Global economic slowdown, rising inflation, increase in excise duty and service tax have created a mood of desolation, since it will make drugs more expensive, according to Indian pharma majors. In such a gloomy scenario, it is high time pharma companies particularly the active pharma ingredient (API) sector re-devises manufacturing strategies to look at different dosage forms, adopt nanotechnology and opt for genomic drugs, Anjan K Roy, managing director of RL Fine Chem and committee member, Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA) told Pharmabiz.
There is also the issue of poor infrastructure compared to China and we need to make a strong pitch for investment to get rid of the growth impediments, he added.
Even if India is better than China going by the sound chemistry knowledge and expertise, what is observed in the last six months for the API industry is a deceleration in the year-on-year growth. There is a visible dip by around 4 percent, informed Roy. The Euro zone crisis which has further deepened will now further curtail the exports and this is creating jitters for the pharma industry, he said.
The sharp downturn in demand for API is a concern. The current subdued global environment limits the ability of companies to expand. India is ranked third in API after China and Italy. Even buyouts of potential facilities in the EU or US is viewed unviable to acquire because maintenance costs are huge and survival will be a concern, said Roy.
For large pharma companies in the API space, even the depreciating rupee which resulted in higher export earnings saw hedging mechanisms having no major benefit because it was offset by expensive dollar denominated imports. Even the interest outgo on foreign-currency-denominated loans would also be increased with higher value of foreign-currency-denominated debt. Now the appreciating rupee has seriously impacted exports, according to Fitch Ratings in its report of 2012 Outlook: Indian Pharmaceutical.
The stringent international regulations are making it tough for Indian API players but documentation and dossier submissions will provide an edge over China in the face of stiff competition, said industry experts.
Over the last three years, curtailing cost is on top of the agenda for global majors and this has created opportunities for Indian contract manufacturing. Major efforts to offload non-core tasks like API, excipients and low-cost destinations including India are already on. This could help the domestic pharma. Another issue is the patent expiries and paucity of new molecules which is creating lack of enthusiasm in terms of working on novel products, pointed out Roy.