State pharma industry – problems & prospects

Till the ‘60s, medicines were imported in the country and the pharma industry was dominated by foreign companies. In the wake of this scenario, was the initiative by a small group of visionary entrepreneurs of Indian for forming the Indian Drug Manufacturers’ Association (IDMA) in Mumbai, the commercial capital of India, in 1961. Now, 50 years down the road, the complexion of the Industry is distinctly Indian, and India has acquired a dominant position in the pharmaceutical sector, with Maharashtra leading the way as the torch-bearer of Indian pharmaceutical industry.

Many pharma companies enjoy success largely because their major operations are based in Maharashtra. The government support received by the industry has been substantial and the presence of a pragmatic and  stable state government has been one of the main reasons the state has managed to remain a principal destination for all pharma companies whether Indian or MNC. Maharashtra has been a hub for the pharma industry, both in terms of manufacturing as well as supply of materials.

IDMA and Maharashtra
IDMA and Maharashtra state share some similarities. Both were founded in the same year 1961, with headquarters in Mumbai and both are  proudly celebrating their Golden Jubilee this Year. In fact, over a period of time, a large base came up in the neighbouring  states of Maharashtra, only due to the presence of a thriving pharma industry here.

Maharashtra has also been a meeting ground for people of varying skill-levels and socio-economic backgrounds. A very cosmopolitan state - it has always been a rich breeding ground for innovation, a source of abundant skilled and diverse manpower which has worked well for the pharma sector in the past.

The flourishing state economy
Maharashtra has a thriving economy which is based on the edifice of a strong infrastructure. The state has a sound economic and social infrastructure. The economic infrastructure includes the roads, airports, railways, ports, telecom and power. Education and training, tourism and health services are included in the social infrastructure.

Maharashtra accounts for about 17per cent  of the foreign direct investment that is received by the country and 13 per cent of the national industrial output. The state's favourable economic policies of 1970s have helped flourish the business and economy of Maharashtra, thereby making it the leading industrial state of the country. Over 64 per cent  of the people are employed in agriculture and allied activities. Almost 46 per cent  of the GSDP is contributed by industry. The Economic Survey of Maharashtra for 2010-11 has projected this GSDP to grow at 10.5 per cent  against 8.7per cent the previous year. Industry is expected to grow by 9.1 per cent while the service sector by 10.9 per cent during the year.  

The pharma leader
Maharashtra’s contribution to  the Indian pharma market is substantial – about  ` 19,000 crores out of  ` 59,000 crores, i.e. 32 per cent. Maharashtra is home to 347 bulk drug units, about 693 formulation units, and various other manufacturing units such as 17 large volume parenteral units , nine  vaccine units, 1931 loan licensees, and about 1200 ayurvedic and cosmetics units. The state also has 171 units that are approved as per WHO – GMP guidelines and 10 units approved by US FDA. The state is the leading producer of vaccines in the country. Major pharma clusters in Maharashtra are Pune, Nasik, Aurangabad, Mumbai and Navi Mumbai. A number of SEZs have  also been notified such as SEZ at Navi Mumbai , Ajanta Projects  and Wockhardt at Aurangabad, a dedicated SEZ at Nanded, Serum Bio Pharma Park at Pune etc.

Maharashtra is a very cosmopolitan state - it has always been a rich breeding ground for innovation, a source of abundant skilled and diverse manpower. The state manages to attract investments due to the availability of human capital, skilled labour, good infrastructure and government policies. The real strength of Maharashtra is in the availability of diversely skilled manpower such as pharmaceutical research scientists, pharmacology, pharmaceutical chemistry and pharmacists, microbiologists, analytical chemists along with management experts in manufacturing, marketing, finance, sales and  human resource development. All these experts in Maharashtra at par with international standards.

The Food and Drug administration of Maharashtra was established in 1959 and is a vibrant and proactive organization with its headquarters in  Mumbai, with licensing authorities appointed at divisional places to approve manufacture of drugs. The Central Drugs Standards Control Organization (CDSCO) also has set up their west zonal office in Maharashtra in Mumbai, with two drug testing laboratories

The state government is very industry-friendly and the industrial norms for setting up pharma units are very supportive. The authorities are willing to advise new units on the norms instead of policing them. Maharashtra also provides special incentives and exemptions to encourage new units such as waiving electricity duty for 15 years, exemptions in stamp duty, refund of Octroi in certain categories and Special Capital Incentives (SCI) to all SSI Units etc.

However, times are changing and other states are catching up with Maharashtra. Competition has intensified among states and this has been good for industry in general. As the industry grew in the country, states such as Gujarat, Andhra Pradesh, Karnataka, Tamil Nadu, emerged as alternate pharma hubs. Later tax and excise exemptions offered by industrially backward states like Himachal Pradesh, Uttarakhand, Baddi, Jammu and Kashmir etc. saw a  large number of industries shifting their manufacturing facilities to those states, for obvious reasons.

Also, in the recent past, a fair degree of industrialisation took place in  Himachal Pradesh, Uttaranchal and Sikkim. This was propelled primarily due to the financial benefits extended by the union government for manufacturers in these states. The supply and logistics infrastructure in these states also slowly matured and now are comparable to that in Maharashtra. Also, the southern states of Andhra Pradesh and Tamil Nadu have seen significant industrialisation, as far as the pharma sector is concerned. All capacity expansions have actually happened in these states or within SEZs.

Maharashtra, no doubt, is also doing a lot but it needs to move at a much faster pace. Despite some industrial movement out of Maharashtra, the state still provides a very conducive industrial as well as financial climate.

The Maharashtra Government has also initiated e-tendering system for all hospital supplies and to procure only generics in order to save cost which will ultimately benefit the patients in  the state. The quality of the same will be approved by Maharashtra FDA and only then the medicines will be supplied to various hospitals.

Mumbai is and will always remain the capital of pharma industry. With a large market, big hospitals, research and educational institutions and good communication and transport in place, Mumbai accounts for maximum number of head-offices and marketing offices of pharma companies. Mumbai has the three most important financial centres of India - the Mumbai Stock Exchange founded in 1875, the Reserve Bank of India established in 1935, and the National Stock Exchange set up in 1992. Maharashtra ranks first in the generation of nuclear and thermal electricity. Mumbai, of course, is the centre of Indian film industry popularly known as Bollywood, and also the television entertainment  industry.

One of the major benefits that Mumbai offers is easy connectivity with the rest of the world that makes it easier to set-up research activity in Mumbai. Apart from that, Mumbai is serviced by major ports and airports, which facilitate logistics, within and out of the country. These factors are true for all industries operating in Maharashtra - specifically, in and around Mumbai.

Mumbai and the  nearby TTC industries areas at Navi Mumbai, Tarapur MIDC, Pune etc with various MIDC areas, Nashik and Aurangabad are said to be quadrilateral for pharma industry.

This quadrilateral offers best trained technical manpower, with presence of strong  and great pharmacy educational & research  institutions including University Department of Chemical Technology, Bombay College of Pharmacy, K. M. K. College of Pharmacy, Bharati Vidhayapeth College of Pharmacy and various other colleges at  Pune, Nashik, Mumbai and all over Maharashtra totalling about 56 degree colleges and 105 diploma colleges.

The intellectual capital the state has to offer will always make it a priority destination for setting up R&D centres especially for the pharmaceutical industry. The strong presence of medical colleges and pharmacy colleges provide an environment for clinical research,   formulation development and new drugs development and the government must provide all necessary tax sops to attract more investment in this area.

Speed-breakers
However, there are a few areas hindering the further development of pharmaceutical industry in Maharashtra such as:

• Highly pro-labour laws and attitude of the state government e.g. The Sales Promotion Employees (Conditions of Service) Act was amended to cover medical representatives and to classify them as "Workers" which no other state has done.
• Labour unions in Maharashtra are quite active and often make life particularly of small and medium scale industries very difficult.
• Time-consuming and bureaucratic procedures without adequate facilities.
• Too many Inspections which are expensive for industry in terms of time and money. These can be curtailed and rationalized considerably.
• Infrastructure and traffic problems are very acute and progress very slow – forcing people to think of other states, which are also more economical in terms of property costs/rentals, cost of living and overall business expenses including wages. Business has to remain competitive and efficient for survival.
• Although Maharashtra FDA is best organized and has excellent officials, license for new justified formulations (necessary for growth) are difficult in Maharashtra whereas such licenses are easily given in certain other states. Maharashtra FDA should strengthen its technical wing and make judicious decisions instead of making manufacturers to go to Delhi and other states.
• The Small scale units are the backbone of many industries, especially pharma industry. Due to the stringent provisions of the revised Schedule M many small scale units had to close down due to their inability to conform to these norms. The Government must provide for financial and technical support to revive these units.
• Minimum wages in Maharashtra are raised frequently by the government without considering the economic difficulties of the industries concerned.
• Although Mumbai is the business and financial centre of India, no initiative has been taken by Maharashtra government to provide to premier industry associations like IDMA, FICCI, CII, etc. institutional facilities at concessional rates, in any of the newly developed business zones, viz. Nariman Point, Central Mumbai, Bandra-Kurla Complex, etc. so as to promote better government- industry working relationship and to facilitate image-building for Maharashtra as a preferred business destination.

The wish list
We appreciate our state government's desire to redevelop the pharmaceutical industry in Maharashtra, which has since gone away to Gujarat, Andhra Pradesh, Goa and other states in the north.

It is now necessary that the Maharashtra government takes more proactive steps to further the growth of this industry by allowing for better incentives, tax sops and investment in talent creation. This will be crucial in order for the industry to sustain its current growth momentum to make sure that the bulk of Indian pharma activity remains within Maharashtra. The steps that must be urgently taken are:

• To keep ahead - not just with other states - but with other advanced economies around the world, it is imperative that the infrastructure is upgraded.
• The influx of outsourced work from global pharma companies has given the necessary impetus for the creation of Pharma Special Economic Zones (PSEZs), such as the one coming up in Nanded which would be one of the key drivers of outsourced pharma services growth in the coming future.
• Maharashtra should look to create more such areas to enable growth, so that companies can benefit from them. Development of PSEZs is a key step that the government can take to enable the growth of the pharma industry.
• Maharashtra should encourage pharma industry to set up manufacturing plants in the state, now that the tax/excise duty  benefits in states like Himachal Pradesh, Uttarakhand, Jammu and Kashmir etc have been reduced.
• The State Government must also provide tax incentives and subsidies to the pharma industry. This will encourage newer players to enter into the fray and help more established ones to build on their foundations.
• Inspection of a large number of Common Effluent Treatment Plants by Central Pollution Control Board has revealed that, in general, the CETPs are not performing satisfactorily, largely due to improper operation and maintenance. The state government must provide technical and financial assistance and support to enable these CETPS to perform optimally. This will encourage more pharma units to set up CETPs.
• Though there are pharma clusters in Thane, Nasik and Aurangabad, the State Government must encourage more cluster-based projects by providing state-of-the-art common facilities.  This will help the SME sector to share costs and enhance quality, productivity and innovative capabilities.  
• Allow for expansion of existing units to meet growing domestic & international demands.
• Encourage setting up of new units to make products for international markets on contract basis.
• Set up new R&D Units to undertake research and development work for domestic and international companies.
• Encourage industry-academic interaction and close co-ordination.
• Provide support and ancillary services for above.

The pharma industry in Maharashtra forms the foundation of Indian pharmaceuticals industry as the globally recognized leading manufacturers of affordable quality generic pharmaceuticals. It is no surprise that a majority of the top 10 pharma companies in the country are based in the state. Added to this, its economic strengths and it's positioning logistically – one would understand why Maharashtra has had a glorious past and continues to still house most major corporations across sectors. With the support of the state government, Maharashtra can very confidently reclaim its premier role as the torch bearer for the Indian pharma sector.