India is recognized as one of the leading players in the manufacture of generics - both APIs and formulations. It is one of the top five countries producing and exporting APIs and it is estimated that 40 per cent of the world's API requirement is met by India. The national sector of the industry is a flag-bearer for India's export competitiveness and continues to serve the domestic market admirably with quality affordable medicines. The Industry also continues to invest sizeable amounts in IPR, created largely to target global competitiveness.
As rising healthcare costs have forced the western and European countries to look at alternatives destinations, generic APIs and formulations from India are seen as an ideal option for their affordability and quality.
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.
Indian major players like Dr Reddy's Laboratories, Aurobindo Pharma, Glenmark Pharmaceutical, Cipla, Lupin, Jubilant Life Sciences, Orchid Chemicals, Divi's Laboratories, Ranbaxy Laboratories, Ind-Swift etc. and several other manufacturers received higher approvals for DMFs in the US as well as CoS in Europe. Indian players have been able to meet the domestic demand and could export huge quantities to several emerging pharma markets as well as regulated markets. With a number of international standard facilities, talent pool, CRAMS opportunities and backup of R&D activities, India has emerged as a major hub for API sourcing.
Aurobindo Pharma, a Rs 4,381 crore Hyderabad -based company has filed total 154 DMFs upto the end of March 2011 and its sales from APIs went up by 12.5 per cent to Rs 1,802 crore from Rs 1,602 crore in the previous year. The APIs sales contributed over 41 per cent to its total sales during 2010-11.
Glenmark Pharma's continued its market leadership in Perindopril, Lercanidipine, Telmisartan and Amiodarone combined with launches of four new products during the year. It received Perindopril annual tender in Malaysia and also received first product registration in Russia. Glenmark recorded APIs revenue of Rs 1,263 crore during the year ended March 2011 as against Rs 1,050 crore in the previous year, contributing over 43 per cent of its total net sales. The company filed 6 DMFs during 2010-11.
In the API space, Orchid Chemicals' cumulative US DMFs filed stood at 81as at the end of March 2011. The break-up of the total filings is 26 in the cephalosporin space, 41 in NPNCC space, 2 in the Betalactam segment and 11 in the Cabapenems segments. The cumulative filings of CoS for the European market stood at 21. With concerted efforts on product development, Orchid's filing and approval count is poised to increase in the coming months. Orchid is the largest manufacturer-exporter of cephalosporin bulk actives in India and is ranked amongst the top five cephalosporin producers in the world.
Dr Reddy's Laboratories' pharmaceutical services and API revenues during 2010-11 declined by four per cent to Rs 1960 crore from Rs 2040 crore in the previous year. Modest growth in API business led by new product launches was offset by decline in pharmaceutical services due to lower customer orders. The company filed 56 DMFs globally with 19 in the US, seven in Europe and 30 in rest of the markets. The cumulative DMF filings reached 486 as at the end of 2010-11.
The role of China
Today China is fast becoming the force to be reckoned with on the global stage. There is barely an established industrial sector where China’s growth in output and competitiveness is not growing apace.
The low cost availability of APIs from china is making the Indian companies to dangerously over dependent on that country. This trend has seen an erosion of API manufacture in India, mainly due to the unhealthy competition from China due to dedicated large volume production plants sponsored by the state. Moreover the transaction costs in China are far lower than what is prevalent in India. The Chinese Government has also recently revealed plans to invest more than US$ 750 million to build up capacity to produce APIs mainly for exports.
While the Indian economy is entrepreneur driven, the Chinese economy is government supported. The first generation entrepreneurs in India, whether in pharma, engineering, chemicals, dyes, IT , automobile spare parts or any other industry, had done wonders in last 30 years i.e. 1970 to 1990 due to the government's encouraging policy to develop industries.
At present first generation entrepreneurs, scientists or technocrats will find it difficult to start manufacturing without deep pockets. The land price is extremely high. Even a small land of about 2000 meters costs anywhere between Rs. 40 lakhs to Rs.100 lakhs. The question is who will fund the first generation entrepreneur with a vision to be a large manufacturer in 20 years. Similarly if a large -scale unit wants to procure 20 to 50 hectares of land, it will have to do so at a prohibitive cost, whereas in China, the government supports the procurement of large areas of land for the pharma industry at affordable costs.
There must be a concerted move by the Government, both central and state, to focus on the economies of scale, providing land at economical rates, strengthening of R&D & manufacturing and funding. Lately, the structure of the industry has become capital intensive with stringent requirements to set up dedicated manufacturing and R&D facilities for different varieties of drugs to ensure drug safety and quality. Further, importing is far cheaper than revamping manufacturing for several product classes. As the infrastructure is technology and human skill intensive, the cost of setting up and running such facilities to serve small volumes becomes uneconomical.
The API industry requires whole-hearted support from the Government in terms of realistic costing and price controls. Also strong support from Indian formulators in sourcing their API requirements indigenously will make a lot of difference to our hard hit API manufacturers.
Whilst low prices of Chinese Origin APIs are attractive, there were many instances that revealed low quality products. Moreover the phenomenon of low priced APIs could only be temporary as nothing would stop them from increasing prices once they are aware of the fact that Indian manufacturers of APIs have closed down due to cut throat competition. This could be a death knell for the pharmaceutical industry in India as some of the key APIs required for formulation manufacture would not be available.