India drug industry rise

Previously, India was known for producing low-cost knockoffs of some of the generic drugs produced by pharmaceutical firms in the West and Japan. However, the rise of India’s pharmaceutical industry in recent years has been one of the major success stories in foreign trade. Initially, Indian firms were barred from selling these products in developing countries because they breached intellectual property rights. However, the firms later complied with World Trade Organization guidelines on intellectual property rights and ceased manufacturing the low-cost knockoff products. The compliance marked the start of the dramatic growth of the Indian pharmaceutical industry since foreign companies began doing business with their Indian counterparts. There has been lots of partnerships between Western and Indian companies resulting in immense growth of sales (Perlitz, 2008). This paper discusses some of the ways in which the U.S. pharmaceutical companies and consumers have benefited from the rise of the Indian pharmaceutical industry. It further discusses the key losers due to the rise, the benefits vs the loses and the theory that explain the phenomenon.

How U.S Pharmaceutical Companies Benefit from the Rise of the Indian Pharmaceutical Industry

Today, globalization has taken effect and the rise of the Indian pharmaceutical industry may benefit any pharmaceutical company in the world including the U.S. pharmaceutical companies. The rise could open more opportunities that otherwise would not have come up if there was no rise in the Indian pharmaceutical industry. The rise means that the other pharmaceutical companies have to improve on the quality of their drugs so as to compete favorably with the Indian companies. Apart from that, the compliance that India agreed to in the WTO means that the interests of the U.S. pharmaceutical companies are safeguarded and therefore Indian companies cannot sell the cheap knockoff drugs they initially sold anymore (Greene, 2007).

How U.S. Consumers Benefit from The Rise of the Indian Pharmaceutical Industry

The competition that come with the rise of the Indian pharmaceutical companies will compel them to sell their drugs at more affordable rates. When they do so, the U.S consumers stand to benefit since they will access the drugs at lower rates than initially sold to them by the U.S pharmaceutical companies. Further, the consumers will have a wider variety of products to choose from since the rise will mean more drugs are availed in the market for the consumers. The fact that India will be able to sell in the U.S. means that the U.S. pharmaceutical companies will be forced to produce quality drugs and services in a bid to stay ahead in the competitive market. Production of high quality drugs and services is an advantage to the consumers. One of the effects of the competition is increased research and investment in development which lead to cost saving while trying new models of innovation which in the long run benefits the consumers (Greene, 2007).

Losers as a Result of the Recent Rise of the Indian Pharmaceutical Industry

The rise of the Indian pharmaceutical industry did not benefit all since some people lost and the key losers were the drug producers in other countries. Initially, India produced some of the drugs that were patented in the U.S. Later, with compliance with WTO regulations, it meant that the U.S drug producers would lose owing to the stiff competition that came with the rise of India. The increased partnership with the Indian pharmaceutical companies led to the U.S. outsourcing manufacturing and services to India meant a fall in the employment levels in the U.S (Chandra, 2016).

Benefits Vs Loses from the Trade with The Indian Pharmaceutical Sector

The pharmaceutical industry is regarded as one of the most profitable and is one that has continually experienced growth over the years (Chandra, 2016). The industry needs huge investments and also operation costs and therefore it is almost impossible for companies to quit the industry. The industry has kept growing and the loses of trade with India cannot outweigh the benefits. Through outsourcing, companies, like those in the U.S have been able to produce drugs cost-effectively. The consumers have been able to benefit from the competition and enjoy variety and quality in the market.

International Trade Theory (or Theories) That Best Explain the Rise of India as a Major Exporter of Pharmaceuticals

India has enjoyed benefits over the other countries that it is competition with by coming up with generic drugs (Perlitz, 2008). The efficiency in production of these kind of drugs placed them ahead of many countries. There is need for nations to specialize in the production of goods that they enjoy an absolute advantage in and trade them for goods produced by other nations. The rise of the Indian pharmaceutical industry can be best explained by the Heckscher-Ohlin Theory. The theory states that comparative advantage comes from the divergence in the national factor endowments (O’Rourke, 2003). The extents to which countries are endowed with resources or factors of production like capital, land and labor vary greatly. The process of drug production in India involved lower cost since it has plenty low-cost labor compared to a country like the U.S.

Conclusion

Outsourcing is one way of cost saving and global business relationships are a way to achieve this and take advantage of the numerous benefits that come with it. It is important for countries to outsource from countries that have advantage of what the country is looking for or lacks. Companies may benefit from cost-effective services, shared risks, increased productivity and increased efficiency when they outsource from other nations. Outsourcing in India has proved to help companies to realize their mission including wealth creation and customer satisfaction.

References

Chandra, U. (2016). Opportunities and Challenges of Indian Pharmaceutical Sector: An overview. International Journal of Scientific Research and Management (IJSRM), 4287 - 4302.

Greene, W. (2007). The Emergence of India’s Pharmaceutical Industry and Implications for the U.S. Generic Drug Market. Washington DC: U.S. International Trade Commision.

O’Rourke, K. (2003, July). Heckscher-Ohlin Theory and Individual Attitudes Towards Globalization. Retrieved February 8, 2017

Perlitz, U. (2008). India’s Pharmaceutical Industry on Course for Globalisation. Frankfurt: DB Research.