With the fast approaching patent cliff and liberal foreign direct investment (FDI) adding to it, the bulk drug and API industry particularly in India and across the globe are poised to take major strides in growth. However, to tap this opportunity to its fullest extent, generic makers across the globe not only should enhance their compliance with advance regulations but also need to dynamically change according to the emerging trends.
According to Krishna Prasad, CEO and MD, Cito healthcare, the Indian players can gain even more from the patent cliff, if the government allows liberal FDI in the pharma sector and allocate more funds for research and development in healthcare sector. Definitely the API segment in India can surpass china and can capture major export markets across the globe with these measures, he added.
Because of the limited support from the government and stringent regulatory constraints in the western markets, the API segment in India is reeling under pressure. To overcome this, the Indian pharmaceutical fraternity should retrospect and upscale their quality standards and upgrade themselves in consonance with the international regulatory standards.
"To give the regulators a fitting response, Indian industry needs to accept the challenges and inculcate a culture of openness and give space to commit mistakes, to learn from them and bounce back" pointed out Sudhanshu Pandey, Joint secretary of commerce, government of India, while referring to recent USFDA warning to Indian players.
Of late, the government of India under the leadership of Prime Minister, Narendra Modi, is leaving no stones unturned to attract foreign investors to India. With positive hints from the government, the pharma industry is expecting the much needed booster shot for growth.
In the API segment, presently China is the leader in Asia while India is lagging way behind and is largely dependent on Chinese bulk drug for its formulation industry. According to industry experts, over-dependence on Chinese API will hamper the formulation industry in the long term.
Indian players had imported APIs and drug intermediates worth of five billion dollars in the year 2012, according to a report. From about three billion dollars in 2011, Indian API imports from China rose to 58 per cent in just one year. Though, this could help to improve the prospects of the formulation industry in the short term, continuation of the same would back fire in the long run, pointed out experts. An Associated Chambers of Commerce and industry of India (Assocham) report has indicated that the growing imports from China have made the Indian industry susceptible to abrupt disruptions in supplies.
In order to reduce the trade gap between India and China, the government of India with the support of Pharmaceutical Export Promotion Council (Pharmexcil) is making all efforts to break in to the Chinese and Japanese markets. “China and Japan are having a lot of opportunities for generics but their regulations are strict and tougher than the US and EU. We are making all our efforts to convince the Chinese and Japanese regulators and their local traders about the quality standards and business opportunities with the Indian players. We are hopeful that the coming days will be favourable for India and the Indian players will be able to venture in to these markets,” said Dr. P.V. Appaji, Director General of Pharmexcil.
At present the global API markets is valued at US$ 120 billion of which the US holds 45 per cent. There are over 2000 bulk drug manufacturing units in India manufacturing about 1500 APIs accounting to 21.42 per cent of global APIs. The Indian API market is valued at US$ 9 billion, out of which nearly 50 per cent is exported.
As India has the required talent pool and holds proven chemistry skills with strong infrastructure facilities, the developed world is looking at India for utilizing these facilities. To grab this opportunity, Indian manufacturers should focus on niche products, which are going off patient and be first generic suppliers in these markets. Also potent high value products, some of them low volume, such as anti-cancer drugs, steroids, antiretroviral drugs, a few biological products may also add value to Indian exports, according to experts.
Knowledge, technology and FDI to boost economy
In order to have healthy citizens, any nation should have substantial exchange of knowledge, technology and brain power that help in boosting R&D, exports and drug development and latest technological applications.
The pharma and the biotech industries have come up with various solutions to problems related to human health across continents. FDI is welcome as it facilitates economic growth, development of R&D, exports, drug development and latest technological applications, points out Krishna Prasad.
India should look for more avenues to expand its foreign relations with respect to the pharma and biotech industries. The patent expiry by 2015 is expected to be a boon for the pharma and biotech and is poised to attract more FDI.
In spite of a brief impasse the pharma and biotech industry in India would continue to register unprecedented growth and meet the healthcare requirements of the developing world.
The Prime Minister Narendra Modi’s visit to the US is expected to give the necessary impetus to push forward the Indian pharma and biotech industries. As the industry is highly regulated and is knowledge-intensive, steady growth is vital in driving the growth of the Indian economy.
Patent expiry in the regulated markets would be the key growth driver for the Indian pharmaceutical industry over the next three to five years. Moreover the growth in outsourcing by global pharmaceutical companies will further drive exports.
The Indian pharma industry revenues have been witnessing a rise since 2008 and are likely to continue at a compound annual growth rate (CAGR) of 17.8 per cent to US$ 36 billion by the end of the year 2016.
Though sales in domestic market earlier projected to grow by 14.4 per cent to US$ 27 billion in 2016 from US$ 23.6 billion in 2013 may not be achievable as of now, riding on a plethora of opportunities, Indian firms can expect to rake-in US$ 40 billion in sales with 46 US drug patents set to expire by 2015.
A significant point to note is that India has joined the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching US$50 billion. Till last year i.e. 2013, there were 4,655 pharmaceutical manufacturing plants in India, employing over 345000 workers.
With the industry friendly initiatives of the new government at the centre, there will be a growing interest of foreign companies for mergers and acquisitions (M&As), given the immense potential, availability of skilled labour pool, and government push to drive investments.
FDI challenges and opportunities
While most of the businesses and investors have welcomed the Indian government’s plans to facilitate FDI in various fields, there are also other sections in the society who are apprehensive about it. However considering the fact that there are bodies to govern the proper functioning of the impact and effect of FDI on indigenous producers, overall it may welcomed as a boon that will enable advancement.
Though the FDI in retail is highly debatable, the same in the pharma sector will only help the economy scale newer peaks ensuring a remarkable growth in technology and medical advancement. In order to in par with its American and European counterparts, the Indian pharma industry badly needs foreign aid.
Despite adversities and a number of challenges, the Indian pharma and the biotech industries have shown phenomenal growth and are almost at par with foreign industries. And in order to have diverse expertise in the field, there has to be a healthy exchange of views and ideas complimented with the latest technology vis-à-vis foreign aid.
According to an industry expert, “India has built a global platform in the generic sector. In spite of various challenges faced by the industry, the pharma and biotech sectors have grown phenomenally. FDI has added to the growth substantially. One should look into the economic growth of the country through various sectors/industries.”
A number of countries have benefited because of FDI and hence India should look for more avenues to expand its foreign relations with respect to the pharma and biotech industries.
Investors from abroad like to initiate newer ventures in India because the country is less expensive- right from the finances that are needed to invest to kick start a project to efficient manpower, cheap and efficient labour, renowned scientists & research personnel. In totality, India is a hub for contract research, biotech, clinical trials and clinical data management.
There were initial apprehensions expressed by some of the drug making lobbyists from the domestic industry about the arrival of MNCs to monopolize the Indian pharma sector, particularly after the six famous acquisitions.
After going through the recommendations made by the Maira Commission, the government has categorized the FDIs as investment in Brownfield and Greenfield areas. While M&As taking place in Brownfield sector will be scanned by the Competition Commission of India (CCI), 100 per cent FDIs will take place in the Greenfield sector.
The industry is in favour of 100 per cent FDI in the domestic pharma sector and would like the CCI to work out a policy/ guideline to look into pharma M&As. The industry is growing rapidly in the country and is expected to create a niche for itself in the global market.