India’s eagerness to explore the tough markets of Japan is commendable. As part of India’s regular initiative to push Indian pharmaceutical capabilities into Japan, Pharmexcil, along with Federation of Indian Chambers of Commerce and Industry (FICCI) are jointly organising ‘India show’ at the International pharmaceutical exhibition (Interphex) which is to be held in Tokyo, from 2nd to 4th July 2014.
India’s, strength as a global manufacturer of high quality generics at affordable costs is well known to the world. The country’s leading pharmaceutical firms like Dr. Reddy’s, Ranbaxy, Sun Pharma, Cadila, etc have all established strong market hold in the western world like USA, EU and LATAM. Having achieved a saturation point in the western world, the Indian pharma sector is now concentrating on the regional markets of Asia and South East Asian countries like Japan, Malaysia, Indonesia and Philippines, etc.
Among all these countries in Asia, India’s interest to break the regulatory jinx of Japanese pharmaceutical market is commendable. In order to improve India’s image in Japan, Government of India along with pharmaceutical export promotion council of India (Pharmexcil) has been consistently working to promote the Indian pharma sector’s strengths and capabilities to the Japanese market. As a part of this initiative, Pharmexcil for the first time in year 2012 had organized ‘Brand India Pharma’ campaign at CPhI Tokyo.
According to Dr PV Appaji, Director General of Pharmexcil, though Japan is considered as a tough market to enter in, but recent efforts by Government of India and initiatives taken up by pharmaceutical export promotion council have paid up."Since 2010-11, pharma exports to Japan have increased three-folds. Many Japanese pharma companies are showing keen interest to source bulk drugs, formulations and herbals from India,” explained Dr. Appaji.
Giving more information on India’s participation at Interphex in Japan, Dr Appaji said that in continuation to their ‘Brand India Pharma’ campaign both Pharmexcil and FICCI are jointly organising an ‘India show’ where more than 35 Indian companies will display their products and services to the Japanese pharma traders. “Ahead of India show, on 30th June 2014, we are organising Business to Business (B2B) executives meet at Osaka, where top CEOs from Indian and Japanese companies will meet and discuss business opportunities and regulatory issues between India and Japan.”
The Indian delegation of pharma companies is led by Abhaya Kumar, Managing Director of Shasun Pharmaceuticals Limited. Leading Indian companies participating in the Interphex Japan are Shasun Pharma from Chennai, ACG Pharma from Mumbai, Suven Labs from Hyderabad, Pharma Asia Biotech from Delhi, Aurobindo and Dishman from Ahmedabad and Eisai pharma from Vizag are the major companies sending their senior executives to take part in the B2B meet at Osaka.
It is also learnt that during the B2B meet large number of Japanese companies will also participate to discuss business opportunities and draw out modalities to increase mutual pharmaceutical business among Indian and Japanese firms. “Our goal is to enhance Indian exports to Japan. Even the Japanese companies are also showing keen interest to build trade relations with Indian pharmaceutical firms. Most of the Japanese companies are keen to source bulk drugs, herbals and other generic medicines from India,” informed Appaji.
Osaka is a major pharma hub of Japan. A large number of Japanese pharmaceutical companies are located in and around Osaka city. In the B2B meet with the Japanese CEO, along with Indian delegates, Rajeev Kher, secretary commerce and Nirmala Sitharaman, Minister of State for Commerce, Government of India, will also participate to discuss on the various issues concerning trade and regulations between India and Japan. “Government of India officials will have discussions with Japanese MoH and FDA officials on matters relating to pharma exports. Hopefully all the issues will come up for discussion and will be resolved,” said Appaji.
Objectives of brand India pharma campaign
The global launch of Brand India Pharma took place on March 21, 2012, at CPhI Japan in Tokyo. The campaign is a significant initiative being led by Pharmexcil (the pharmaceutical export promotion council) and IBEF (India Brand Equity Foundation) under the aegis of the Department of Commerce, Government of India, to highlight the value proposition that Brand India Pharma presents today for globally.
India aims to double its exports to reach US$ 500 billion by 2016. Pharma is a major sector growing at 15 per cent annually and generics is a major strength area. Traditionally India has been exporting to regulated markets, which mainly comprise the US and the EU apart from other regulated markets like Oceania and Japan; and the unregulated markets - Latin America, Africa and parts of Asia.
India is aware that while its pharma growth in regulated markets like the European Union and North America has been phenomenal and that growth in Africa has also been spectacular but there has been a difference. In the former markets, India has largely been existent in the upper end of the value chain. While there is a huge potential in the regulated markets, the events of 3 to 4 years have demonstrated the necessity for diversification. This new dimension of India’s strategy is coincidental with developments in Japan. Given the heavy pressure on the health requirements, specially its ageing population, Japan, which is a US$ 109 billion market of which generics constitute 8 per cent, has decided to enlarge its generics portfolio. Japan today represents an opportunity for the Indian pharmaceutical industry. India has also entered into an FTA (Free Trade Agreement) with Japan, which is a conscious agreement to mutually increase cooperation in the pharma sector. “Since launching of Brand India Pharma Campaign by Government of India in Tokyo in 2012 and subsequent promotion activities undertaken by IBEF and Pharmexcil for improving pharma branding/ exports, there is a significant growth in our exports. Several Japanese companies are now looking to partner with Indian companies for business in Japan and India,” said Appaji, while explaining the impact of Brand India Pharma.
According to statistics provided by Pharmexcil, Indian pharmaceutical exports have increased consistently since 2010. The bulk drugs gained a year on year (YoY) increase of 18 per cent from Rs. 263 crores in 2010-11 to Rs. 448 crores in 2011-12 and Rs. 530 crores. Similarly, the formulations have also exhibited exemplary growth and have increased Rs. 67 crores in 2010-11 to Rs. 374 crores in 2012-13. In herbals, Indian exports have jumped from Rs. 32 crores in 2010-11 to 74 crores in the year 2012-13. Over all, the total Indian pharma exports almost witnessed three-fold growth from Rs. 363 crores in 2010-11 to Rs. 975 crores in 2012-13 with a YoY of 34 per cent. During 2013-14, India's exports were pegged at Rs. 1055 crores with an overall growth per cent of 8.2 during the year. “Having seen huge growth potentials, India and Japan are interested to explore more business in the pharma and biotechnology segments. The Japanese firms are also interested to invest in India and are looking to partner with firms in India. They are also interested to offer their manufacturing facilities for contract manufacturers to produce generics for Indian companies who are looking to market in Japan,” said Appaji while talking about possible business opportunities with Japan.
Overview of Indian pharma and healthcare
India is already among the top six producers of pharmaceuticals of the world. The Government of India has announced a host of measures to create a facilitating environment for the Indian pharmaceutical industry.
The policies of the Government of India are aimed at building more hospitals, boosting local access to healthcare, improving the quality of medical training, increasing public expenditure on healthcare to 2 to 3 per cent of GDP, up from the current level of 1 per cent. At the same time, the growth in healthcare insurance industry in India is also expected to complement the overall growth in the pharmaceutical market.
The healthcare insurance industry in India is expected to grow at a CAGR of 15 per cent till 2015. Investments in R&D in India have grown from US$ 52.5 million in 2000 to US$ 646.5 million in 2010. Of this, nearly 80 per cent or US$ 505 million is accounted for by the domestic companies while 20 per cent or US$ 141.5 million comes from foreign companies.
The Government of India has made tax breaks available to the pharmaceutical sector and a weighted tax deduction of 150 per cent for any R&D expenditure incurred. This is in league with Indian Government's Pharma Vision 2020 which aims at making India a global leader in end-to-end manufacture by 2020. India is home to 10,500 manufacturing units and over 3,000 pharma companies. India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines.
Globally, India ranks among the top exporters of formulations by volumes. India's generics exports have been growing at a rate of nearly 24 per cent annually over the last four years. India's pharma exports stood at US$ 14.7 billion in 2012-13, registering a growth rate of 11 per cent. India plans to increase its total exports to US$ 25 billion by 2016.
Troubles of Indian pharma with Japan
Japan is regarded as a tough market for any global pharmaceutical firm to enter in. Its regulatory set up is highly complex and extremely time consuming. Though many Indian companies have tried to enter its markets earlier, but could not sustain for longer for reasons well-known.
Having ventured in Japan, Indian companies like Cadila, Ranbaxy and Dr. Reddy’s had to exit from the Japanese markets because of the tough regulatory concerns. For instance, India based Cadila Healthcare Ltd has decided to close its Japanese subsidiary Zydus Pharma, which was set up by the company in the year 2006. Post incorporation, Zydus acquired Nippon Universal Pharmaceutical Company in 2007 to strengthen its base in Japan. In spite of having a strong hold in Japan, Cadila Healthcare has therefore announced to exit from its business in Japan. Cadila Healthcare initially tried to sell Zydus pharma but due to reasons unknown, the company had finally decided to close its operations in Japan.
In fact, Cadila Healthcare is the fourth Indian drug manufacturer to exit from Japan’s pharma markets after Ranbaxy, Dr. Reddy’s and Orchid Chemicals. It appears that Japan’s copycat drug market is still considered tough for Indian drug manufacturers as the quality standards and regulations in Japan are more stringent and often not very transparent.
As Japan is regarded as the second largest pharma market in the world, the country has large markets to explore. Particularly in the generics segment, the country has huge potential to tap for affordable high quality medicines.
While explaining about the various issues concerning with Japan, Appaji said, “Major issue with Japan is its complex regulatory set up. The real time VAT prices for submission of data are very high. Another difficult part of their regulatory requirement for getting a new product approved in Japan is to conduct clinical trials and bio-equivalence studies, which is again very costly and time consuming.”