Pharma industry is witnessing considerable expansion and investments in infrastructure. The second edition of India Pharma is expected to be a better and bigger event. The sector which is balancing both the demonetisation and the President Trump’s move to lower drug prices are likely to have minimum impact on the industry. However, the small and medium enterprises (SMEs) forming over 90 per cent of the country’s pharma industry landscape will also need to innovate to give a further push to growth, says Sunil Attavar, president, Karnataka Drugs & Pharmaceutical Manufacturers Association(KDPMA) in an email interaction with Nandita Vijay. Excerpts:
How do you view the impact of the two developments on the Indian pharma industry”-- India’s demonetisation and President Trump taking on as the US president?
Demonetisation seems to have had a minimum impact on the pharma industry. The data we have from AWACS for November and December 2016 shows a growth of 15.3 and 7.2 per cent respectively. This is an indication that there is minimum impact. We will of course need to track the secondary sales in the coming few months, but I do not expect any significant change.
Regarding US President Trump, it is going to be very interesting. Some of the things what he is saying is not different from what is being said by other world leaders. Definitely his tone and tenor is different but ‘Make at Home’ is the mantra of every state or country and rightfully so, as leaders are looking at ways to create jobs for their citizens. On the matter of taxation, I also think there is a consensus to build a sustainable taxation policy that discourages corporations from avoiding taxes by using fiscal incentives. We need to read the details on the proposed Border Adjustment Tax to know its impact on pharma. We may see some short-term concerns due to the proposed changes in The Affordable Care Act (Obamacare ) but considering that President Trump is an advocate of affordable healthcare , it will be an opportunity for Indian pharma companies who are well positioned to encash on this opportunity.
Some of the decisions President Trump has already made like pulling out of the Trans Pacific Partnership Agreement should actually benefit India as we were out of this very large bloc. I think the same will hold good for the Trans-Atlantic Trade and Investment Partnership Agreement.
The Indian pharmaceutical companies are well prepared to face these changes in the US market. We are seeing many Indian companies moving up the value chain by making strategic acquisitions in the US and slowly moving into the branded market.
Following the cash crunch and the economic slowdown , what are your expectations of the second edition of India Pharma?
Pharma industry has not seen much of a cash crunch. In fact, it is witnessing a lot of expansion and investments in infrastructure and field coverage. Therefore, we expect the second edition of India Pharma to be a better and bigger event. This is the flagship event of the Department of Pharmaceuticals, Government of India being organized by Ficci. The preparation started well in advance. The event covers a spectrum of subjects in the pharma industries in different ways. These include a regulators meet, CEO’s Round Table, B2B event organized by Pharmexcil, interactions with multiple stakeholders of the government and industry, seminars on various subjects relating to quality, skill development and moving up the value chain.
Karnataka has been playing host to this event to primarily attract investments and give the local pharma industry a fillip with the better infrastructure. Now what has been the efforts of the KDPMA to prod the government for the same?
The Karnataka government has been actively engaging with all stakeholders and also KDPMA is investing a lot of effort and energy to attract investments in the pharma sector. Bengaluru and Karnataka has been a magnet for investments in IT, biotechnology and aerospace. The city also has been attracting most of the start-ups due to already existing eco system and socio-economic environment. In the last few years, Government of Karnataka has been actively pushing for the growth in other manufacturing sectors including pharmaceuticals . As you know, Karnataka was the first state to introduce a pharmaceutical policy which recently moved to the Ministry of Industries and Commerce for more focus on implementation. There are a few projects that are already in the pipeline and we are positive that these will materialize in the coming days.
Last year, many large companies have made Greenfield and Brownfield investments in Karnataka like GSK, Mylan, Zuventus Healthcare Ltd and Recipharma . We expect that they will anchor more companies into looking at Karnataka as an attractive destination. A few cluster areas have been identified but, but the nature of the industry requires a lot of clearances from different departments .
Karnataka can excel and bring a lot to the table for the pharma industry looking to the future, with over 300 research labs, more than 40 CROs, the world best IT companies and Indian top science institutes.
The state is home to 71 pharmacy colleges. The Karnataka government had initiated a dedicated department of skill development to give a fillip to trained manpower. In your view do you see a skewed status with regards to supply and demand for manpower in the state?
I agree that, we need to do a lot to bridge the gap between industry expectation and availability of skilled manpower. In the last few months, we see a lot of traction on this front. Many pharmaceutical colleges and institutions have initiated skills development programmes. The Pharma Training Institute under the Karnataka Pharma Trust , TALL , Cornucopia and others are conducting learning and development programmes to make students industry ready. Apart from this, we have held many seminars supported by DOP which chipped in the grants to associations for conducting programmes on skills development. No doubt this is a small step but we see it gathering momentum in the coming days. KDPMA has tied up and signed MOUs with a few colleges and institutes to partner on this important aspect. We expect to train over a 1,000 students in the next three years. Government of Karnataka has earmarked some significant grants for Finishing schools in the policy and there is a definite movement for building up more institutions for training and development
As you are aware, Government of India has mandated that all staff and workers employed in pharma companies need to have desired skill set and has mandated LSSDC(Life Sciences Skill Development Council) to support the process. This will help hasten the process.
In a phase of patent expiries, do you see that this would be the right environment for mergers and acquisitions?
I think mergers and acquisitions are a part of the business. The gestation time for building up new business is getting longer and companies see more value in making acquisition to hasten their growth.
The SME sector has been offered a slew of funding platforms to upgrade and purchase equipment, how much have these supported the industry?
Many of the very good schemes announced for upgradation did not take off because of the last mile delivery. A very small portion of grants are actually taken by companies. Going forward, excellent schemes like these should be decentralized to the State or to accredited associations. This will allow a more equitable distribution and make these schemes a success at the local level.
There are also a lot of schemes available for cluster development. It could help if these are delegated and the implementing authorities are selected state wise or a trade federation which has branches all over India be selected . This would make it easier for companies especially SME’s to access these schemes .
In your view, going forward, what are the growth drivers for India and Karnataka pharma industry?
Karnataka pharmaceutical industry, though small in number with less than one per cent of the number of units, makes a significant contribution of eight per cent to the national turnover with over 9 percent of its revenues coming in from exports. Karnataka has built a name for itself as a destination of quality manufacturing. This is evident from the fact that most of the international companies and large Indian companies outsource their manufacturing to companies in Karnataka. Many of India’s top brands are made here in the state.
In spite of a small number, we have close to a dozen USFDA approved units, an equal number of MHRA approved institutions apart from international accredits and 82 WHO GMP units. A strong regulatory department has helped the industry in its recognition.
Apart from the common growth drivers for the industry of increased accessibility , higher spend on health care by the government, rise in insurance coverage, increase in number of hospitals and primary healthcare centres especially in tier 2 and 3 cities , opportunities in the global markets are due to the long list of products going out off patent. There is also a ballooning opportunity in biologics and bio-similars that will push the growth of the pharma industry in India and Karnataka. The unique drivers for Karnataka will be skilled manpower and innovation .
Pharma companies will need to work closely with other industries like IT, nanotechnology etc. Karnataka has a very strong base, about 44 per cent of Indian R&D cells are stationed in Karnataka which will allow pharma companies to actively collaborate with them. We also have top science institutions in Karnataka . As industry moves up the value chain, the need for active engagement with academia will be a necessity. This is where Karnataka has an edge due to proximity of R&D centres, industry experts, CROs and regulators.
As the president of KDPMA , what are the opportunities you see for the SME sector ?
The SME sector has no doubt been on a roller coaster in the last few years. As India looks to align itself with best global practices, the regulatory expectations have increased multi- fold. This has definitely put strain on SMEs with growing cost of infrastructure, need to maintain high quality standards and retain the competent manpower.
On the marketing side, the UCPMP (Uniform Code of Pharmaceutical Manufacturers Practices) in some form will be implemented sooner than later. But the pressures on pricing will continue . SMEs like all other companies will need to innovate if it need to grow. We have to look to strengthen ourselves rather than hoping for some external support.