As Japan's third largest innovator pharmaceutical company, Daiichi Sankyo Co Ltd (Daiichi Sankyo), announced in June 2008 that it would acquire a majority stake (63.9 per cent) in India's largest generic drug company, Ranbaxy Laboratories Ltd (Ranbaxy), for US$4.15 billion. Daiichi Sankyo was formed in 2005 through a merger of Daiichi Pharmaceuticals and Sankyo Co Ltd, both established Japanese firms with more than a 100-year history and known for their strong research focus. With the acquisition of Ranbaxy, it became the first Japanese drug maker to be engaged in the four primary pharmaceutical fields – new prescription drugs, generics, over-the-counter drugs, and vaccines.
Ranbaxy was started in 1937 by Ranbir Singh and Gurbax Singh as an India-based distributor for a Japanese company, Shionogi. The name Ranbaxy originated from the combination of the names of its first owners, Ranbir and Gurbax. Bhai Mohan Singh bought the company from his cousins, Ranbir and Gurbax, in 1952 and Ranbaxy was incorporated in 1961. Shortly after, it started production of drugs in India and soon was known for producing cheap generic versions of branded drugs without compromising on quality. Bhai Mohan Singh's son, Parvinder Singh, joined the company in 1967 and launched an ambitious plan to transform Ranbaxy into a major generic drug manufacturer in India with the construction of a large manufacturing plant and the launch of the company's IPO in 1973 to tap public funds. Parvinder Singh then began building Ranbaxy's international distribution network by driving export sales of low-cost generic drugs to developing countries. His sons, Malvinder Mohan Singh and Shivinder Mohan Singh, further expanded the company's presence globally by undertaking foreign acquisitions, marketing generic versions of expensive drugs all over the world. The Singh family transformed a small, local company into a respectable multinational company that provided affordable and quality medicines to patients around the world.
Until 2000, both Daiichi and Sankyo had a focus on domestic markets. After 2000, the Japanese Ministry of Labour, Health and Welfare took a series of actions to control rising health costs of an ageing population, including issuing new guidelines on drug reimbursements, tightening approvals and cutting reimbursement amounts, which added pressure on Japanese innovator drug firms’ profit margins. The Japanese government had also set up a target for generic drug use of a 30 per cent market share by volume by 2012.