Even as poor investment climate and delays in land clearances resulting in infrastructure bottlenecks are hampering expansion of drug manufacturing units in the country, several Indian pharma companies are moving abroad to identify locations to boost their manufacturing activities, according to pharma consultants who are closely monitoring the sector.
From Biocon to Strides Arcolab, companies are heading to Malaysia where adequate government support among others ensures investor confidence. Now there are a couple of small-medium sized pharma companies too which did not want to be named that are also looking at viable locations abroad to invest, sources said.
Stability of the economy is important. There are concerns of market volatility. Even for foreign direct investment (FDI) to come in, India needs low inflation, less restrictive labour laws and an unwavering currency. The country is not doing well on all these counts, according to the Institute of Economic and Social Change, Bengaluru.
In order to overcome the slowdown and the inability to expand manufacturing, companies could relocate to South East Asia, particularly Thailand, Vietnam and Malaysia where governments encourage investments. Even Africa is providing ample scope for expansion and Indian pharma would be able to easily access the public private partnership opportunities in these markets, said Gurudatta G G, chief executive officer, Estima Pharma Solutions LLP and a pharma consultant.
Lack of new production units could freeze new product launches and lead to decline in production capacities which eventually would result in retrenchment. Therefore, the implications of poor infrastructure, no plans to revive growth and improve current business climate would only debilitate investor confidence, said Anjan K Roy, managing director, RL Fine Chem and committee member, Karnataka Drugs & Pharmaceutical Manufacturers Association.
“Indian pharma’s prowess would allow to convert much of the current challenges to advantages. But the government has a major responsibility to facilitate the industry with the proper infrastructure covering roads, power, including the approvals of effluent treatment and provide the tax benefits. In addition it is also critical to harmonize our regulations with other parts of the world. There is no dearth of experts and consultants in the pharma sector which the government agencies could approach and utilize their know-how and capability. Although efforts by the government are in progress it should be on a fast track or we would miss the bus,” pointed out AG Raghu, chief executive, Santhana Gopala Consultants.
According to Sriram V Iyer, CEO, Valuegen Pharma Pvt. Ltd., although pharma industry is largely seen as recession resistant, the slowdown both global and national is eating into the profitability of the companies. There are pricing pressures ensuing from low reimbursements in the European Union and US president Barack Obama’s Healthcare law. Therefore, this is a new international age for Indian pharma exports where companies need to deal with drug price reduction and increasing expenses. In this subdued economic environment it is the survival of the fittest.