Pharmabiz
 

AP pharma industry optimistic despite headwinds

A Raju, Hyderabad Thursday, May 24, 2012, 08:00 Hrs  [IST]

The pharmaceutical industry in Andhra Pradesh, which has been playing a vital role in strengthening India’s economic growth, is quite optimistic on the growth prospects despite the fact it has been lagging due to regulatory hurdles and lack of government encouragement to attract new investments in the recent past.

Andhra Pradesh has grown into a pharma hub for bulk drugs basically for two reasons. Historically because of Indian Drugs and pharmaceuticals Ltd (IDPL) and secondly because of entrepreneurship and availability of adequate talent pool in the state.

The first and foremost reason for the growth of pharmaceutical industry in the state can be attributed to the presence of IDPL, set up in the year 1961 at the behest of India’s first Prime Minister , Pandit Jawaharlal Nehru.

IDPL was India’s largest public sector drug maker in the early days. The company was set up to enable the country attain self sufficiency in life-saving drugs. Unfortunately IDPL is saddled with accumulated losses of more than Rs. 5000 crores and has a negative net worth of Rs. 4816 crores.

Had there not been IDPL, the bulk drug industry in Andhra Pradesh wouldn’t have seen the present day. Though the company was a flagship and front runner in the early days, the paradox today is many private sector drug manufacturing companies have overtaken it and are performing on par with the international standards giving stiff competition to the global drug makers.

Today Andhra Pradesh has become the preferred destination for investments in pharmaceuticals for Indian and as well as foreign multinational companies. It is also a centre for pharmaceutical healthcare education and research and reputed for innovation in these areas.

Looking at the statistics, Andhra Pradesh ranks first in manufacturing of bulk drugs and third in formulations in the country. It accounts for 40 per cent of the total Indian bulk drug production and 50 per cent of the bulk drug exports. The state pharma industry and exports are expected to grow at 20 per cent annually.

Today the state has a dominant position in pharma sector. In value terms, the industry is worth US$ 1.6 billion and the state will leverage its strong position to emerge as the next global hub of pharmaceuticals with a share of around US$ 15-20 billion by 2020. The state exports over US$ 500 million of pharma products. It has over 2500 pharma companies and is home to two of the top five pharma companies Viz. Dr. Reddy’s Laboratories and Aurobindo pharmaceuticals Ltd.

The Active Pharmaceutical Ingredients (API) sector with more than 200 units in the state is poised to grow at a rate of 10 to 15 per cent in the coming days. In fact the industry holds the potential to grow at the pace of 25 per cent if there is proper encouragement and support from the state government.

Ups and downs
If one looks at the past and present, the pharma sector in Andhra Pradesh has been witnessing two different phases. The initial phase was the golden age during 1993-98 in which the industry rose to the highest levels leading AP to become India’s bulk drug capital. Today the industry is passing through another phase, of bad times , in the aftermath of ban and regulatory restrictions by the state and central authorities.

During the early days of economic liberalization and globalization, pharmaceutical sector in the state was given freedom to flourish with hardly any regulatory restrictions binding their activities. But as time passed, the industry’s indifferent attitude towards environmental safety and lack of social responsibility have forced the regulating authorities like PCB and DCA in the state to clamp a ban on expansion and production of new products. Today the pharma industry is facing the Supreme Court ban in four districts of the state such as Mahaboobnagar, Medak, Range Reddy and Nalgonda because of pollution problems.

Recently, the Andhra Pradesh pollution control board had cracked the whip and banned eight pharma units in Nalgonda for violating pollution control norms. Further, it has also issued warning notices to drug manufacturing units in Medak district.

In spite of the problems relating to regulatory restrictions and environmental  safety, the industry has been steadily improving its market share and reputation on the global stage owing to its inherent capabilities and competitiveness.

However the pharma industries around Hyderabad have become congested and had been posing environmental challenges. To address this, the state together with the centre is promoting a pharma cluster near here with Rs. 66.16 crores to upgrade the existing infrastructure of Jeedimetla and Pashamylaram industrial estates.

Reckoning the concerns of pollution and environment safety, the state government has come forward with proposals of setting up of special zones for pharma industry in the state. Taking forward this initiative, it had set up two special economic zones, one at Paravada in Visakhapatnam district and the second at Jadcherla in Mahabubnagar. The state government has also come up with a proposal of setting up of a PCPIR (petroleum, chemicals, petrochemical investment region) industrial corridor between East Godavari district and Vizag. But due to problems of land acquisition and issues relating to rehabilitation of people, this project has been put into cold storage. The main objective of this corridor was to check pollution and divert the waste into the sea.

The state government had also recently allocated 200 acres of land for setting up a medical and biomedical devices unit and also proposed to implement the Jan-Aushadi programme of the central government. Adding to this, the US pharmacopoeia has also set up a facility with an investment of Rs 60 crores in Genome valley, which is the first of its kind of facility outside the US.

“Thought the state government is coming up with some small efforts to encourage industry, these initiatives are not enough. We want the government to lift the ban on expansions and permit the industry to manufacture new drugs. The entire industry is mindful of pollution control norms and is adhering to it. Every small unit has installed most sophisticated machinery to check pollution within and ensuring zero discharge levels. The government should come out of the old mindset and  open up to the new realities and lift the ban they have imposed 15 years back,” said Krishna Reddy, ED BDMA.

“We have been constantly working with the regulatory authorities both at the PCB and DCA and have solved lot of problems relating to bulk drug units during the past three years. Within the next 2-3 months we are expecting the lift of ban on product expansion as we have received an assurance from DCA in this regard,” added K.V.Rangarao, ex ED BDMA.

The bulk drug industry in the state is of the opinion that, the government should recognize pharma industry under the Essential Services and Maintenance Act and should be protected from disrupting mobs and extortionists.

The small and medium scale industries are facing a lot of problems as they are not having sufficient infrastructure like land, water and power. The clusters in Nalgonda district and Medak districts do not have common effluent treatment plants. They have to carry wastes to long distances in Patancheru and Amberpet treatment plants which is costing them heavily.

Unless the government comes forward with a revised pharma policy for the state, it is difficult for the pharma industry to survive and sustain the growth. If corrective measures are not taken, the industry will slowly shift to other states with better opportunity, opined Krishna Reddy.

Strengths of AP pharma industry
The strength of the Andhra Pradesh pharma industry lies in its strong base with established pharmaceutical organizations starting with IDPL and strong R&D centres of reputed institutions like Indian Institute of chemical technology (IICT), the Centre for Cellular and Molecular Biology (CCMB), Centre for DNA fingerprinting and Diagnostic (CDFD) and National institution of Nutrition (NIN). After setting up the Biotech Park and the ICICI knowledge Park near Hyderabad, the government is in the process of creating a pharma city at Parawada near Visakhapatnam under public/private partnership. The Pharma City will have a world-class infrastructure on an area covering 2,200 acres with state-of-the art environmental protection measures. This will facilitate the local industry to expand its manufacturing facilities.

Another important strength of AP is its talent pool in the science and biotechnology domain. There are more than 350 pharmaceutical colleges under various state and central universities offering professional education in the state. A part from this, there are numerous hospitals, research and diagnostic laboratories which all are enabling the domestic pharma sector to grow.

ChallengesThe main challenge for the sector is to sustain its growth. The industry should sustain its base as a bulk drug maker and move up the value chain. Though the situation seems to be stable, due to delayed government processes and lackadaisical attitude of government officials there is a possibility that the pharma sector may slowly drift it base to other states like Gujarat, Maharashtra, Himachal Pradesh and Jammu and Kashmir which are offering better incentives.

“On one hand the government says we need to beat china in production, while on the other hand the regulatory authorities are binding the industry for silly reasons. In such a scenario how can one expect Indian industry to surpass China?” asks Reddy.

China is able to out-compete India because the Chinese industry gets financial and moral support from their government, especially the SSI units. “Many states have pharma policies, but AP does not have one. The government does not consider pharma industry as a priority sector,” he added.

In China there is a uniform policy and procedures with regard to environmental pollution standards where as in India, each state has its own regulations. This is creating an imbalance in growth.

“In order to sustain growth the industry should not merely focus on bulk drugs. It has to move up the value chain and should focus more on formulations and generics which are in great demand,” said ORS Rao, Director, Cygnus Business consulting and Research Pvt. Ltd.

Though the firms in the state are self-sufficient in bulk drugs, their overall dependence on imports of APIs from other countries like China, Switzerland and Australia is of serious concern as it may impair the future growth of the industry. There is a serious need for the government to look towards this front and gradually reduce over-dependence on imports of APIs and provide adequate infrastructure facilities and financial assistance to newer firms and encourage them to develop APIs in the state. The pharma industry should focus more to capture retail markets where the profit margin is more rather than just serving the wholesale market with low profits, he added.

 
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