Anticipating a surge in demand for active pharma ingredients (APIs), which has been the backbone of Indian pharmaceutical industry for the last two decades, the industry is in the process of ramping up infrastructure capacities, increasing investments in R&D and infusing new technologies.
India is fast emerging as an attractive choice for API outsourcing due to low development costs, complex synthesis capabilities, cGMP compliance and a large domestic market. With increased investments in R&D and focus on quality as well as cost, Indian companies could out-compete firms from many other nations and gain salience in the international market.
Indian APIs players are now well ahead of other countries in drug master filings (DMFs) in the US and Certificates of Suitability (CoS) in Europe. India ranks third in the world producing about 500 different APIs and largest number of US FDA approved plants outside US.
The cost -cutting measures by the US and highly regulated countries in healthcare segment has pushed up the demand for low cost generics. As a part of cost cutting measures, many multinational players have started sourcing bulk drugs from cost competitive destinations during last few years. Such a shift has provided India with immense opportunity for growth and Indian companies have emerged as the preferred supplier for APIs the world over.
Moreover several blockbuster brands had lost exclusivity during last couple of years and more are losing in the coming years. While this has helped in the overall growth in API operations , Indian players could successfully cash in on this opportunity. It is estimated that 40 per cent of the world's API requirement is met by India.
According to M. Narayana Reddy, managing director, Virchow Laboratories, Andhra Pradesh, there are good opportunities for the API manufacturers in India and especially of Andhra Pradesh in the future as many products are going out of patent in the future. The Indian companies can exploit the opportunity by manufacturing and marketing those products. Once it goes off patent, anybody can engage in the manufacturing and sale of the product at lower price.
The increase of the price of raw materials from China also have a positive impact as several local manufacturers have come forward to exploit the situation and are currently engaged in production of several intermediates, he added.
Upcoming investments
Karnataka’s Bal Pharma is slating a Rs. 20-25 crore investment for its second API facility and is now scouting for land. Micro Labs is now spearheading its efforts to file12 DMFs in the US and seven DMF’s in EU by end of FY 2011. Hyderabad’s Divi Labs has allocated Rs. 160 crore to boost capacity at a plant near Hyderabad.
The US-based Alvogen is now looking at widening its reach with bulk drug manufacturers here. In May 2010, the company signed agreements with several pharma companies including the Chennai-based Orchid and Shashun Chemicals, Bangalore-based Strides Arcolab, and Mumbai-based Marksans Pharma.
Growth in categories like oncology, neuro psychiatry, diabetics, anti allergy, cardiology and nephrology are some of the focus areas for companies like RL Fine Chem, Strides Arcolab, Micro Labs, Bal Pharma, Aurobindo Pharma and Dr. Reddy’s Laboratories.
In segments of analgesic-antipyretic drug (paracetamol), antibiotics (penicillin), anti fungal (Metronidazole) and vitamins, which were some of the promising areas of growth for pharma industry, India continues to retain the portfolio in their product range despite having faced stiff competition from China in these segments, said Anjan K Roy, managing director, RL Fine Chem.
Strong on expertise and exports
India is one among the largest to submit DMFs. The Bulk Drugs Manufacturers Association estimates the APIs industry to be around Rs 32,000 crore to Rs 35,000 crore ($6.61 billion to $7.23 billion) out of the total Rs 78000 crore ($16.12 billion) Indian pharma industry. Out of the total API business, almost Rs 15,000 crore to Rs 18,000 crore ($3.1 billion to $3.7 billion) is from exports. The industry has maintained almost 10 to 15 per cent growth both in API and its exports business.
The country has around 600 API manufacturing companies. The leading API companies are Dr. Reddy's ,Ranbaxy Laboratories Ltd, Aurobindo Pharma, Cadila Pharmaceuticals Ltd, Sun Pharmaceuticals Industries Ltd, Cipla Ltd, Dishman Pharmaceuticals & Chemicals Ltd, Divi's Laboratories Ltd, Hikal Ltd, Orchid Chemicals & Pharmaceuticals Ltd, Torrent Pharmaceuticals Ltd, Micro Labs, etc.
The role of Indian bulk drug manufacturers in the global pharmaceutical supply chain is gaining traction with increasing presence in synthesis and manufacture of late stage intermediates and APIs. Traditionally, innovators have frequently opted to perform final stages of API synthesis in-house or partner with specialized European suppliers while outsourcing early stage intermediates to Indian manufacturers. However, recently, the reputed track record of Indian companies in supplying quality products coupled with complex synthesis capabilities have enabled increasing participation in supply of late stage intermediates to innovator companies, said N R Munjal Vice Chairman and Managing Director Ind Swift Laboratories Ltd
“The domestic bulk drug industry is poised to benefit from the impending patent expiries in the regulated markets (including many blockbuster drugs) leading to increase in generic penetration; thereby providing a significant opportunity for supply of APIs to manufacturers of such generic drugs coupled with increased outsourcing of bulk drugs by multinational pharmaceutical companies,” said Munjal.
Global manufacturers eyeing India
According to S. Lakshmanan, Deputy Manager, Regulatory Affairs and V. Muthu Krishnan, Senior Manager, Regulatory Affairs, Dr. Reddy Laboratories, in Europe, the United Kingdom, Germany, France and Switzerland are the major bases for API manufacturers for the innovative sector. Italy and Spain are showing growth potential in the generic sector. In fact, Italy has become one of the major bases for generic API manufacturers due to its advantageous patent regime.
Asian manufacturers are able to offer cost-effectiveness as well as meet regulatory standards. Though API producers in Europe and the US have the advantages of high levels of regulatory compliance, and having advanced technological capabilities, the major disadvantage of using these companies is higher costs. API producers from the Asia Pacific region are gaining similar advantages by acquiring facilities in Europe and the US. One of the biggest challenges facing manufacturers, however, is the growing competition from low-cost manufacturers in Asia, said the officials from Dr. Reddy’s.
Outsourcing the production of APIs, or if already outsourced, finding a cheaper supplier, is a key way of saving money at the API manufacturing stage, whether it is for preclinical or clinical trials, or for the production of finished drugs. This is a key strategy for pharmaceutical companies pressured by the emerging ‘patent cliff’. For example, UK-based AstraZeneca has stated that it is looking to outsource its entire API production between 2014 and 2019 and there have been suggestions that this will be to China and India, they pointed out.
But with the presence of the highest number of USFDA plants apart from several international regulatory clearances sought by Indian pharma companies on a regular basis, global chemical and API manufacturers are keen to have India for the production and research of a range of chemicals and bulk drugs. Being on the radar of the leading global majors for contract manufacture and research of APIs are the inherent aspects of expertise and competitive pricing, stated BG Bairy, managing director, Bairy Group of Companies during an earlier interaction with Pharmabiz.
In an age of economies-of-scale in production, companies from the US and EU are looking at India for outsourcing . There was a lull between end of 2008 and mid 2010 which has shown an optimistic reversal, informed Ajay Bharadwaj, CEO and founder Anthem Biosciences.
The scenario opens up ample opportunities to the API manufacturers to improve the export market prospects. The companies are chalking out strategies to increase opportunities in the regulated regions as well as in the emerging markets. They are looking to provide competitive prices and engage in the production of niche APIs to remain aggressive in the market, said Roy.
Problems & challenges:
One of the major challenges is the severe competition particularly from China and the need for strong of government support to address the same. APIs from China which are known to be of poor quality is debilitating the growth of the sector, pointed out Roy.
According to Reddy, the main challenge being faced by the API industry is the environment related issue. Though in the recent years, the industry has made a lot of effort to treat effluents, the society and the regulatory bodies do not believe the industry as in the earlier days it was known for its pollution emissions.
The issues like the constant imposition of fines from the pollution control board has to be sorted out expeditiously feel officials from the Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA). There is also the burden of high cost and power shortage . The poor infrastructure like roads and connectivity are also impeding the growth of the industry. Added to these are labour problems affects the deadlines in contract manufacture, the officials said.
KDPMA is of the view that a dedicated pharma park for APIs industry could ease a lot of hassles. The industry has been facing infrastructural problems in the state for some time now. The need of the hour is a special chemical zone to tackle pollution control and effluent treatment issues.
According to Bharadwaj, there are several issues which hinder the growth of the sector. Setting up a business in India is tough for entrepreneurs. There are no clear cut norms, clearances are cumbersome and lead to inordinate delays. Moreover land prices are exorbitant which is affecting industrial growth in India.
Though the government is planning so many things including incentives, in the long run it won’t help much. For the long-term benefits, there is a need to create good infrastructure and effluent treatment facilities in a big way. Infrastructure programmes are better than incentive-oriented programmes, opined Reddy.