.

Contd
BIOLOGICAL MEDICINAL PRODUCT - A

medicine where the active substance is a biological substance as opposed to a chemical substance. The biological substance is produced by or extracted from a biological source. BRAND NAME DRUG - A brand name drug is a drug marketed under a proprietary, trademarkprotected name.

Contd
CAS NUMBERS - Chemical Abstracts Service

Registry numbers. A unique, numerical designation for every chemical, including pharmaceuticals. CAS numbers are used primarily by chemists to identify different drugs, since the text names of drugs can vary. CAS numbers are assigned by the American Chemical Society's Chemical Abstracts Service (CAS), generally determined with the rules of the International Union of Pure and Applied Chemistry (IUPAC) and the International Union of Biochemistry (IUB). Registry numbers are assigned randomly and do not imply any compositional or other meaning. DRUG MASTER FILE (DMF) - A confidential document filed by API manufacturers and referenced in an Abbreviated New Drug Application (ANDA) or New Drug Application (NDA).

Contd
GENERIC DRUG - A generic drug is the same as a

brand name drug in dosage, safety, strength, how it is taken, quality, performance, and intended use. In the case of the US, before approving a generic drug product, the FDA requires many rigorous tests and procedures to assure that the generic drug can be substituted for the brand name drug. The FDA bases evaluations of substitutability, or "therapeutic equivalence," of generic drugs on scientific evaluations. GRANDFATHERING - A clause within the implementing language for GATT in the US that allows a company that had made"substantial investment" in a generic pharmaceutical prior to the GATT extension of certain patent expiry dates to market a generic version of the product on which the patent has been extended provided that the generic company pay a "reasonable remuneration" to the

Contd
ORANGE BOOK - The FDA's list of Approved Drug

Products with Therapeutic Equivalences is commonly referred to as "The Orange Book." The FDA's official publication, it covers, among other things, approved generic, dose form dossiers, non-antibiotic patent expiries and Waxman-Hatch extension information for pharmaceuticals Key Opinion Leader (KOL) - Key Opinion Leaders are physicians who influence their peers' medical practice, including but not limited to prescribing behavior. Often KOLs are chosen more for their high prescribing habits than for their knowledge or other attribute that would enable them to influence their peers. Physicians are more interested in true thought leaders who have credentials such as academic standing and/or have performed clinical trials.

Contd
Corrective Direct-to-Consumer Advertising - FDA

regulations require prescription drug ads to contain accurate information about the benefits and risks of the drug advertised. When this is not the case, corrective advertising is designed to dissipate or correct erroneous beliefs resulting from a false claim. Direct-to-Consumer (DTC) - The promotion of prescription drugs by pharmaceutical companies directly to consumers via broadcast and print media such as television, radio, magazines, billboards, and also the Internet.

Contd
Disease Awareness Ad - Pharmaceutical marketers

often use the term "Disease Awareness" in reference to Help-Seeking Ads. These ads are designed to increase the market size of a therapeutic by "building" awareness of a particular medical condition. An example would be ads for "overactive bladder," which have been successful in building awareness among consumers of a medical condition (urinary incontinence or urgency) that many thought was only of concern for senior citizens. Multichannel Marketing (MCM) - Multichannel pharma marketing refers to the use of multiple synchronized communication channels to reach consumers, patients, and physicians with marketing communications or information at the appropriate point in their decision cycles.

Contd
Medical Science Liaison (MSL) - Professionals

(employees of pharmaceutical companies) -- most with advanced medical, pharmacy or science degrees -- that offer credibility and objectivity of a peer, but also provide an insider's knowledge of their companies and products. MSLs coordinate the flow of clinical information and manage important key opinion leader (KOL) relationships, which can be critical to a product's success at any stage of its life cycle. Pay-for-Delay - In a "pay-for-delay" agreement between a brand-name drug manufacturer and a potential generic competitor, a patent holder (the brand-name manufacturer) agrees to pay a large sum of money to an accused infringer (its would-be competitor), and the competitor agrees that it will no longer challenge the patent and will not enter the market for a specified period of time.

Contd
Reverse Payment - In a "reverse payment" agreement between

a brand-name drug manufacturer and a potential generic competitor, a patent holder (the brand-name manufacturer) agrees to pay a large sum of money to an accused infringer (its would-be competitor), and the competitor agrees that it will no longer challenge the patent and will not enter the market for a specified period of time. Sampling - Sampling (ie, Drug Sampling) is the process by which pharmaceutical companies distribute free drugs (Drug Samples) to physicians. According to the Prescription Drug Marketing Act of 1987, the term "drug sample" means a unit of a drug, which is not intended to be sold and is intended to promote the sale of the drug. According to this act, the manufacturer or distributor of a drug subject may distribute drug samples by mail or common carrier to practitioners licensed to prescribe such drugs or, at the request of a licensed practitioner, to pharmacies of hospitals or other health care entities. The recipient of the drug sample must execute a written receipt for the drug sample upon its delivery and the return of the receipt to the manufacturer or distributor

Performance Parameters
The Pharmaceutical industry has been focusing

most of its resources on the next blockbuster drug. With changes in regulations, declines in drug approvals, and a shift toward developing high value biologics, todays manufacturers must begin to refocus and to address current processes, practices and systems, and take a hard line on improving their overall quality and compliance efforts. Key Performance Indicators (KPIs) help Pharma corporations highlight successes and identify program areas for continuous improvement, helping provide a picture of its pharmaceutical benefit

Financial Parameters
Overall Drug Trend - Identifies drug trends over

time. Aids in formulary reconstitution and management. Drug Utilization - Provides an insight into the efficiency of drug use (i.e. whether a certain drug therapy provides value for money). Evaluates performance compared to geographically relevant benchmarks Generic Dispensing Rate - Monitors changes in utilization of generic drugs and the associated savings. Offers multiple drill-downs by geography, therapeutic class, or age/gender to uncover potential cartel formation, unethical dispensing trends, disease patterns and

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Generic Substitution Rate - Tracks the

percentage of all multisource drugs that were dispensed as generics. The overall level of generic drug utilization is determined both by the frequency of generic substitution at the pharmacy counter and by physician prescribing patterns. Enables pharmacy benefit managers to spot undesired trends in drug utilization. Channel Tracker - Aids in understanding the channel conversion from retail pharmacy to mail order, as well as the associated savings resulting from this conversion

Medical Parameters
Therapeutic Efficacy/Success Rate - Enables

PBMs to understand the effectiveness of a drug (therapeutic class wise) by analyzing the Medical Claims with the Pharmacy claims. Specialty Drug Utilization - Provides a complete picture of the total utilization of injectable, infusible and oral drugs. Tracks the HCPCS codes with regard to each therapeutic class, enabling assessment of specialty drug spending on the medical benefit side.

Operational Parameters
Prescription Turn-around Time - Measures the

average time between prescription generation and drug delivery, enabling pharmacy managers to track customer experience and identify potential pharmacy load issues across regions. Medication Possession Ratio - Identifies prescription adherence patterns across member segments, plans and therapeutic classes. This attribute can be used to adopt relevant intervention programs. Seasonal Therapeutic Tracker - Tracks the impact of seasonal factors on drug utilization, which helps PBMs devise suitable strategies and member intervention programs.

Dynamics (Basis of competition)

Strong intellectual property protection is essential to a vital

innovative pharmaceutical industry. The strength of intellectual property rights protection profoundly impacts investment decisions. This investment is essential to enable further pharmaceutical innovation, as it now supports the extraordinary progress from which this and future generations all benefit. The incentives for innovation that are secured by intellectual property rights are also essential to promote competition, both among research-based companies and between research-based and generic companies. This investment supports the constant efforts of research-based companies to develop innovative products to compete with the products of other research-based companies in a given therapeutic class. This investment also promotes competition between research-based companies and generic companies. And this is a crucial point to understand. Simply stated, generic companies are in the business of copying products developed by research based companies. To the extent investment does not occur to fund the development of these innovations, research-based companies and generics alike will have fewer new products, and less competition will occur.

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Robust patent rights for initial and sequential

product development are needed to promote innovation and related competition. It comes as it will, sometimes quite serendipitously

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The key to the pharmaceutical industrys

innovation is its ever-growing investment in research and development. On average, economists estimate that it takes 1015 years to develop a new drug. Most drugs do not survive the rigorous development process only 20 in 5,000 compounds that are screened enter preclinical testing, and only 1 drug in 5 that enters human clinical trials is approved by the FDA as being both safe and effective.

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Rapid recent growth of the generic drug industry

is not the only source of increased competition in the pharmaceutical market. The competition among research-based pharmaceutical companies continues to increase. For example, Tagamet, an ulcer drug introduced in 1977, had 6 years on the market before another drug in the same class, Zantac, was introduced. In contrast, Invirase, the first of a new class of anti-viral drugs known as protease inhibitors, was on the market only 3 months before a second protease inhibitor, Norvir, was approved. Patients and the American health care system benefit from this robust innovator competition.

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Sequential innovation leading to improved

product improvements, however, is an important element of competition in the pharmaceutical industry, and patent protection is an essential precondition for that innovation

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The pharmaceutical industry is characterized by

significant first-mover advantages. At the same time, breakthrough drugs generally face competition within their initial patent life from other branded drugs of the same therapeutic class. Further, with eventual generic competition a certainty under the Hatch-Waxman Act, branded manufacturers try to develop improved products to retain sales.

Thank You