1

“A Study To Determine Whether New Product Launch

Process Is The Key Success Factor For A Pharmaceutical

Company In The Domestic Market, Done At Dr Reddy‟s

Laboratories Ltd, Hyderabad.”

Organization Study

Submitted to

Mahatma Gandhi University, Kottayam

In partial fulfillment of the requirements for the award of

Masters Degree in Business Administration

(2010 - 2012)

By

Nima Muraleedharan,

Reg No:21833

Rajagiri College of Social Sciences

Rajagiri P.O.

Kochi - 683104

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DECLARATION

I, Nima Muraleedharan, hereby declare that this project report entitled ―A Study To Determine

Whether New Product Launch Is The Key Success Factor For A Pharmaceutical Company In

The Domestic Market ‖ is prepared in partial fulfillment of the requirement for the award of the

degree in Master in Business Administration during the academic year 2010 - 2011 under the

guidance of Prof. Jose Varghese, Faculty Member, Rajagiri Center for Business Studies and Mr.

Sunil Menon Associate Director, SCM, Dr Reddy‘s Laboratories Ltd.

I also declare that this project has not been submitted to any other institution for the award of any

other degree.

Place: Cochin

Date:

Nima Muraleedharan

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ACKNOWLEDGEMENT

I am forever indebted to the Lord Almighty for being with me throughout and in all my

endeavors. His grace was sufficient for me.

I express my sincere and heartfelt gratitude to my Project guide Mr. Sunil Menon, Associate

Director, SCM, Dr Reddy‘s Laboratories LTD for providing me an opportunity to fulfill my

dream of doing my summer project at Dr Reddy‘s Laboratories LTD.

I am thankful to Mr. Somasundar (Deputy Manager, SCM) Mr. K Sudhakar (Senior Manager,

SCM) Mr. Umangg and Ms Gita for all the facilities they provided for a conducive

environment to conduct the study.

I am greatly indebted to my faculty guide, Prof. Jose Varghese, Rajagiri Center for Business

Studies for his kind guidance and helpful suggestions in every stage of this project.

I am thankful to all the personnel at Dr Reddy‘s Laboratories Ltd who participated in my study

for sparing their time and valuable comments without which I would never have been able

to complete this project.

I acknowledge my indebtedness to my parents and friend and fellow intern Mr Joffin Raju

Joseph for their constant love and support rendered.

I express my sincere gratitude to other countless people who have been generous with time, their

support and encouragement.

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TABLE OF CONTENTS

Chapter No. Particulars Page No.

Executive summary 5

Chapter 1 Organizational study 6- 38

- Industry profile 6-19

- Company profile 20-38

Chapter 2 Research methodology 43-46

Chapter 3 Data analysis and interpretation 47-76

Chapter 4 Findings 77-78

Chapter 5 Conclusion 79

Bibliography

Annexure

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EXECUTIVE SUMMARY

Dr Reddy‘s Laboratories (DRL) Ltd. founded in 1984 by Dr K Anji Reddy is one of the leading

pharmaceutical companies in India. The company has a strong product portfolio of more than

140 products, including niches like oncology and hormones, and Dr Reddy‘s is the third ranked

API player globally. DRL caters to a number of markets worldwide including India, US, Canada,

Europe, Japan and Russia.

Dr Reddy‘s India market contributes 1044 crores (13.9%) of overall revenue. New product

launches in domestic market is considered to be a key success factor in growing top & bottom

lines. Considering the last three financial years of DRL it is evident that the revenue generated

from the new products has been significantly increasing. In the last financial year (2010-11) the

revenue generated by the new products formed 31.2% of the total revenue(domestic market).

This shows that new product launches are important to the company‘s continuing viability.

In the scenario of such a success, it was an ideal time to conduct a study on the New Product

Launch Process for the domestic market and understand the key areas where the process can be

improved to ensure the continuing success of the launches.

The study was conducted over a time period of 6 weeks in which the necessary data was

collected through personal interviews and the analysis of annual reports & other data. Key

people from all the departments involved were met and discussions with the various personnel

helped understanding that during the execution of the launch (from selection to marketing) the

Company faces a large number of challenges. The key challenges are detailed in the report.

At the end of the study, statistics gathered from the annual reports and marketing department

showed that new product launches are indeed the key success factors for the Company in the

domestic market. A new product launch is an extremely complex process with integrated work

from various departments. Though the key challenges were identified, due to time constraint, a

deep study of the process could not be done to identify the solutions. The report ends with further

scope to conduct a study on the solutions that can be considered for the key challenges identified.

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ORGANIZATIONAL

STUDY

7

INDUSTRY PROFILE

Introduction:

Indian pharmaceutical industry has been growing at record levels in the recent years but now has

unprecedented opportunities to expand in a number of fields. The domestic industry‘s long

established position as a world leader in the production of high quality generic medicines is set to

reap significant new benefits as the patents on a number of blockbuster drugs are scheduled to

expire over the next few years. In addition, more and more governments worldwide are seeking

to curb their soaring prescription drug costs through the greater use of genetics. These

opportunities are presenting themselves not only in India‘s traditional wealthy client markets

such as the US and European Union nations but also in emerging economies with vast

populations such as Africa, South America, Asia and Eastern and Central Europe.

In addition, India‘s long established position as preferred manufacturing location for

multinational drug manufacturers is quickly spreading into other areas of outsourcing activities.

Soaring costs of R&D and administration are persuading drug manufacturers to move more and

more out of their discovery research and clinical trial activities to the subcontinent or to establish

administration centers there, capitalizing on India‘s high level of scientific expertise as well as

low wages.

Both multinational and local drug manufacturer could eventually benefit from the market

potential of India‘s population of over one billion. A large market will likely open up as the

result of a projected boom in health insurance, an area in which the country is currently woefully

underdeveloped. New government initiatives seek to enable the majority of the population to

access the life saving drugs they need, while even greater opportunities may be presented by the

rise of the new Indian consumer. This group- urban, middleclass and wealthy- live fast-paced

Western-style life and as a result they are beginning to suffer from western life lifestyle related

illnesses, for which they want and can afford, innovative drug treatments. This untapped

domestic market is also highly attractive to the MNCs, which recently have returned to India in

large numbers.

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Now, MNCs and domestic companies are starting to work together, utilizing each other‘s

strength for their mutual benefit. For the foreign firms this includes not only the Indian

companies‘ research and manufacturing capabilities and their much lower operational cost levels,

but also comprehensive marketing and distribution networks operating through India‘s vast

territories.

Industrial Background

The Indian pharmaceutical sector has come a long way, being almost non-existent before 1970 to

a prominent provider of healthcare products, meeting almost 95 per cent of the country's

pharmaceuticals needs. The Industry today is in the front rank of India‘s 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. From simple headache pills to sophisticated antibiotics and complex

cardiac compounds, almost every type of medicine is now made indigenously.

Indian Pharma Industry playing a key role in promoting and sustaining development in the vital

field of medicines, boasts of quality producers and units approved by the regulatory authorities

of USA and UK. 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.

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units

with severe price competition and government price control. It has expanded drastically in the

last two decades. There are about 250 large units that control 70 per cent of the market with

market leader holding nearly 7 per cent of the market share and about 8000 Small Scale Units

together 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.

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 duly approved by the Drug Control Authority.

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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. The total Indian production constitutes about 13 per cent of

the world market in value terms and, 8 per cent in volume terms.

A brief history

The first Indian Pharmaceutical Company, the Bengal Chemicals and Pharmaceutical Works,

which still exist as one of 5 government owned drug manufacturers, appeared in Calcutta in the

1930. The other four are:

Indian Drugs and Pharmaceuticals Ltd.(IDPL)

Rajasthan Drugs and Pharmaceutical Ltd. (RDPL)

Karnataka Antibiotics and Pharmaceuticals Ltd. (KAPL)

Hindustan Antibiotics Ltd. (HAL)

For the next 60 years, most of the drugs in India were imported by multi nationals either in fully

formulated or bulk form. The government started to encourage the growth of drug manufacturing

by Indian companies in the 1960s, with the Patents Act in the 1970, enabled the industry to

become what it is today. The patent act removed the composition patents from food and drugs,

and though it kept process patents it was reduced to a period of 5 to 7 years.

The lack of patent protection made the market undesirable to the multinational companies that

had dominated the market, and while they streamed out Indian companies started to take their

places. They carved a niche in both Indian and world market with their expertise in reverse-

engineering new processes, for manufacturing drugs at low cost.

The Changing Prescription

As per WTO, from the year 2005, India granted product patent recognition to all new chemical

entities (NCEs) i.e., bulk drugs developed then onwards. This introduction of product patent

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regime from January 2005 is leading into long-term growth for the future which mandated patent

protection on both products and processes for a period of 20 years.

Under this new law, India will be forced to recognize not only new patents but also any patents

filed after January 1, 1995. Under changed environment, the industry is being forced to adapt its

business model to recent changes in the operating environment.

Indian pharmaceutical industry is mounting up the value chain. From being a pure reverse

engineering industry focused on the domestic market, the industry is moving towards basic

research driven, export oriented global presence, providing wide range of value added quality

products and services, innovation, product life cycle management and enlarging their market

reach.

The old and mature categories like anti-infective, vitamins, analgesics are de-growing while; new

lifestyle categories like Cardiovascular, Central Nervous System (CNS), and Anti Diabetic are

expanding at double-digit growth rates. The Indian companies are putting their act together to tap

the generic drugs markets in the regulated high margin markets of the developed countries. The

R & D Manufacturing Marketing

Traditiona

l Business

models in

Indian

Pharma

Industry

Model 1 - Integrated operations

Model 2- In-house manufacturing and marketing of

own product

Emerging

Business

models in

Indian

Pharma

Industry

Model 3-

Contract R&D

Model 4-

manufacturing for

CM & Supplies

Model 5-

Contract and co

marketing

alliance

CT

O

DD

&D

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US market remains to be the most lucrative market for the Indian companies led by its market

size and the intensity of blockbuster drugs going off patent.

Outsourcing in the fields of R&D and manufacturing is the next best event in the pharmaceutical

industry. Spiraling cost, expiring patents, low R&D cost and market dynamics are driving the

MNCs to outsource both manufacturing and research activities. India with its apt chemistry skills

and low cost advantages, both in research and manufacturing coupled with skilled manpower

will attract a lot of business in the days to come.

The Indian Government's decision to allow 100 percent foreign direct investment into the drugs

and pharmaceutical industry is expected to aid the growth of contract research in the country.

MNCs in India are facing the problem of having a very high Drugs Price Control Order (DPCO)

coverage, weakening their bottom lines as well as hindering their growth through the launch of

new products. DPCO coverage is expected to be diluted further in the near future benefiting the

MNCs.

Emerging Trends:

The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical

research, contract research, manufacturing and innovation opportunities. This path can lead the

Indian pharmaceutical industry to huge success endeavors.

1. Research & Development

Research & Development is the key to the future of pharmaceutical industry. The pharmaceutical

advances for considerable improvement in life expectancy and health all over the world are the

result of a steadily increasing investment in research.

There is considerable scope for collaborative R & D in India. India can offer several strengths to

the international R & D community. These strengths relate to availability of excellent scientific

talents who can develop combinatorial chemistry, new synthetic molecules and plant derived

candidate drugs.

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The R & D expenditure by the Indian pharmaceutical industry is around 1.9 per cent of the

industry‘s turnover, which is a little low as compared to foreign research based pharmaceutical

companies.

However, now that India is entering into the Patent protection area, many companies are

spending relatively more on R & D. Indian Pharmaceutical Industry, with its rich scientific

talents, provides cost-effective clinical trial research. It has an excellent record of development

of improved, cost-beneficial chemical syntheses for various drug molecules. Some MNCs are

already sourcing these services from their Indian affiliates.

2. Product Development

For years, firms have made their ways into the global market by researching generic competitors

to patented drugs and following up with litigation to challenge the patent. This approach remains

untouched by the new patent regime and looks to increase in the future. However, those that can

afford it have set their sights on an even higher goal: new molecule discovery. Although the

initial investment is huge, companies are lured by the promise of hefty profit margins and the

recognition as a legitimate competitor in the global industry.

3. Domestic Demand

The industry has enormous growth potential. Factors listed below determine the rising demand

for pharmaceuticals.

The growing population of over of a billion

Increasing income

Demand for quality healthcare service

Changing lifestyle has led to change in disease patterns, and increased demand for new

medicines to combat lifestyle related diseases

More than 85 per cent of the formulations produced in the country are sold in the domestic

market. India is largely self-sufficient in case of formulations. Some life saving, new generation

under-patent formulations continue to be imported, especially by MNCs, which then market

them in India.

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Demand for drugs for treatment of lifestyle-related diseases such as diabetes, cardiovascular

diseases, and central nervous system are on the increase. Historically, the low cost of

domestically produced drugs together with government controlled prices, and the absence of

patent regulations had made the market less attractive for foreign players. With the new patent

laws in place the market scenario has changed. Indian market has become attractive for foreign

companies.

Opportunities and challenges:

Opportunities:

The main opportunities in the Indian Pharmaceutical Industry are in the areas of:

Generics

Biotechnology

17%

11%

10%

10%10%

10%

5%

5%

5%

5%

2%4%

7%

Market Share of Different Pharmaceutical Product Categories

Anti Infective

Gastro Intestinal

Cardiac

Respiratory

Vitamins/Minerals/Nutrients

Pain/Anagesic

Dermatological

Gynaecology

Nuro Psychatry

Fig 2

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Outsourcing

Contract manufacturing

1. Generics:

By the year 2007-2008, drugs worth $40 billion in the US and $ 25 billion in the Europe lost

their patent protection. Indian firms have taken over 30% of the global generics market. Low

production costs give India an edge over other generics world markets, especially China and

Israel. It will be easier for Indian firms to win larger generics market shares overseas than at

home, particularly in the US and Europe. Indian manufacturers export their products to more

than 65 countries in the world. The largest customer of the Indian pharmaceutical company is the

US.

2. Biotechnology:

In the past years, biopharmaceuticals accounted for 60% of India‘s total biotechnology markets,

which was worth an estimated $709 million- up 39 % over the previous period. With 200 biotech

companies and total revenues of $500 million annually, India‘s biotechnology sector is still in

the developmental stage.

However, it is growing fast with initial emphasis on vaccines and bioservices. The industry is

situated mainly in Karnataka, although there are operations in Andhra Pradesh, Hyderabad,

Kerala, Maharashtra and West Bengal.

3. Outsourcing:

India‘s status as an information technology superpower, with access to specialized skills and

24X7 work hours is a huge advantage, as it strengthens its position as the destination of the

choice for contract research including drug-discovery. Eighty-two percent of US companies

overall rank India as their first choice in IT outsourcing destination. IT and IT enabled services

(ITES) have been expanding their activities in India to new business segments such as

bioinformatics and life sciences: those doing so or planning to do so include Accenture, Intel,

Satyam, Cognizant, IBM, Oracle and TCS.

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India‘s other advantages for off shoring

Low cost skill base

Current Good Manufacturing Practice (GMP) and US FDA compliance level

High Visibility in generics

High quality, compliant manufacturing

Strong financial position with ability to scale up

Manufacturing capacity

Access to new technologies

Cost efficiency and track record

Industry position

Recognition of product patents

4. Contract manufacturing:

The global pharmaceutical market is estimated to represent a $48 billion opportunity for India, in

terms of:

Manufacturing outsourcing supply of Active Pharmaceutical Industry (API) and

Intermediates

Development outsourcing – conducting clinical and pre-clinical trials.

Customized chemistry services- contract research services for compounds pre-launch.

Challenges:

1. Underdeveloped new molecule discovery program

The main weakness of the industry is an underdeveloped new molecule discovery program. Even

after the increased investment, market leaders such as Ranbaxy and Dr. Reddy‘s Laboratories

spent only 5-10 per cent of their revenues on R&D, lagging behind Western pharmaceuticals like

Pfizer, whose research budget last year was greater than the combined revenues of the entire

Indian pharmaceutical industry.

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2. Hue & cry against exploitation

In clinical testing persons from developing countries will be used to generate data about possible

effects of a drug. A feeling of unrest among them or some section of society might develop that

we are being used as guinea pigs. It might lead to demonstrations or legislations which will

hamper the growth of industry.

3. Back lash against outsourcing

Similar to BPO there might be unrest in developed nations that outsourcing of clinical trials will

lead to job loss culminating into legislation banning the whole procedure.

4. IP leakage

IP leakage is one of the major concerns by companies outsourcing research work to India. So any

major incident of IP leakage by Indian company can taint the image of whole industry.

5. Restricted items

There are a lot of items that are restricted under the EXIM policy from free trading. These

restrictions are a weakness for the industry and hence pose to be a threat for its development.

6. Reservation for small scale industries

Some drugs are reserved for exclusive manufacture by the small scale units. These are

Niacinamide, Paracetamol, Glycero Phosphates, Nicotinic Acid.

Corporate Catalyst India India‘s Pharmaceutical Industry. The present investment limit for units

to qualify as a small scale unit is Rs. 30 million.

7. No brand value

India has a low beep on the radar screen of MNC drug companies as no potential clinical testing

has been ever outsourced to India. So we have a low brand value in global arena.

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Growth drivers:

India‘s population is just over one billion at present and projected to rise to 1.6 billion by 2050

and India will become the world‘s most populous country. It is estimated that by 2025, 189

million Indians will be 60 or older up. This projection shows the demand of pharmaceutical

drugs will rise in coming years. Indian government has framed a favorable policy to boost

foreign investment in the pharmaceutical sector.

Tax holidays are offered to industrial operations established in specified Special Economic Zone

or under developed areas, deduction of profits earned from exports, liberal depreciation

allowances, deduction of capital R & D expenditure; and relief on all contributions to approved

domestic research institutions are some examples.

Foreign Direct Investment up to 100 per cent is permitted through the automatic route and

Automatic approval for Foreign Technology Agreements also is available in the case of all bulk

drugs cleared by Drug Controller General (India), all their intermediates and formulations,

except those restricted by the Government of India.

India has excellent skilled and educated manpower. There are 115,000 scientists with their

master‘s degrees and 12,000 with Ph.D. in chemistry alone pass out every year. Clinical trials

account for over 40 per cent of the costs of developing a new drug, and Rabo India Finance (a

subsidiary of the Netherlands based Rabo Bank) estimates that a standard drug could be tested in

India for as little as $ 90 million – 60 per cent of the sum it would cost to test in the US.

Maximum US FDA approvals outside USA are with Indian Companies – approximately 197.

Largest No. of US Drug Master File‘s (DMF) – 213 (38 per cent of DMFs filed in First half of

2005 are from India)

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Vision 2020:

1. Responsibilities and Resources would make an important beginning in the transition of

efficient and effective use of pharmaceutical in building a prosperous and healthy India.

2. The Government should take immediate steps to remove the anomalies in the Indian

Pharmacopoeia Commission created by it, and give necessary teeth to truly function as an

independent and autonomous scientific body.

3. The Indian pharmaceutical industry shall ensure that essential drugs at affordable prices

are available to the vast population of this sub-continent and also continue providing

employment for millions.

4. India shall implement all the rules and regulations, which guide, monitor and control the

activities of the providers of the healthcare system in the country and shall Corporate

Catalyst India, India‘s Pharmaceutical Industry examine the way to bring them up to

international standards. The government should implement the recommendations of

Mashelkar committee and constitute the Central Drug Authority at the earliest.

5. The basic course of education should be designed to ensure that the newly qualified

pharmacist has the necessary knowledge and skills to commence practicing competently

in a variety of settings including community and hospital pharmacy and the

pharmaceutical industry. Concept of National schools of pharmacy should be established

to develop and introduce model curriculum.

6. Pharmacists should become knowledgeable to participate in medication management and

outcome monitoring. Pharmacy profession should orient concept of pharmacy practice at

community and hospital pharmacies through appropriate training and compensation.

7. India will emerge as a major global player in the field of pharmaceuticals exports and as a

provider of quality medicines at low costs. It shall also emerge as a major player in the

generic drugs market in USA and Europe.

8. The pharmacy profession will make the clinical trial industry in India to grow to over a

billion dollars in the next five years and position itself as a destination of choice for CRO

services by way of strict implementation of patent laws, single window clearance of

clinical trial protocols by regulatory clearances and shall accord industry status to this

sector.

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9. India shall attain new heights in herbal drugs research in shaping Indian Systems of

Medicine into a popular system of medicine of the future for holistic health care and

ensuring health care for all - especially for the welfare of the poor.

10. India‘s Patents Act should ensure that it does not exceed the requirements of TRIPS, and

that prioritizes access to medicines and public health, while retaining the right to

participate in the compulsory license scenario. India should lead a movement of

developing nations and create a TRIPS south and G-20 alliance is a step in that direction.

11. The Government should take immediate steps to remove the anomalies in the Indian

Pharmacopoeia Commission created by it, and give necessary teeth to truly function as an

independent and autonomous scientific body.

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COMPANY PROFILE

Introduction:

Dr. Reddy's Laboratories Ltd. founded in 1984 by Dr. K. Anji Reddy, has become India‗s

biggest pharmaceutical company. Reddy's manufactures and markets a wide range of

pharmaceuticals in India and overseas. The company has over 190 medications, 60 active

pharmaceutical ingredients for drug manufacture, diagnostic kits, critical care, and biotechnology

products.

Dr Reddy‘s transformed industry sobriquet from ‗‘Imitators‟ to ―Innovators‟. It was the 1st

Indian Pharma Company to take up Drug Discovery research.

Dr. Reddy's began as a supplier to Indian drug manufacturers, but it soon started exporting to

other less-regulated markets that had the advantage of not having to spend time and money on

a manufacturing plant that that would gain approval from a drug licensing body such as the U.S.

Food and Drug Administration (FDA). By the early 1990s, the expanded scale and profitability

from these unregulated markets enabled the company to begin focusing on getting approval from

drug regulators for their formulations and bulk drug manufacturing plants in more-developed

economies. This allowed their movement into regulated markets such as the US and Europe.

By 2007, Dr. Reddy's had six FDA-plants producing active pharmaceutical ingredients in India

and seven FDA-inspected and ISO 9001 (quality) and ISO 14001 (environmental management)

certified plants making patient-ready medications – five of them in India and two in the UK.

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About the founder:

Dr. K. Anji Reddy did his B.Sc. tech in Pharmaceuticals and Fine chemicals from Bombay

University and PhD in Chemical Engineering from National Chemical Laboratory, Pune, (1969)

the founder Chairman of Dr. Reddy‘s Laboratories Limited (Dr. Reddy‘s). He served in the state-

owned Indian Drugs and Pharmaceuticals Limited (1967-73), was founder-Managing Director of

Uniloids Ltd (1976-80) and Standard Organics Limited (1980-84).

Under Dr. Anji Reddy‘s leadership, Dr. Reddy‘s has become a pioneer and a trendsetter in the

Indian Pharmaceutical industry. Dr. Reddy‘s has become the first company to take up drug

discovery research in India (1993) and has led the industry from being- dubbed as ‗copycats‘ for

several years to now being acknowledged as ‗Innovators‘.

Dr. Reddy‘s was listed on the New York Stock Exchange – the first non-Japanese Asian

pharmaceutical company to list on NYSE – in April 2001 (RDY).

Dr. Reddy is a serving member of the Prime Minister‘s Council on Trade & Industry,

Government of India, and has been nominated to the Board of National Institute of

Pharmaceutical Education and Research (NIPER). He is also a Member of the Board of

Governors of Institute of Chemical Technology, University of Mumbai. Dr. Reddy chairs the

Governing Body of Hyderabad Eye Research Foundation.

Naandi Foundation, a not-for-profit development institution that strives for eradication of

poverty has Dr.Reddy as its founding father. He is also founder-Chairman of Dr

Reddy‘s Foundation for Human & Social Development, a social arm of Dr. Reddy‘s.

Dr. Reddy has been the recipient of several awards and honors. Notable among them are the

Sir P. C. Ray award, twice conferred on Dr. Reddy by Indian Chemical Manufacturers

Association (1984, 1992) and the Federation of Asian Pharmaceutical Associations (FAPA)‘s

FAPA-Ishidate Award for Pharmaceutical Research in 1998. He was voted Businessman of the

Year by India‘s leading business magazine Business India in the year 2001. For his pioneering

work and introduction of affordable medicine, CHEMTECH Foundation has bestowed on him

the Achiever of the Year award in the year 2000 and the ‗Hall of Fame‘ award in 2005, for his

Entrepreneurship, Leadership and thrust on Innovation.

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Corporate Overview:

Dr Reddy‘s is an integrated global pharmaceutical company. They define the purpose of their

existence as “Providing Affordable and Innovative Medicines for Healthier Lives.”

Dual Impact Approach of the Company:

Improve accessibility through generic pharmaceuticals

Satisfy unmet medical needs through new and improved pharmaceuticals

Dr Reddy‘s is committed to progressive governance and as a part of this adopted international

governance practices & processes. The Company gas vowed commitment to highest standards of

disclosures & transparency. Dr Reddy‘s is the only Pharma company from India to be listed on

the New York Stock Exchange.

The hierarchy of the governance is as follows:

Board

Board Committees

Management Council

Corporate Business

Corporate Business Level Bottom- Up

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Work Culture and Work values:

At Dr. Reddy's we foster a culture which is:

Customer Focused and High Performance

Entrepreneurial and Innovative

Egalitarian and Trusting

Flexible and Adaptive

Journey to excellence:

Dr. Reddy‟s Execution Excellence Model

Enable execution excellence by simplifying business/enabling processes while adopting global

best practices, design flexibility & scalability to meet changing business needs/ambitious growth

plans

Lean Manufacturing Drive

Emphasis on reduction of process variation, Goal is to incorporate less low value human effort,

less inventory, less time to develop products, and less space to become highly responsive to

customer demand while producing top quality.

Viable Vision

Provide a ―Partnership‖ to clients that deliver superior Inventory Turns, when all other

parameters remain same for the Global Generics business. Substantially increase the productivity

of the R&D resources while significantly improving the ability to complete projects on time.

DRL Headquarters:

DRL World Headquarters is located in Hyderabad (Andhra Pradesh). The headquarters is

beautifully designed according to environment of Hyderabad. The manufacturing units consist of

all the essential facilities which are necessary for an organization.

The collection of works is focused on major twentieth century art, and features works by

masters. The gardens originally were designed by the world famous garden planner, Russell

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Page, and have been extended by François Goffinet. The grounds are open to the public, and a

visitor's booth is in operation during the spring and summer.

Company profile at a glance:

Type Public

Traded as NSE: DRREDDY

BSE: 500124

NYSE: RDY

NASDAQ: RDY

Industry Pharmaceuticals

Founded 1984

Headquarters Hyderabad, Andhra Pradesh

Key people K Anji Reddy. Chairman

GV Prasad, CEO

Revenue `74,393 million

Employees Worldwide employees : 10900+

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Board and Management:

The directors are experts in the diverse fields of medicine, chemistry and medical research

human resource development, business strategy, finance, and economics. They review all

significant business decisions, including strategic and regulatory matters. Every member of the

Board, including the non-executive directors, has full access to any information related to The

Company.

The board of Directors includes:

Dr K Anji Reddy Chairman

Mr. G V Prasad Vice Chairman, CEO

Mr. Satish Reddy Managing Director, Chief Operator Officer

Dr. Omkar Goswami Independent Director

Mr. Anupam Puri Independent Director

Dr. J P Moreau Independent Director

Ms. Kaipana Morparia Independent Director

Dr. Brucella Carter Independent Director

Dr. Ashok Sekhar Ganguly Independent Director

Alliancing and Partnership:

Dr. Reddy‘s is actively pursuing a wide range of partnering interests that leverage its diverse

product development activities, broad commercial presence, and unique infrastructure and

capabilities.

1. Commercial Partnerships:

Dr Reddy‘s has a strong commercial presence in some of the largest and fastest growing

pharmaceutical markets such as the US, UK, Germany, India, Russia, CIS, Romania and

Venezuela. In all these markets, our strong product pipeline and customer focus have delivered

successful product launches and increase in market share.

In the unbranded generic markets, the Company has built a broad customer base, including all

major retailers, wholesalers/ distributors, pharmacy benefit managers, regional/non warehousing

26

chains and independents. Reddy‘s have successfully in-licensed, co-developed, and acquired

products with various partners in the US.

Contract/ Outsourcing services:

Custom Pharmaceutical Services (CPS) business is today a partner of choice for all the strategic

outsourcing needs of innovators worldwide. With strengths in IP - advantaged product

development & scale up, world-class manufacturing capability and a strong network of strategic

partners, CPS provides integrated services to their partners, including extensive Chemistry &

Process R&D expertise (including steroids, cytotoxic and hormonal APIs), cGMP compliant API

& USFDA inspected finished dosages manufacturing.

2. Product Development partnerships:

Dr. Reddy‘s vertically-integrated product development platform includes an R&D team of over

950 professionals that develop products across the entire pharmaceutical value chain – Active

Pharmaceutical Ingredients, Branded/Generic Formulations, Specialty Pharmaceuticals,

Biologics, and New Chemical Entities.

Partners and Acquisitions:

Partners:

CLINTEC INTERNATIONAL: Dr. Reddy's and Clintec International are partners in the

co-development of Anti-Cancer Compound DRF 1042.

MERCK

Dr. Reddy‘s launches authorized generic versions of MERCK‘s Proscar® and Zocor®

RHEOSCIENCE:

Dr. Reddy‘s Laboratories (NYSE: RDY) announced today that the Company has entered

into a co-development and commercialization agreement with Denmark based

Rheoscience.

ROCHE: Dr. Reddy‘s signs definitive agreement to acquire Roche‘s API business at it‘s

Mexico facility

Acquisitions:

27

GlaxoSmithKline – Penicillin Bus: In 2011, Dr. Reddy's Laboratories Ltd acquired the

oral penicillin business of GlaxoSmithKline PLC, a London- based manufacturer of

pharmaceuticals.

Jet Generici Srl: Reddy Pharma Italia SpA, a unit of Dr Reddys laborites Ltd of India,

acquired Jet Generici Srl, a wholesaler and retailer pharmaceuticals and generic finished

dosages.

Betapharm: In 2006, Dr Reddy's Laboratories Ltd of India acquired Betapharm

Arzneimittel GmbH (BA), an Augsburg-based manufacturer of pharmaceuticals.

Trigenesis Therapeutics Inc: In 2004, Dr Reddy's Laboratories Ltd acquired Trigenesis

Therapeutics Inc, a manufacturer of dermatology prescription pharmaceuticals.

Dr Reddy‟s Businesses:

India‘s largest pharmaceutical company by revenue, Dr Reddy‘s Laboratories Ltd (DRL) .The

Company consists of Active Pharmaceutical Ingredient Business (API),Custom Pharma Services

(CPS), Generics, Generics Biopharmaceuticals, Differentiated Formulation, New Chemical

Entities (NCEs).

PSAI & Custom Pharmaceutical

IngredientsGlobal Generics

Proprietary Products

AN INTERGRATED GLOBAL PHARMACEUTICAL COMPANY

28

PSAI (Active Pharmaceutical Ingredients):

Dr. Reddy's offers an unparalleled portfolio to the customers, who include innovators and

generic formulators worldwide. With a strong product portfolio of more than 140 products,

including niches like oncology and hormones Dr Reddy‘s today the third ranked API player

globally. More than 25 Products have been commercialized in Regulatory Markets and more

than 100 in the near- regulatory markets. Strong relationships with the top tier global and

regional generic players in key markets have also added to their success.

Dr Reddy‘s has a strong customer base servicing more than 800 customers spread over 100

countries and 6 continents..

Operation capabilities:

The details regarding the operation capabilities of Dr Reddy‘s in this field are:

Capabilities in Major Chemistries 24

State-of-the-art equipment and Instruments 8 FDA-inspected plants, 6 in India, 1 in

Mexico and 1 in Mirfield, UK

Fully integrated Operations Supply chain and ERP systems(SAP R/3)

Environmental Compliance Contributing to a sustainable world with zero

liquid discharge systems

Custom Pharmaceutical Ingredients1:

Custom Pharmaceutical Services (CPS) business serves several ‗innovators‘, both Big Pharma

and emerging biotech, and a large number of emerging Pharma companies. Within a short span,

The Company has become the largest CPS player from India and a partner-of-choice to

innovators, offering top-end technical expertise, tailor-made Pharma solutions and a track record

of bringing innovations to the market quickly, efficiently and economically.

29

Operation capabilities:

R&D Facilities Three Centers with over 300 chemists &

engineers well-skilled in cGMP requirement

Separate Labs for Formulation development.

Total strength of 60 scientists

Organic Chemistry Labs 21

Formulation Development 3

Analytical Labs 3

Unique Manufacturing Capabilities Steroid and Cytotoxic

Generics:

There are two kinds of generic drugs:

1. Branded Generics:

Branded Generics portfolio offers over 200 products in the major therapeutic areas of gastro-

intestinal, cardiovascular, pain management, oncology, anti-infectives, paediatrics and

dermatology. Brands like Omez, Ciprolet, Nise, Enam, Ketorol, Exifine and Cetrine enjoy

leadership positions in several key markets, including India, Romania, Venezuela, Russia &

the CIS countries.

2. Unbranded Generics:

In the unbranded generics space, the Company has capitalized on every opportunity to bring

the high-quality products to more people around the world. The generics offerings deliver

quality at cost-effective prices in the highly regulated markets of the United States, UK and

Germany. In the US, Dr Reddy‘s rank among the top 12 generic companies, with 34 product

families being marketed and a large pipeline pending approval. In the UK itself, there are more

than 30 products of the company in the market. The acquisition of betapharm, Germany's 5th

largest generics company, further consolidated their presence in the European Union (EU),

with 145 products in the market.

30

Global oncology - niche therapeutic area:

Dr Reddy‘s has the leading position in India in the area of oncology and the growth rate is

estimated at approximately 40%. The company is leading in the Filgrastim and Oxaliplatin

markets and has secures the second position in the Gemcitabine, Docetaxel and Temozolomide

markets. The company is operating in US, Europe, India, Russia, South Africa & Brazil.

Strong Biologics & Cytotoxic Manufacturing Infrastructure helps the Company to address the

need of Oncology Market.

Infrastructure Capabilities:

API Facilities Six FDA-Inspected plants in India,one FDA-

Inspected plant in Mexico, one FDA-Inspected

plant in Mirfield

Finished Dosage Units Six in India, With ISO 14001 and ISO 9001

certifications,

Approved by USFDA, MHRA (UK), MCC

(South Africa),

TGA (Australia), ANVISA (Brazil), TPP

(Canada) One FDA Inspected plant in USA

Biologics Facility One in India, audited by multiple regulatory

agencies

Custom Pharmaceutical Services Two Technology Development Centers (TDC)

in India and one in Cambridge, UK

Key global markets:

A Synopsis:

Focus on US, Germany, India and Russia

Wholly-owned subsidiaries in the USA, UK, Russia, Brazil, New Zealand, Turkey and

Mexico

Joint Ventures in China, South Africa and Australia

Representative Offices in 16 countries

31

3rd party Distribution setups in 23 countries

India:

Dr. Reddy‘s began as an API manufacturer in 1984, producing high-quality APIs to first the

Indian, and later, the international markets. In 1987, Dr Reddy‘s started our formulations

operations and, after becoming a force to reckon with in the Indian formulations market, went

international in 1991.

In India, The Company has a product portfolio of over 200 brands in major therapeutic areas,

with an emphasis on gastro-intestinal, cardiovascular, pain management, oncology, anti-

infectives, probiotic, pediatrics and dermatology.With a range of over 200 brands across 13

therapeutic areas, Dr. Reddy‘s aims to further consolidate its position as an industry leader in the

Indian pharma market.

Germany:

In Europe, Dr. Reddy‘s is an emerging player in the generics space. Dr. Reddy‘s Laboratories

(UK) Ltd. was created through the acquisition of BMS Laboratories Ltd., and it‘s wholly-owned

subsidiary Meridian Healthcare, in April 2002. Within a short span of time, Dr. Reddy‘s

succeeded in taking a leading position in key genericized molecules. In other important markets

like Italy, Spain, France, Nordic countries and the Netherlands, Dr. Reddy‘s has partnered with

established companies, thereby expanding its reach across the EU.

North America:

Established in 2001, Dr. Reddy‘s North American Generics began marketing its finished dosage-

form products in the United States and Canada. Under the Dr. Reddy‘s label, the company

currently markets 38 prescription products in 168 dosing presentations (ie, strengths and package

sizes). In addition, Dr. Reddy‘s Private Label OTC Group, which was established in 2007,

markets 8 different products in 139 packaging presentations. The Dr. Reddy‘s North American

Generics operations purpose is to provide affordable and innovative medicines for healthier

lives.

Dr. Reddy‘s North American Generics understands and appreciates that every ―customer‖ of

pharmaceutical products — the purchasing wholesaler/chain/retailer/pharmacy, the prescribing

physician, the patient, and the payer — has a ―choice.‖ They have a choice of products, as well

32

as a choice of where to acquire those products. Knowing this, The Company strives daily to

provide the best products at the best value (product, price, quality, service level, timing, etc.).

Shareholders:

DRL (symbol: RDY) shares are traded principally on the New York Stock Exchange in the

United States. The company is also listed on the NSE (symbol: DRREDDY) and BSE stock

exchanges. DRL has consistently paid cash dividends since the corporation was founded.

Share Holding Pattern on June 3, 2011

Promoters holding No. Of Shares % of Shares

Individuals 4,289,484 2.53

Companies 39,128,328 23.10

Sub Total 43,417,812 25.63

Indian Financial

Institutions

13, 337, 383 7.87

Banks 444,048 0.26

Mutual funds 9,369,468 5.53

Sub Total 23,150,899 13.67

Foreign Holding

Foreign Institutional

Investors

44,252,306 26.12

NRIs 2,692,699 1.59

ADRs/Foreign National 31,712,668 18.72

Sub Total 78,657,673 46.44

Indian Public&

Corporates

24,165,434 14.27

TOTAL 169,391,818 100.00

33

Integrated Product Development – a strong platform:

Dr Reddy‘s has state of the art facility in IPDO the first of its kind in India. The IPDO has helped

the company in creating a Prolific Global Generics Development Engine.

The IPDO in the Bachupally Campus located in Hyderabad consists of

NO. OF

PERSONNEL

FUNCTIONS

R&D Team Over 700 Integrate the product development activity of APIs and Finished

Dosages

Regulatory

Team

Over 55 Increase speed, flexibility and reliability

IP Team Over 50 Effective combination of chemistry and formulation

skills with legal, regulatory and IP expertise

Financial snapshot:

Consolidated revenue for 2010-11 grew by 6% to `74,693 million. In the ten years

between

2000-01 and 2010-11, your Company‘s revenue has been rising at a CAGR of 21%.

The Company‘s EBITDA in 2010-11 was ` 16,789 millions, which was higher than the

previous year‘s EBITDA of `15,828 millions.

Profit after tax at ` 11,040 millions in 2010-11 was also significantly greater than what it

was in the previous year.

Global Generics grew by 10% to ` 53,340 in 2010-11 from ` 48,606 in 2009-10.

Revenues from PSAI de-grew by 4% to ` 19,648 millions in 2010-11 from ` 20,404

millions in 2009-10.

Dr Reddy‟s revenue in the various markets:

34

Human Resources:

The statistics of the employees of Dr Reddy‘s is as follows:

World Wide Employees 10900+

India 8600+

Germany 300+

Rest of Europe 900+

North America 300+

Rest of the world 8600+

Research and scientific staff 1200+

Marketing & sales force 3800+

Manufacturing staff 3700+

Nationalities 370140+

The aim of HR department at Dr Reddy‘s is to

Attract, Develop and Retain multi-skilled high-performers

Create a learning organization

16%

36%22%

17%

3%6%

Revenue From Global Markets

Europe

North America

India

Russia

CIS

Others

2011

35

Develop and nurture young leaders

Promote teamwork and collaboration

Build a diverse workforce and meritocracy people

Corporate Social Responsibility:

Dr Reddy‘s is committed to access and affordability of medicines through a business model that

prioritizes the manufacture of affordable generic medicines and investment in discovery of new

molecules that meet unmet and poorly met medical needs.

Reddy‘s engage with the community at two levels, one being in and around the campuses with

the active involvement of the employees and the other where-in The Company channels the wide

network of social activities through Dr. Reddy‘s Foundation (DRF) – the social arm of Dr.

Reddy‘s Laboratories. Activity of DRF spans two broad areas of social intervention: Livelihoods

and Education. The Company is also building the necessary capabilities and soft skills among

medical support professionals, through Dr. Reddy‘s Foundation for Health Education (DRFHE)

programs with an aim to strengthen the healthcare delivery system.

Achievements:

In the year 2011: NHRD Inspire award 2011 for Learning & Development

for organization best practices in the area of competency framework in the Non-IT sector

Best CSR in the Pharmaceutical Sector at the India Shining Star CSR Awards 2011

Dr. Anji Reddy conferred with Padma Bhushan the third highest civilian award by the

Government of India.

In the year 2010: NDTV Profit Business Leadership Awards 2010: Business Leader

in the Pharmaceutical Sector Employer Branding Awards 2010 & Best HR strategy in

line with Business.

Scrip Award for Best Company in an Emerging Market.

36

TRIPLE BOTTOM APPROACH:

Core PurposeBusiness

OperationsCommunities Society

Dr Reddy‘s Foundation – Livelihoods & Education

Patient Assistance Programs & DRHFE

Employee Engagement - Volunteer Program & Power of Ten

Customer: FDA approved, Product safety (Pharmacovigilance)

Zero Liquid Discharge & SHE technologies

Environment: ISO 14001 & OHSAS 18001certified facilities

Suppliers: my SAP business Suite

Corporate Governance

Employees: Policies / Talent Mgmt Board / Leadership Development / BPE

To help people lead healthier lives through global access to medicine

37

SWOT analysis:

1. Strength

Wholly owned subsidiaries in US and Europe.

Joint ventures in China and South Africa.

Markets pharmaceutical products in 115 countries.

Partnerships with global pharmaceutical companies like Novartis, NOVO Nordisk, etc.

Strong product portfolio.

Manufacture and market over 250 medicines targeting a wide range of therapies.

Wide range of anti-cancer drugs developed.

Over 100 APIs developed.

Six New Chemical Entities (NCE).

Low cost base.

Contributes to company‘s high profit margin of around 34% of sales.

Partnerships with key players in the market maintain its cost base down.

Research Driven & Global Talent.

Expertise in developing innovative product formulations.

6120 employees worldwide including 951 scientists in which 323 are dedicated towards

new drug discovery research.

2. Weakness:

High amount of revenues from overseas.

India - a rich source of Active Pharmaceutical Ingredients (APIs), hence major source of

revenue is exports of APIs. May loose out to western world, especially Europe, where

currency is much more stable than the Indian Rupee.

Over-reliance on partnerships.

In order to compete effectively in global markets, strategic partnerships required to

develop products.

Lack of resources similar to US and Europe based competitors to develop a drug to

marketing stage.

38

Generic drugs smallest focus.

Smallest portion of revenues from generics at around 20%.

Lack of patent legislation in India harms sales of its products.

3. Opportunities:

Take a drug all the way to market.

Take a molecule from its pipeline all the way to the market place cost-effectively market.

Buy back of the integrated drug development company from ICICI Ventures and

Citigroup.

Domestic Generic drugs market.

In another 4-6 years, many product patents obtained after the 2004 legislation will go off

providing an opportunity to the company increase its domestic footprint in Generics.

4. Threats:

Needs to gain FDA approval for all sources and products.

Products have to pass strict FDA trials before going to market, which can be costly and

time consuming.

This may delay the company entry to particular markets which affects revenue.

Competition from US and European Companies.

Based in lucrative markets e.g. Novartis, Merck & Co.

Revenues running into billions which dwarfs Reddy‘s annual turnover Litigation charges.

Reddy‘s lost the case against Pfizer for the use of generic form of Norvasc drug. Legal

cost $10m and also loss of market opportunity.

Heightened concerns about profitability of German generics business of Betapharm.

39

GENERAL INTRODUCTION

OF THE

STUDY

40

INTRODUCTION

The medications or drugs, which are used in various medical treatment procedures, are

commonly termed as Pharmaceuticals. These medications are usually distributed and prepared by

pharmaceutical companies. Pharmaceuticals are prescribed by medical practitioners for treating

both human and animals. The unbelievable development in the field of science and technology

has influenced Pharmaceuticals industry immensely. Malaria, Cholera and Diphtheria that were

considered as deadly or incurable diseases few decades ago, are now treated successfully with

modern pharmaceutical products. Scientists are trying hard to help those patients who are

suffering from lethal diseases by furthering their experimentation on various pharmaceutical

products.

Extensive research and experimentation is conducted before launching a pharmaceutical product

in the market. If this crucial issue is not heeded with proper care and caution, it may generate

some serious repercussion in future. A patient may suffer from serious and severe side effects as

well. This is the reason why the quality and affectivity of a medication needs to be ensured at

any cost. A pharmaceutical product is usually tested on animals for ensuring its affectivity and

safety before it is sold in the market. Without the prior permission of Food and Drug

Administration, a medication cannot be sold in the market. A pharmaceutical company can hold

the patent of a pharmaceutical product, if the drug is solely developed or invented by the

scientists of that company.

Nowadays, pharmaceutical products have become an integral part of human life. They are

bettering public health by recovering patients from the deadly clutches of lethal

diseases. Pharmaceutical products are elongating the lifespan of living beings by launching new

medications in the market.

With the drug prices high in most OECD (Organization for Economic Co-operation and

Development) member states, health services came to rely on generic versions of the drug rather

than branded ‗originals‘. A generic drug is a pharmaceutical product, usually intended to be

interchangeable with an innovator product, which is manufactured without the license from the

innovator company and marketed after the expiry date of the patent or other exclusive rights.

Generic drugs are manufactured under a non- proprietary or approved name rather than a generic

or brand name. Generic drugs are frequently as effective as, but much cheaper than, brand-name

drugs.

41

Problem statement:

The study had been conducted to map the new product launch process and hence understand its

contribution to the total revenue of the Company in the Indian market. Innovations and new

products are always considered to be the key success factors of any company. The study helps to

analyze the launch process and its importance in the success of a pharmaceutical company.

Need for the study:

The study helps in understanding the various processes involved in the launch of a drug and its

marketing. The study also helps to determine whether new products essentially form the key

success factors. While the study progresses the key factors which reduces the efficiency of the

process can also be identified.

Significance of the study:

The back bone of Dr Reddy‘s is the range of generic products it offers to the public at a lower

price. The profitability of the company is highly dependent on the quality and diversity of the

products, thus it is very essential to maintain the sales of the existing products as well as bring

out new products to ensure the success of the company

Title of the study:

―A study to determine whether new product launch process is the key success factor for a

pharmaceutical company in the domestic market.‖

Objective:

Primary objective:

To map the product launch process for a new drug in the domestic market and determine its

contribution to the success of the company.

Specific objective:

To understand the key challenges faced during the product launches.

To understand the integrated functioning of various departments in a pharmaceutical

firm.

To understand marketing and sales in the pharmaceutical industry.

42

RESEARCH

METHODOLOGY

43

Research methodology is a systematic way for solving any research problem. It is a science of

analyzing how research is done scientifically. It studies the various steps that are generally

adopted by the researcher in studying the research problem.

Research Design:

The research design is descriptive in nature. Since the purpose of the research is well known and

clear, descriptive research design has been chosen. Descriptive research design is used when the

characteristics of certain group or association of certain variable are to be determined.

Sources of Data:

The data required for the project is collected through two main sources namely primary source

and secondary source.

1. Primary data: It refers to the data that is fresh and collected for the first time. It refers to

the data collected by the researcher himself and original in character. The primary data

were derived from the answers respondents gave in the structured interviews prepared by

the researcher. The primary data is collected from Department Heads and Project

Managers. The researcher had to fix appointments and visit the respondents and conduct

interviews.

2. Secondary Data: The Secondary data, on the other hand, is those which have already

been collected by someone else and which have already been passed through statistical

processes. Secondary data is the information that already exists. For collecting secondary

data researcher used internet, magazines, news papers and various books. However, the

main source of secondary data was the Company Annual Reports. Researcher also

consulted faculties for getting valuable information.

44

Tools and Techniques of Data Collection:

Research Instrument:

The tool used for the collection of data was the interview schedule. For this study, structured

interviews were prepared as the research instrument and were presented to the selected

respondents. Depending on the personnel being interviewed the schedules differed.

Data Analysis Procedure:

1. Percentage analysis method

The statistical tool used in this research is

PERCENTAGE ANALYSIS = SALES DERIVED FROM NEW PRODUCTS x 100

TOTAL REVENUE IN THE DOMESTIC MARKET

Percentage refers to a special kind of ratio and is used in making comparison between two or

more series data. They are also used to describe relationships. This kind of analysis gives a clear

picture of the research study in terms of how many of the respondents are involved in the

interview and what type of opinion they are having etc. and the interpretation of all this is done

mainly based on the percentage analysis.

2. Scatter Diagrams and Regression Analysis

A Scatter Diagram examines the relationships between data collected for two different

characteristics. Although the Scatter Diagram cannot determine the cause of such a relationship,

it can show whether or not such a relationship exists, and if so, just how strong it is. The analysis

produced by the Scatter Diagram is called Regression Analysis, which develops an estimating

equation – that is, a mathematical formula that relates known variables to the unknown variable.

Sample Design:

1. Population: Department heads and project managers.

2. Sampling Frame: Employee, Dr Reddy‘s Laboratories LTD including:

45

Name Designation

R Adhikesavan Deputy Manager, Contract Manufacturing

Dr Prashanth Varma Senior Manager, Marketing

A Ramakrishnan Associate Director, Logistics

K Sudhakar Senior Manager, Delivery Planning

Sunil Menon Associate Director, Delivery Planning

T P Vijayarahavan Manager, Research and Developement

Balaji Deputy manager, Regulatory Affairs

3. Sample Size: 7

4. Sampling Method:

Field Work

The field work was done in this project by using a well structured interview schedule. The

interview schedule was answered personally by the respondents as the researcher conducted the

interview. The survey was conducted in the DR REDDY‖S LABORATOIES CAMPUS. The

responses were recorded and analyzed to build a structured report.

46

Data Analysis and

Interpretation

47

Data analysis:

The research was conducted to map the steps involved in the launch of a new pharmaceutical

product and hence understand its contribution to the total revenue of the company in the

domestic market. Analyzing the whole process it was found that the product development and

launch takes place in 11 steps. It can be illustrated as followed:

STEPS IN DEVELOPMENT DEPARTMENT(S) INVOLVED

1 Selection of a generic drug product for

Manufacture

Marketing department

2 Preparation of a business case of the molecule

selected

Marketing, finance, and

operations department

3 Integrated product development Integrated product development

organization (IPDO)

4 Formulation of product delivery teams IPDO

5 Making of the drug master file IPDO

6 Getting approval of drug for manufacture from

DCGI

Regulatory Affairs Department

7 Selecting the site for manufacture Contract manufacturing

department , IPDO

8 Selection and approval of brand name and packages Marketing department

9 Marketing of the drug Marketing Department

10 Distribution of the drug Global Distribution centre

The functions of each steps and its contribution to the process are explained below.

48

STEP 1 - SELECTION OF A GENERIC DRUG PRODUCT FOR MANUFACTURE

The main driving force for the selection of generic drug products for manufacture is the

estimated sales volume for the branded product and the potential market share that the firm

expects to have once the generic drug product is manufactured and approved for marketing.

Information About A New Molecule

The launch of every new product starts with acquiring of the basic idea about a new molecule in

the market. Hence a pharmaceutical company must have strong ears and eyes to study its

environment and to understand every minute changes and developments in it.

The basic idea about a new molecule is acquired through various sources. These include:

Scientific journals

Medical conferences

Doctors

From other companies

Research centers

Patents

Out of these the patent expiry is the most important source of information for the generic drug

market.

A patent usually refers to an exclusive right granted to anyone who invents any new, useful, and

non obvious process, machine, article of manufacture, or composition of matter, or any new and

useful improvement thereof and claims that right in a formal patent application. Examples of a

particular patent include biological patents, business method patents, chemical patents and

software patents.

When a pharmaceutical company first markets a drug, it is usually under a patent that, until it

expires, allows only the pharmaceutical company that developed the drug to sell it. Generic

drugs can be produced without patent infringement for drugs where:

Patent has expired

49

The generic company certifies the brand company‘s patents as either invalid or

unenforceable

For drugs which never held patents

In countries where the drug does not have a current patent protection.

An expired patent cannot be renewed. Once a patent expires, other drug companies then have the

right to manufacture and market the generic drug. However, they must market it under a different

brand name or its generic name.

Scientific journals are another source which gives the developments and findings in the field of

science. A scientific journal is a periodical publication intended to further the progress of

science, usually by reporting new research.

When a medical representative visits a doctor, he may get information about a drug another

company is marketing. This information may be useful as the drug may have the potential to

bring profit if marketed.

Another small company marketing a drug can approach a larger company and offer the company

the right to market it.

The availability of technology and the cost of acquiring technology to manufacture the product

will also impact on the choice of generic drug. The decision to proceed with the development of

a generic drug product should therefore be based on well-researched data that primarily indicate

market value together with a sound knowledge of patent expiry dates, predicted market share,

and growth rate for the product, amongst others.

Selecting the Product List

Pharmaceutical companies rely on new products and line extensions to differentiate and maintain

a competitive advantage in the marketplace. Under ever greater pressure to deliver safe, effective

products in shorter time frames, pharmaceutical companies are placing more emphasis on the

new product planning function. Before launching a new product the marketing team must:

Define target markets, customers, competitive strengths

Define an overall strategy for pharmaceutical products to guide selection of development

projects

50

Develop brand strategy and differentiated positioning.

Rationalize and prioritize competing development projects.

Plan the product launch

The marketing team does an extensive research through literature search and patent search. Some

other key activities are also involved:

Defining the Active Pharmaceutical Ingredient (API)

Brand procurement

Ensure there is sound source of raw materials necessary

Devise the formulation strategies.

Based on these factors the Marketing Department selects from the list of available molecules,

those molecules which it can consider for production.

51

STEP 2 - PREPARATION OF THE BUSINESS CASE

A business case captures the reasoning for initiating a project or task. It is often presented in a

well-structured written document.

Preparation:

The business case is prepared mainly by the Marketing Department and the Finance Department.

Once the final product list is prepared by the Marketing Department it is forwarded to the

Medico – marketing Team who gives useful inputs to the making of the business case. All the

details regarding the current generic products in the market and in the company is maintained by

the Global Generics Portfolio Management (GGPM). The integrated efforts of the four

department s help in building a strong business case. The logic of the business case is that,

whenever resources such as money or effort are consumed, they should be in support of a

specific business need.

Formal business cases are evaluated to ensure:

The investment has value and importance

The project will be properly managed

The firm has the capability to deliver the benefits

The firm‘s dedicated resources are working on the highest value opportunities

Projects with inter-dependencies are undertaken in the optimum sequence.

Answers the question "What happens if we take this course of action?"

Answers the question "Should we invest in this market?"

Components of a business case:

The various parts of a business case are:

1. Part One: Executive Summary

This part of the business case gives a concise summary of each part of the business case

including the purpose of the business case, the goals and objectives of the business, and

an explanation of how the project goal and objectives align with the organization‘s

strategic priorities.

2. Part Two: Introduction

52

The introduction provides the problem or opportunity the proposed project seeks to

address and an overview of how other organizations have responded to similar situations.

It also provides the project goal and objectives and explains how these align with the

organization‘s strategic priorities.

3. Part Three: Methods And Assumptions

This section outlines the methods used to arrive at the conclusions and recommendations

in this document. Authors use this section to explain and defend their conclusions and

recommendations. This section allows readers to judge how data was gathered and

analyzed and, ultimately, the validity of the Business Case.

4. Part Four: Impact Analysis

The extent of financial analysis captured in this section of the business case depends on

the rigor of the financial model used. Common measures used include the following:

Cash flow, new cash flow, cash flow stream.

Payback period.

Return on Investment (ROI).

Discounted Cash Flow (DCF) and net present value (NPV).

Internal rate of return (IRR).

It analysis

Non-Financial Impacts

Sensitivity and risk

5. Part Five: Achievability

This section provides an assessment of how challenging it will be for the organization to

complete the project successfully. It provides:

(i) an assessment of organizational capability to complete the project

(ii) an overview of procurement considerations

(iii) recommendations on how the project should be governed and managed

(iv) an explanation of how risks will be managed

(v) available funding for the project.

The business case thus prepared is presented before the top managers of the Company who

analyze this carefully before giving approval for the project.

STEP 3 - INTEGRATED PRODUCT DEVELOPMENT

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Strategic planning is one prerequisite for successful drug development which is applicable to

both conventional medicinal products and to biopharmaceuticals. One key element is an

integrated development plan which includes pharmaceutical manufacture and control, non-

clinical and clinical aspects, the Target Product Profile (TPP) and marketing and commercial

factors.

The essential aim of this Integrated Product Development Plan is to define the targets and key

claims of the medicinal product and to set up the strategic framework at an early stage of

development.

Role of IPDO:

Once the product is approved the Integrated Product Development Organization (IPDO) is

responsible for the further processes. Integrated product development is a team approach

involving experts from manufacturing, quality control, quality assurance, preclinical and clinical

research, regulatory affairs, project management and commercialization. IPDO is responsible for

strategic planning of the drug analysis and approval.

Key topic to be considered in strategic planning includes:

What is the specific value of the drug, such as medical need, better safety and tolerability,

improved efficacy, better pharmacokinetic profile

What are the label claims

Does the planned clinical development program ( type and design of clinical study)

support specific product claims

What are the target markets

What are the regulatory challenges

What are the trends in pricing and reimbursement

What are the parameters/ metrics of the decision making process

STEP 4 - FORMULATION OF THE PRODUCT DELIVERY TEAMS

The product delivery team is responsible for the pre-formulation works. The team consists of a

project manager and his team members. Their functions include:

Developing a plan for the pre-formulation works and gathering preliminary information

about the API.

54

Responsible for the analytical procedures and clinical trials

They have to provide a specific timeline under which the works happen

Responsible for calculating the date of dispatch of the first stock- the launch stock

They decide on the root of development of the molecule after the primary analysis and

approval.

Pre- formulation is a stage of development during which the physicochemical properties of drug

substance are characterized. Pre-formulation is a case of learning before doing.

Active Pharmaceutical Ingredient (API)

Active Pharmaceutical Ingredients (API) is also known in regulatory and pharmacopeial parlance

as ―Drug Substance‖. Additional terms frequently employed in business are Bulk Pharmaceutical

Compounds (BPC), Bulk Actives and Active Ingredient. New Chemical Entities (NCE) refer to

the drug substances that are the first to enter the drug regulatory arena under the banner of New

Drug Application (NDA).

Comparison with innovator API:

The challenge that the API supplier manufacturer faces in entering the market place is to assure

the user of the material that the API will be comparable to the innovator or pioneer drug

substance, which is employed in an approved NDA drug product. Current FDA requirements

regarding the filing of an ANDA for a single component listed drug product is that the API must

be the same chemical entity, which is contained, in the listed drug. The critical aspects of

sameness or comparability for the ―generic‘‘ API vs. the innovator API include three critical

realms:

Chemical Structure :The API must have the same chemical structure as the innovator

drug.

Impurity Profile

Analytical Profile:

The PDT is responsible for the analysis of the brand name drug. The PDT makes an extensive

study on the API and carries out the pre-formulation studies.

The study on API includes:

55

Stress testing of API for first API specification

Impact of Impurities on API Specifications to understand the allowable level of

impurities.

Pre-formulation Investigations

Stability assessment

Shelf life study

Selection of API and Drug Product Processing Methods

Degradation Issues for Combination Products

Role of API Processing in Product Instability

Role of Excipients in API Instability

There are two types of clinical trials for a generic product.

1. The Bio- Root:

If a molecule is already present in the domestic market for at least 4 years, such

molecules have already been approved by the DCGI. If another company wants to

manufacture and market the molecule, the company need not conduct a clinical trial.

Only an analysis proving the bioequivalency of the drug to the innovator drug is needed.

2. The B&CT- Root:

If a company is the first one to launch a generic molecule in India , he has to follow all

the procedure and is obliged to show efficacy as well as the bioequivalence.

Once the pre-formulation studies are done and the API is studied in detail the IPDO creates a

drug master file which is to be submitted along with the application for license from Drug

Controller General of India (DCGI).

STEP 5 - MAKING OF THE DRUG MASTER FILE

A Drug Master File (DMF) is a submission to the FDA of information, usually concerning the

Chemistry, Manufacturing and Controls (CMC) of a component of a drug product, to permit the

FDA to review this information in support of a third party‘s submission. Drug product

information or other non-CMC information may be filed in a DMF.

56

One can search the DMF database and obtain information such as the name of the article

included in the DMF, the name and address of the sponsor or holder of the DMF and date of

original submission. The filed DMF is typically used in the generic drug environment to support

the filing of an ANDA.

The DMF sponsor is required to update the filed DMF annually with information concerning any

changes that were made in the manufacturing or controls employed for the production of the

API, including specifications and test methods. As part of the procedure and practice of making

any changes to a filed DMF for an API, the DMF holder is requested to notify all ‗‗customers‘‘

who purchase that API, and who have referenced the particular DMF in their ANDA, of such

changes.

There are five types of DMFs

1) Manufacturing plant information

2) Drug substance, drug product, intermediates and material used in their

manufacture

3) Packaging

4) Excipients

5) Other Usually clinical, tox

Current Types of DMFs:

1) Now Four Types (Numbering retained to avoid confusion)

2) Drug substance, drug product, intermediates and material used in their

manufacture

3) Packaging

4) Excipients

5) Other Sterile manufacturing plants, biotech contract facilities, clinical, tox

STEP 6 - LEGAL APPROVAL FROM THE DCGI

For each and every step of the original API analysis in the laboratory to obtain knowledge about

its characteristics require legal permission from the Drug Controller General of India. The

57

Regulatory Affairs(RA) department is responsible for the proper filing of legal documents at

CDSCO.

Functions of Regulatory Affairs:

Participate in the regulatory activities of full spectrum of Product development, from clinical

trials to marketing to post approval activities.

Ensure the appropriate licensing, marketing and legal compliance of API products.

Combining knowledge of scientific, legal and business issues, enable the products to meet the

required legislation.

Some of the important Acts and Rules are:

Prior to clinical studies:

Prior to manufacturing and marketing the molecule the RA has to file for further licenses. Along

with the application for these licenses the Drug Master File should also be submitted.

Form-29 (Test License)

It is a license to manufacture drugs for the purposes of examination, test or analysis. It is

obtained from State Licensing Authority [SLA]. The test-license is valid for the period

one year from date of grant of license.

NOC for Form-29 (Test License) – For new drugs

Obtained from DCGI prior to applying for test license to SLA for a new drugs

B-NOC and CT-NOC:

These are licenses for carrying out Bio-root and B&CT-root clinical trials. These are

obtained from State Licensing Authority [SLA]

Form-11 (Import License/T-License for Innovator Samples or API) – [For small

quantities of drug]

Form-11 is a license to import drugs for the purpose of examination test or analysis.

It also permits the import of drugs for the purpose of BA/BE Studies and for Clinical

Trials. It is valid for the period one year from date of grant of license.

Once the DCGI grants these licenses a company can carry out all the clinical trials and analytical

studies.When applying for a license from the DCGI, the API is introduced in the generic name

and not the brand name. Along with the application the Drug Master File is also given. The

58

DCGI brands that the drug is bioequivalent to the innovator drug and can be taken up for

manufacturing.

Prior to manufacturing:

The actual license for manufacturing and marketing is received from the local Dug Control

Authority (DCA). The process involves the following steps:

The company has to provide all the relevant details regarding the site of manufacture.

A dossier containing the details of an internal audit of the site of manufacture has to be

submitted.

The DCA will conduct an audit themselves to ensure that all GMP norms are followed.

For the approval of the drug the Company has to provide the brand name, i.e. the name in

which the drug will be marketed. Once the DCA approves the company can take up the

manufacture.

The forms that need to be submitted include:

Form- 41 (Import Registration)

Form-41 is the registration certificate to be issued for import of drugs into India under

drugs and cosmetics Rules, 1945. It is valid for the period three year from date of grant of

license.

Form-10 (Import License)

It is a license to import drugs to the drugs & Cosmetics Rules 1945 for commercial

activities/Product development purposes. Form-10 provides validity up to the validity

period of Registration Certificate.

Form 45 (Import Permission)

It grants permission to import finished formulation of new drug.

Form 45-A (Import Permission)

It grants the permission to import new bulk drug substances.

STEP 7 - SELECTING THE SITE FOR MANUFACTURE

Once the final molecules are selected, the most important decision lies whether to make the

molecule in-house or to outsource the manufacture.

59

There are two ways of manufacturing the products:

Outsourced - The Company looks if the product exists in another company‘s product

pipeline and outsources the production to that company. The product marketing alone is

done here.

In-house - The team looks if the products can be developed in the company. This is

usually a tedious process. It may take 1-2 yrs

Pharmaceutical companies seldom have all the expertise in-house to cover the required areas,

and look for the external partners by outsourcing of the service to complement their own skill set

in particular areas or to cut costs.

To this aim a clear communication structure supporting open dialogue and qualified program

oversight by an experienced Project manager are essential when outsourcing stages of

development.

The involvement of any external contract partners Contract Manufacturing Organizations

(CMOs) and non-clinical or clinical research partners (CROs) implicates auditing to ensure that

Good Manufacturing Practice (GMP), Good Laboratory Practice (GLP) and Good Clinical

Practices (GCP) are established and heeded.

The decision is taken by the Capacity Planning Team (CPT) along with IPDO.

Capacity Planning:

Capacity planning is the process of determining the production capacity present in an

organization to meet changing demands for its products. In the context of capacity planning,

"capacity" is the maximum amount of work that an organization is capable of completing in a

given period of time.

Certain formulations can only be manufactured In-house at Dr Reddy‘s. For others, that need

high expertise it is usually outsourced to other manufacturing units.

Contract manufacturing

In case of outsourcing, the contract manufacturing department is contacted. Contract

manufacturing is a form of outsourcing. The hiring firm approaches the contract manufacturer

with a formula for a new molecule. The contract manufacturer will provide details about the

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various factors including the processes, labor and material cost. Industries including aerospace,

defense, energy, medical, food manufacturing, automotive etc... utilize this business model. The

pharmaceutical industry utilizes this process with CMs called Contract Manufacturing

Organizations (CMOs).

A CMO also known as Contract Development and Manufacturing Organization (CDMO) is an

organization that serves pharmaceutical industry and provides clients with comprehensive

services from drug development through manufacture. Services offered include:

Pre-formulation

Formulation development

Stability studies

Method development

Pre-clinical and phase-1 clinical trial materials

Late stage clinical trial materials

Registration batches

Commercial production etc…

The pharmaceutical market uses outsourcing services from providers in the form of Contract

Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs).

In recent years the concept of comprehensive, single source providers from drug development to

commercial manufacture has emerged. This concept has been implemented today by providers

known as Development and Manufacturing Organization (CDMO).

Contract manufacturing at Dr Reddy‘s:

The details of the approved drug to be manufactured are forwarded to the Contract

Manufacturing Department. The Contract Manufacturing Department has a list of approved

CMOs.

Contacting the CMO

The department contacts a suitable CMO and gives details about the new molecule that is to be

manufactured.

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The CMO sends back a report to the Contract Manufacturing Department which gives details

about the cost involved, procedures, labor cost, time line, the technology it has etc… From this

information the average cost that the firm may incur is derived. The same is communicated to the

Marketing Department which checks the Maximum Retail Price that it has decided for the

molecules against the cost the CMO has provided. If acceptable the marketing department

informs the Integrated Product Development Organization (IPDO).

Location approval:

The IPDO is responsible for the location approval. The IPDO has a check list against which it

checks the merits of the CMO. The CMO should contain all the facilities and safety measures as

needed for the manufacture of that particular molecule. The check list is send to the CMO. Based

on the parameters of the checklist the CMO conducts a pre- audit. The report is then sending

back to the Contract Manufacturing Department. If the report proves satisfactory, it is referred to

the Quality Assurance (QA) department. The QA conducts a final audit and forwards the report

to the IPDO. Once satisfied the IPDO gives the approval to the Contract Manufacturing

Department which then communicates it to the CMO.

The Contract Manufacturing Department then issues a purchase order. A purchase order is a

commercial document issued by a buyer to a seller. It includes details regarding the quantities to

be manufactured and the agreed prices.

In case of outsourcing all the legal formalities are taken care by the CMO itself.

In-house manufacturing

In in-house manufacturing an outside CMO is not involved. The organization marketing the

molecule also takes care of its production.

There are two main concepts in this model of manufacture:

Loan License Manufacturing

In-house manufacturing

Loan License Manufacturing:

62

A license issued by a licensing authority to a applicant who does not have his own arrangements

for manufacture but who intends to avail himself to the manufacturing facilities owned by

another licensee is called loan license manufacturing.

Dr Reddy‘s does not have an in- house production facilities for formulations such as injectibles

etc… Such formulations are given for loan license manufacturing.

In- House Manufacturing:

The new molecule is manufactured inside the premises of the organization itself.

The Process:

Once the new molecule to be launched is confirmed, a team is formed under a Project Manager.

The Project Manager (PM) is responsible for co-coordinating the various procedures for in-house

manufacturing. The PM has to prepare a chart which shoes all the processes that are involved in

the drug manufacture and the estimated time that will be taken by them. Thus he can calculate an

approximate launch date. He also decides the launch stock needed for initiating the drug into the

market.

Every 2 weeks the PM has a meeting with the other personnel involved in the new product

launch and he discusses his progress. They also take decision of how to resolve a bottleneck

when it arises.

In this case the Regulatory Affairs body takes care of all the legal formalities. This includes

getting a license from DCGI and local FDA, the approval of brand names etc…

The IPDO also checks the feasibility of commercial production. It decides whether the product

should be manufactured through loan licensing or in-house in the company premises.

If the company decides on loan licensing, the Contract Manufacturing Department comes into

play. The location for manufacture is decided and it is approved by IPDO. The technology for

the manufacture is then transferred to the location.

The Supply Chain Management (SCM) Department is responsible for the procurement of the

necessary materials required for the manufacture. The manufacturing begins and the finished

goods are supplied to the organization.

63

In the case where the molecule is manufactured inside the company premises, the Formulations

Technical Operations Departments take up the manufacturing process. In Dr Reddy‘s there are

many units which undertake manufacture. The legal affairs are again taken up by the Regulatory

Affairs body. In this case, the Contract Manufacturing Department plays no role.

Supply chain management for In house manufacturing :

The marketing department along with the IPDO communicates the New Product Launch

Requirement (NPLR) to the SCM department. The process can be explained as follows:

They issue a Material Requisition Sheet which carries details of all the raw materials

needed for the manufacture of the drug

The SCM department has a list of approved vendors

A purchase order is issued to the vendor.

The vendor gives a purchase requisition number and the Expected Date of

Delivery(EDD)

The raw materials are delivered to the Global Distribution Centre (GDC).

Selection of a new vendor:

In case it is a new vendor, the Company has to make sure that the vendor has the necessary

qualifications and licenses to provide the raw materials. The Central Quality Assurance is

responsible for the examination of a new vendor. The new vendor is given a Vendor

questionnaire which he has to fill. The questionnaire will help get the necessary details about the

licenses he holds, the logistics facilities etc… The CQA has also to ensure that the vendor has to

provide a BSE/TSE free material. The vendor is also asked to send three different lot samples

which can be tested against specifications. The CQA also conducts an audit at the vendor

organization to ensure that the vendor follows all GMP norms. Once a vendor qualifies all the

procedures he will be added to the Approved Vendor List.

STEP 8 - SELECTION AND APPROVAL OF BRAND NAME AND PACKAGES

A well-chosen pharmaceutical branding strategy promotes Pharma brand name awareness and is

easily recalled by prescribers, pharmacists, and consumers. Aside from the obvious marketing

implications of choosing a pharmaceutical brand name with high recognition and memorability,

64

there are significant regulatory benefits in choosing a pharmaceutical brand name that is not

easily confused with other healthcare brand name products. Much of today's pharmaceutical

naming regulatory and legal scrutiny revolves around the problem of confusingly similar

pharmaceutical proprietary names and their effect on medication errors.

When managing a pharmaceutical business, the emphasis is on ―owning your market.‖ The first

step towards this goal is to establish pharmaceutical brand equity and support a powerful brand

image through effective brand management and name brand positioning. Each of the following

must be carefully considered before creating a pharmaceutical brand name:

Nomenclature Strategy/Brand Architecture Positioning

Brand Development

Trademark Screening

Linguistic Screening

Market Research

It is the successful combination of these elements that creates ―a company‘s most valuable

asset,‖ its brand name.

Develop Brand Names:

While developing a brand name, a creative approach should be taken. The methodology includes

brainstorming techniques designed for evaluation of pharmaceutical names and concepts for

creative refinement.

The name selected for a brand may be:

Linked to the molecule

Linked to the indication

Any catchy name.

Approval of brand names:

The marketing department creates a list of brand names that is to be submitted to the local DCA

for approval. The local DCA has a Brand Name Registration Authority.

65

The list if forwarded to the RA department. The RA takes care of making the dossier which

contains the application for Brand name registration, the necessary fee needed and any other

documents as specified.

This is then submitted to the Authority. The Authority has certain norms as to the approval of the

name.

The brand name must not resemble the names of any other drug

The brand name must not resemble the names of any other product in any other industry.

Not more than three consecutive letters of the name should match the names of any other

drug.

The phonetics of the name should not match any other drug or any other product in any

industry.

It should not be similar in indications of other drugs.

In the present scenario, as there are many drugs in the market, the brand name should not

be derived from the chemical entity present in it.

If any names are approved the DCA issues a letter, which acts as a legal document showing the

approval of the drug name.

Trademarks:

A trademark is a distinctive sign or indicator used by an individual, business organization, or

other legal entity to identify that the products or services to consumers with which the trademark

appears originate from a unique source, and to distinguish its products or services from those of

other entities.In the Pharma industry two kinds of trademarks are used:

™ - For an unregistered trade mark, that is, a mark used to promote or brand goods

® - For a registered trademark. The time taken for an unregistered trademark to become a

registered trademark id approximately 15- 20 years.

Development of packages:

The marketing department has a separate team of personnel who work in the development of

packages. In case of cosmetic products the packages should be developed in such a way that they

are catchy and should be appealing to the eyes. However in case of drugs the packaging should

be such that it conveys safety, hygiene and quality. The packaging ideas are then conveyed to an

66

approved printer who prints a sample of the package. The team then gets the package approved

by the marketing department and it is forwarded to the RA department for approval from the

DCA.

Approval of packages:

The packaging for a pharmaceutical product is approved from the local DCA. In order to get the

approval the company has to undertake certain tests on the package. The most prominent

amongst them is the stability test.

Stability test:

A stability test can be conducted for 3 months or for six months. In the stability test the drug is

kept in the proposed package for duration of 3 months or 6 months. The drug is then examined to

see if there are any changes in the chemical as well as physical properties. If not, then the

package is proven to be stable.

The package of the drug should also carry certain details like:

The organization marketing the drug.

The organization manufacturing the drug

The date of manufacture and expiry

The dosage form

Drug inserts: Label showing the official description of a drug product which includes

indication (what the drug is used for); who should take it; adverse events (side effects);

instructions for uses in pregnancy, children, and other populations; and safety

information for the patient .

The design of the package is also important. It should be in such a way that the drug does not

interact with the outside atmosphere which will affect the stability of the drug. If approved, the

DCA issues a letter, which acts as a legal document showing the approval of the drug packaging.

STEP 9 - MARKETING OF THE DRUG

Pharmaceutical marketing, sometimes called medico-marketing, is the business of advertising or

otherwise promoting the sale of pharmaceuticals or drugs.

67

The pharmaceutical marketing strategies of the company include :

Medical representatives

Giving drugs as free samples to doctors;

Providing details of their products through journal articles or opinion leaders;

Gifts that hold the company logo or details of one or multiple drugs; and

Sponsoring continuing medical education.

The most important amongst these are the medical representatives who form the backbone of the

marketing success.

Medical representatives:

Use of medical representatives for marketing products to physicians and to exert some influence

over others in the hierarchy of decision makers has been a time-tested tradition. Typically, sales

force expense comprises an estimated 15 percent to 20 percent of annual product revenues, the

largest line item on the balance sheet. Despite this other expense, the industry is still plagued

with some very serious strategic and operational level issues. Prior to sales the medical

representatives are given a training regarding the new product and the scientific facts related to

it. Medical rep has to sell products of Pharma companies or drug manufacturers. He has to go to

doctors and medical shops to sell drugs and promote drugs. He will ask physicians to refer his

drugs for the patient.

At Dr Reddy‘s there are 17 marketing divisions. Each division has a number of medical

representatives. The marketing divisions are:

ZENURA – 2

ZENURA – 3

ZENURA-1

RECURA

FUTURA

ASPIRA

AQURA-HG

DERMA-A

AQURA-SG

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WINTURA

RHEUMATOLOGY

DERMA-B

AESTHETIX

INDURA

SPLTY, AESTHETICS

OTHERS

Each of these divisions has a number of medical representatives and the managers they report to.

The hierarchy of the sales force can be illustrated as:

STEP 10 - DISTRIBUTION OF THE DRUG

Once the manufacture has started a date is set to provide a Launch Stock. The Launch Stock is

transferred to the Global Distribution Centre (GDC) from where it is given to the marketing

department. After the manufacture the stocks arrive at the GDC where separate warehouses for

Medical Representatives

Area Sales Manager

Regional Sales Manager

Zone In Charge

National Sales Manager

69

export drugs and domestic market is present. From the warehouse the stocks are given to

different customers as per the requirement.

Global Distribution Centre (GDC)

The manufactured stock comes from the manufacturer to the Global Distribution Centre (GDC)

from where it is transported to the Carrying and Forwarding Agents (C&FAs). Its job is to store

the material on behalf of the company and forward it to further stockists as per the delivery order

of the company.

The Pharmaceutical stockists in India have an association called the All India Organization of

Chemists and Drugs Association (AIOCDA). Every state and sometimes a district have their own

association.

When the Company dispatches the finished goods to the C&FA and from there to the regional

stockist a NOC is needed. For this, the Company has to pay a fee for the application form

(FORM –FIVE). Once the application is filled and the NOC is received the details of the new

drug will be published in their publication ―Product Information Service. For the NOC the

AIODCA has to be convinced that the MRP charged is not unreasonable. The collection of a fee

for the NOC was made illegal, hence the association collect it under the pretence of ―Product

Information Service‖.

The AIODCA does not have a set rule of action hence their requirement in every state is

different. In certain places like Maharashtra a manufacturing license should also be submitted

along with Form- Five.

For existing products the Company has different credit days for the local stockist as well as the

stockist present around the country. The local stockist is given a credit period of 15 days and the

up-country stockist a period of 21-90 days, depending on the requirements of the AIODCA in the

particular state. In the case of new products the stock may not immediately move and the credit

period is decided by the regional manager and the stockist.

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Logistics

There are two types of cold chain products:

Products to be stored at 2-80

C:

These products have to be dispatched immediately after the manufacture within a time

period of 48 hrs. The means of transportation is by air. The products mainly include onco

drugs and neurological drug like the Cresp.

Products to be stored at 15-250C:

These products are transported by road in special containers that can maintain the

temperature. The company also monitors the storage at the C&FA every week to analyze

the temperature. 28 products are transported by road.

Trends of DRL in the Domestic Market:

The revenues from the new products and existing products of DRL for the past three financial

years are shown below:

2006-07 2007-08 2008-09 2009-10 2010-11

Existing Products Revenue (Crores)

Rs 718

Rs732

Rs 737

Rs 761

Rs 719

New Products Revenue (Crores)

Rs97

0

Rs 31

Rs 153

Rs 326

Total

Revenue

Rs 815

Rs 732

Rs 768

Rs 914

Rs 1044

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Analysis of the data collected:

Table shows the revenue from existing products and new products in the past 5 years. The data

was received from the marketing department.

STEP 1 : Percentage analysis:

The study was conducted to determine if new products are the key success factors for a

pharmaceutical company. The revenue a company makes in a year is the major indicator of its

success. Hence in this step, the contribution of new products in percentage to the total revenue

the company made in the domestic market is determined.

PERCENTAGE ANALYSIS = SALES DERIVED FROM NEW PRODUCTS x 100

TOTAL REVENUE IN THE DOMESTIC MARKET

Year Contribution (%)

2006-07 11.9%

2007-08 0

2008-09 4%

2009-10 16.7%

2010-11 31.2%

Interpretation

In the financial year 2006-07 the revenue from new products formed 11.9% of the total domestic

revenue. 2007-08 was a difficult year for the company as the recession greatly affected the

company. the company recovered quickly bringing a 4% contribution from the new products. In

the subsequent years, as the table clearly shows the contribution from new products has

increased thus increasing the returns to the company.

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STEP 2: Scatter diagram

This step consists of creation of „Scatter Diagram‟ using the table being created in step 1. The

representations for the scatter diagram are as follows:

X – axis: Revenue from new products (crores)

Y – axis: Total revenue ( Crores)

Step 3: Creation of trend line:

The next step is the creation of a „Trend Line‟ in the scatter diagram which is a straight line

representing the relationship between x and y fitted through it. Trend Lines are an important tool

in technical analysis for both trend identification and confirmation. Also, occurrence of Trend

Lines confirms the existence of Linear Relationship between the variables under consideration.

Equations:

Trend Line equation: y = a + bx

Here,

b = [n ( ∑xy) ] – [ ( ∑x ) ( ∑y ) ]

[ n ( ∑x2 ) ]

– [ ( ∑x )

2 ]

a = y` - bx`

x` represents mean of all values of x a represents the y-intercept.

y` represents mean of all values of y b represents the slope of the line.

Calculation Results:

As per the calculations we get,

y = 0.969x + 736.9

Step 4: Correlation Coefficient „r‟:

The last step is to check for the extent of linear relation between the variables namely ‗new

products‘ and ‗total revenue in the domestic market‘, which is done by ascertaining the

73

Correlation Coefficient „r‟. Here, correlation coefficient ‗r‘ defines the magnitude and direction

of the relationship.

Equations:

Correlation Coefficient „r‟ = [n ( ∑xy) ] – [ ( ∑x ) ( ∑y ) ]

[(( n (∑x2 )) - ( ∑x )

2]1/2

. [(( n (∑y2 )) - ( ∑y )

2]

1/2

Calculation Results:

As per the calculations we get,

r = 0.9904

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Scatter Diagram With Trend Line:

815

732768

914

1044

y = 0.969x + 736.9

0

200

400

600

800

1000

1200

0 50 100 150 200 250 300 350

Tota

l Rev

en

ue

(in

cro

res)

Revenue From New Products (in crores)

R = 0.9904

75

Findings

Analyzing the product launch process, some of the key problems identified were:

1. During the selection process, the marketing department faces difficulties in selecting a

new molecule for launch. In the present state a large number of players exist in the

market and a new molecule should be selected in such a way that it can create a niche for

itself.

2. Identifying a brand name is another key difficulty faced as a brand name should be

selected such that it does not resemble any product in any industry. Hence identifying

such brand names and getting them approved from the Brand Name Registration

Authority is a time consuming process.

3. Acquiring a license and approval from the DCGI after B-route and B&CT- root

development for manufacture is a difficult procedure. If not satisfied with the

bioequivalence result the company will be asked to repeat the process which is expensive

and time consuming.

4. When going for in-house manufacturing, the Project Manager (in-charge of the product

launch) may find the manufacturing schedule at the FTO to be filled and may have to

wait till a slot opens. This results in a time lag and may result in delay of the launch date.

5. While selecting a new vendor for raw materials there can be a time delay as the vendor

may not give the three sample lots together with the Certificate of Analysis. Without the

three sample lots the CQA will not approve the vendor.

6. The quantity of the finished goods needs to be forecasted accurately. It is based on this

forecast that the raw materials are bought. If the forecast is not properly done, it may lead

to wastage of raw materials and capital resources.

7. A business case should be carefully built because any error in the forecast can increase

the payback period. While the actual launch process starts investments in equipments, the

capital needed for the product development, the time lag coming up in the process etc..

can reduce the quantity produced in a batch, thus the payback period increases and the

cash flow gets disrupted.

8. Getting an approval from the AIODCA is a tedious process as they do not have any set

rules. The decision is mainly dependant on the person responsible and his personal views.

Also the AIODCA has different requirements in different state which makes the

acquiring of the NOC difficult. The company has to cater to the needs of each state

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AIODCA where it is preparing the launch and further complications occur when each

district has their own association.

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CONCLUSION

Dr Reddy‘s Laboratories Ltd. ranks number one in the Indian Pharmaceutical Industry. It

produces and sells Active Pharmaceutical Ingredients (API), Finished Dosages and

Biologics. It manufactures ulcer medicines, antibiotics, pain relievers, antidepressants

and cardiovascular drugs. The company carries out research and development (R&D) in

diabetes, cancer, cardiovascular diseases, and inflammation and bacterial infections. It

also has a significant presence in the biotech sector.

In 2011 the company generated revenue of Rs. 1044 crores. Implementation of Efficient

New Product Development Processes coupled with effective marketing strategies was

found to be the key success factors. However on analyzing the process various challenges

were identified which need to be given attention. Overcoming these challenges would

ensure that the product launches bring even more success to the Company. Dr. Reddy‘s

adherence to high standards of corporate governance and ethical business practices has

been a key factor to its success.

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ANNEXURE

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Interviewee : Dr Prashanth Varma, Senior Manager, Marketing Department

1. How is the information about a new molecule in the market known to a Pharma

company?

2. Other than patent expiry and journals what are the other sources for the information?

3. Once the information about the molecules are known how do you select the list of

molecules for consideration?

4. What is a business case? Who helps preparing it?

5. Like any other FMCG goods, are brand names important for a pharma product as well?

6. How are the brand names selected and registered?

7. How important is the packaging for a pharma product? Does the package need to be

approved by the FDA too?

8. How does sales and marketing work in a pharma company?

9. How important are medical representatives to a pharma company? How does the team

work?

10. Very few advertisements of Dr Reddy‘s are visible in the mass media. In such a case how

does the company ensure constant advertisement of its products?

11. People generally tend to think that generic drugs are lower in quality and action when

compared to innovator drugs? How is this situation dealt? Does this affect the sales of

generic drug?

Interviewee : T P Vijayaraghavan, Manager, Research & Developement:

1. What is the role of the IPDO in the launch of a new drug?

2. What are the elements considered while making a strategic plan?

3. How is this plan formulated? How is the team for carrying out this plan selected?

4. Could you give more insight into what an API is? How is it compared with the Innovator

drug?

5. Every innovator products goes through 4 to 5 steps of clinical trials? Does the same apply

for a generic drug too?

6. Is a generic drug any different from the innovator drug?

Interviewee : Mr. Balaji, Deputy Manager, Regulatory Affairs

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1. How does the company approach the FDA and DCGI for approval of its products?

2. Do the regulatory Affairs have different teams for product, brand name, package, and

location for manufacture approval? If so, how do they function?

3. What is a DMF? How is it prepared and submitted?

4. As the development and manufacture proceed, does the company need an approval for

every stage of its action?

5. What are the procedures for submitting a DMF? Could you provide details about the

different forms of submission involved?

6. Could you give more insight into the forms needed prior to clinical trials and

manufacture?

Interviewee : R Adhi Kesavan, Deputy Manager, Contract Manufacturing

1. Does Dr Reddy‘s have the capability for manufacturing all their products?

2. What are the roles of CMOs and CROs? How does the company approach them?

3. Could you explain the process of contract manufacturing?

4. What are the guidelines for the approval of a CMO? How does the company approach

them?

5. What are the criteria for selecting a new vendor for raw materials?

6. How profitable is contract manufacturing?

7. What are the difficulties faced during in house manufacturing?

8. Who is responsible for carrying out the in house manufacture?

9. How does the company monitor the manufacturing process- both in house and out

sourced?

Interviewee: A Ramakrishnan, Associate Director, Logistics

1. What is the role of GDC in the company?

2. How are the stocks received and maintained?

3. What are the precautions for carrying the drugs to various parts of the world?

4. What are the major difficulties you face in logistics?

5. How are the conflicts between stockists and the company resolved?

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