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Commitment of Indian Pharmaceutical Companies Today to their Primary Calling of Curing Diseases - A Study

Edition: April-June 2018

The commercialized global pharmaceutical industry today

Indian pharmaceutical companies are becoming unduly profit-centered in the not-for-profit mission of developing vital medical cures and distributing life-saving medicines for all. There had been exposés of deep-rooted corruption in the Indian pharmaceutical industry. Additionally, extremely high-prices of branded drugs with large fluctuations of prices between company brands has resulted in drugs becoming unaffordable by the Indian majority. 

On June 20, 2016, the Government of India approved of a 74% FDI limit in pharmaceutical industries allowing foreign companies to acquire upto 74% ownership of Indian pharmaceutical companies without requiring review by the government., Such acquisitions might encourage Indian drugmakers to employ questionable methods to promote their products like their counterparts abroad. It is a well-known fact that American pharmaceuticals spend substantially more on marketing than they do on research and development.

What is drug promotion?

Drug promotion broadly refers to all the informational and persuasive activities by the pharmaceutical industry, the effect of which is to induce prescription, supply, purchase, and use of medicinal drugs. Drug promotion includes activities of medical representatives, drug advertisements to physicians, provision of gifts and samples, drug package inserts, direct-to-consumer advertisements, periodicals, telemarketing, holding conferences, symposiums, and scientific meetings, sponsoring of medical education and conduct of promotional trials.

The interaction between Indian pharmaceutical companies and medical practitioners is increasingly under scrutiny. A recent study revealed that medical representatives have a lot of undue influence on physicians in prescribing drugs and that these salesmen over-emphasize benefits and suppress any mention of risks in their medicines.

1. Ernst & Young Survey: A two-part survey of 100 respondents was conducted by audit firm Ernst and Young in September 2011 on pharmaceutical ethics (Download Report). The survey revealed the following:

  • About 72% felt that the Medical Council of India (MCI) was not stringently enforcing its medical ethics guidelines.

  • Only 36% felt that the MCI’s guidelines would have any impact on the overall sales of pharmaceutical companies.

  • About 67% believed that implementation of UCPMP would influence the pharmaceutical marketing in India.

  • More than 50% felt that the UCPMP’s guidelines may lead to manipulation in the recording of actual sampling activity.

  • More than 50% indicated that the effectiveness of the UCPMP code will be very low in the absence of legislative support provided to the UCPMP committee.

  • A high majority (90%) felt that pharma companies need to focus on building strong internal control systems for ensuring compliance with the UCPMP.

2. Mumbai Study: A close tie-up between drug manufacturers, chemists, and doctors in India at the cost of consumers was revealed by a study conducted in Mumbai. It was seen from this study that the nexus between drug companies, pharmacists and doctors, and medical representatives that led to many unethical drug promotion practices was well-organized and highly methodical. Medical representatives were seen playing major roles here. The study asserted that people ultimately bear health and price-related consequences due to such unholy alliances. Researchers conclude that better industry regulation involving doctors, pharmaceutical companies, chemists and the common people can help prevent such tie-ups.

3. Pharmaceutical Research by CAG, ChennaiA research study to quantify the effects of drug promotions by pharma companies on Indian consumers was conducted by CAG, with valuable assistance by the Federation of Medical Representatives Association of India (FMRAI), Chennai. This survey included doctors, pharmacies, medical representatives, the public, and hospitals. Key observations from this survey are listed below.

  1. There are numerous brands in the market for the same drug - doctors struggle to isolate the most suitable brand to prescribe to patients. Additionally, it is perhaps because of many irrational drug combinations that drug prices increased excessively.

  2. There is extremely high variation in drug prices across different drug brands.

  3. Drug prices have not stabilized to affordable levels despite the claims by the pharmaceutical industry that free-market based open competition without price controls would facilitate the evolution of low drug prices. The Government of India must take concrete steps to regulate drug prices.

  4. Survey respondents asserted strongly that drug prices must be regulated. It is ironic that the brands with the largest market share are also the maximum-priced - a clear consequence of aggressive marketing practices by pharmaceutical companies.

  5. The cost of these drug promotions by companies are ultimately borne by the consumer.

  6. Promotions by drug companies need to be regulated as done in some of the other countries. 

Pharmaceutical promotion-related regulations

Despite efforts by the government to introduce capping measures, drug companies find a way to bypass such systems, as their work is primarily profit-driven. 

The two main regulations currently in force include: 

1. Code of Ethics Regulations from the Medical Council of IndiaThis code called Code of Ethics Regulations (Professional Conduct, Etiquette, and Ethics Regulations, 2002) (amended upto 8th October 2016) from the Medical Council of India is legally binding on medical practitioners. (See Code of Ethics Regulations, 2002). This regulation describes the duties and responsibilities of physicians, ethics of their conduct to patients, other physicians, to the public and allied medical professionals (pharmaceutical companies and device manufacturers). Section 6.4.1 (Rebates and Commission) restricts medical practitioners from accepting gifts from pharmaceutical companies.

2. Uniform Code of Pharmaceutical Marketing Practices (UCPMP): This code, issued by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers (Government of India), is voluntary in its present form. This code stipulates that a drug must not be promoted without prior marketing approval from the competent authority authorizing its sale and supply. It instructs drug companies to provide accurate, balanced, fair and objective information on drugs. It provides guidelines regarding supply of drug samples and redressal mechanisms for resolving ethical conduct-related complaints. It specifies guidelines to medical representatives to avoid ambiguous and misleading information in their literature and advertising campaigns. The 2016 notification includes medical device manufacturers among the companies that need to comply (See UCPMP PDFRecent UCPMP Notification dated 30.08.2016).

Pharmaceutical sector market snapshots 

R&D Expenses Vs. Marketing Expenses of World's Largest Pharmaceutical Firms (2014)


Total Revenue (Us$ Bn)

R&D Spend (Us$ Bn)

Sales And Marketing Spend 

(Us$ Bn)


(Us$ Bn)

Profit Margin (%)

Johnson & Johnson (US)






Novartis (Swiss)






Pfizer (US)






Hoffmann-La Roche (Swiss)






Sanofi (France)






Merck (US)    












AstraZeneca (UK)






Eli Lilly (US)






AbbVie (US)    






(Source: GlobalData)

Pharmaceutical industry gets high on fat profits, Richard Anderson, Business reporter, BBC News, 6 November 2014,

Average Profit Margins of U.S. Pharmaceutical Companies in 2013 

  • Among the five main industrial sectors namely (Banks, Car-makers, Oil and Gas, Media and Pharmaceuticals), the highest was the pharmaceutical giant Pfizer with 42% profit margin!

  • In 2013, the five pharmaceutical companies (Pfizer, Hoffmann-La Roche, AbbVie, GlaxoSmithKline (GSK) and Eli Lilly) made a profit margin of 20% or more.

Source: Pharmaceutical industry gets high on fat profits, Richard Anderson, Business reporter, BBC News, 6 November 2014

Indian Pharmaceutical Sector

Profit Margins of the Top 5 Indian Pharmaceutical Companies in FY 2011-2012

Company Name

Profit Margin 

(as % of Sales)

Sun Pharma




Dr. Reddy’s Labs


Cadila Healthcare




Source: STATSGURU: Indian pharma is high on profit, low on R&D, (Data Source: Capitaline)

Comparison of Marketing Expenses Vs. R&D Expenses of the Top 7 Indian Pharma Companies (FY10 - FY17)

Sales Revenues, R&D Spends and Advertising/Marketing Spends for 8 years between FY 2009-2010 and FY 2016-2017 for the top 7 pharma companies were calculated from Annual Reports from their official websites. 

Averages of Marketing Expenses to R&D Expenses Ratio (FY10 - FY17) 


Average M.Exp / R&D



<= 0.50 (GOOD)

> 0.50 , <= 0.75 (ACCEPTABLE)

> 0.75, <= 1.00  


> 1.00 








On a continuous positive trend. Consistently < 1.00 all 8 years till now. Reduced from 0.74 to 0.32 these 8 years. 

At 0.32 Now.





(On a Negative Trend Now at 1.12. Gotten > 1.00 since FY 2014-2015)

Was < 0.50 between FY 2009-2010 and FY 2013-2014




(Was above 1.00 

between FY 2009-2010 and FY 2011-2012)

But on a continuous Positive Trend. Reduced from 1.37 to 0.55 now in these 8 years. At 0.55 now.





Consistently < 1.00 since FY 2011-2012.  

At 0.67 now. 




(Was above 1.00

between FY 2009-2010 and FY 2011-2012.)

At 0.77 now.




Has been on a negative trend throughout. Was consistently > 1.00 since FY 2013-2014.

At 1.38 Now.




(Was above 1.00 

between FY 2010-2011 to FY 2015-16.)

At 0.98 Now.



  • It is encouraging that the Total R&D Spend by the pharmaceutical sector leaders was Rs. 41,590.51 Crores in the last 8 years (i.e., Average of 7.11% of Sales Income or 6.91% of Total Consolidated Income for past 8 years), however, it can be seen that the Top 7 pharmaceutical companies together spent Rs. 34,186.95 Crores in Sales and Marketing in the last 8 years. Thus, Marketing Spending could exceed the sector’s R&D Spends in just a few years from now - unless corrective actions are urgently taken.

  • Specifically, SUN PHARMA and CADILA HEALTHCARE LTD. (both in the Alarming category) need to focus on minimizing their Marketing Expenses to the Acceptable category - by making the interests of the common good as a top priority. 

  • At Not Good category levels, Cipla, Dr. Reddy’s Labs, and Glenmark should make proactive reductions in marketing spends now itself - as their Marketing spending are liable to exceed R&D expenses in the coming few years. 

Estimate of health-related OOPE (Out-Of-Pocket Expenditure) savings on reducing marketing expenses in India


Total Pharmaceutical Market Size

US$ 27.57 billion

Total Pharmaceutical R&D Spend

US$ 1.33 billion* 

Total Pharmaceutical Marketing Spend 

US$ 1.01 billion** 

Total Pharmaceutical Sector Profit

US$ 7.22 billion*** At 26.2% Operating Profit Margin For FY 2015-2016 ***

Total Health OOPE

US$ 51.75 billion**** 

From this estimate, we can see that if the pharmaceutical sector marketing expenses were reduced to $0, the OOPE can reduce correspondingly by US$ 1.01 billion to U$ 50.74 billion, (i.e., by  1.95% of the present OOPE) - from the top 7 pharmaceutical companies alone - assuming that the reduction in marketing expenses to zero triggers a corresponding reduction in the pharmaceutical drug prices that cumulatively sums up to $1.01 billion i.e. the total marketing expenses before reductions. This will help bring about direct reductions in the Indians’ OOPE if pharmaceutical companies achieve these estimates. 

Read the full report here


* R&D Spends for the top 7 pharma firms is Rs. 8821.57 Crores (US$ 1.33 billion); CAG Study ( See datasheet

** Marketing Spends for the top 7 pharma firms is Rs. 6679.65 Crores (US$ 1.01 billion). CAG Study. See datasheet.


**** National Health Accounts Estimates for India 2014-15,


1.Pharma industry has a deep culture of corruption, THE HINDU BusinessLine, December 3, 2013,

2. The new pharma FDI policy undermines Indian generics, which may make drugs more expensive  June 28, 2016,

3.  Risky Medicine: Why FDI in India’s Generic Drugs Industry Could be a Bad Idea, 20/07/2016,

4. Lal, Avtar. (2001). Pharmaceutical Drug Promotion: How it is being Practiced in India?, The Journal of the Association of Physicians of India. 49. 266-73,


5. A study on the interactions of doctors with medical representatives of pharmaceutical companies in a Tertiary Care Teaching Hospital of South India, Sandeep Kumar Gupta, Roopa P. Nayak, and R. Sivaranjani, Journal of Pharmacy & Bioallied Sciences, 2016 Jan-Mar; 8(1): 47–51,


6. Pharmaceutical marketing: ethical and responsible conduct - A survey on effectiveness of the guidelines,


7. Roy N1, Madhiwalla N, Pai SA., Drug promotional practices in Mumbai: a qualitative study,


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