Indian active pharmaceutical ingredient (API) companies should focus on efficient manufacturing practices and building partnerships with customers for a successful innings in the global arena, feel industry manufacturers across markets of the US, EU, Japan and the Asia-Pacific region.
APIs have a huge demand from the Asia Pacific because of the population demographics in this region. According to a report from Transparency Market Research, the global API market, which was $119.7 billion in 2014, is expected to reach $185.9 billion by 2020.
The Asian contribution to the API industry is shared among India: 33 per cent, China 61 per cent and others: six per cent. In the recent past, drastic in-house manufacturing cuts implemented by the pharma giants because of poor cost viability and increased productivity issues coupled with other key parameters such as high-end R&D costs and pricing issues on finished formulations have resulted in a thrust to outsource API production.
Excellent growth has been witnessed in pharmaceutical industry in emerging markets. Rising affordability, enhanced life expectancy and improved standard of living are all providing impetus to the demand of pharmaceuticals. However, major regulatory changes in the United States and Europe are set to change the API landscape.
Companies like Aurobindo, Hetero Drugs, Granules, Lake Chemicals, Lupin, Divi Labs, Mankind Pharma, Shilpa Medicare, Hetero, Malladi, Dr. Reddy’s, Micro Labs, Bal Pharma, RL Fine Chem, Biocon among others are realizing and exploiting the potential of the US and the European market with a slew of products.
Indian API prowess
Indian pharma industry is the front runner in science sector. There are over 2,000 API manufacturing units producing nearly 1,500 APIs, which is estimated at US$ 9 billion in the country. Out of this nearly 50 per cent is for export. Therefore industry experts do see that India has the opportunity to grow this business and increase its global market share.
The key strengths of the Indian industry are the sound knowledge of chemistry , access to competent and technologically sound work force, which has enabled it to gain a strong foothold in the global API market. In 2014-15, the export revenues that ensued from the pharmaceuticals is estimated at around US$12 billion and is seen to increase to around US$20 billion by 2020.
The big advantage for Indian API industry in the global arena is the cost competitiveness. In India the expertise is high, based on the chemical acumen of its scientific talent. The contract manufacture and research services in India has taken off where companies like Anthem Biosciences and Syngene, a Biocon subsidiary and Jubilant in India have proved their know-how compared to the western countries, noted experts.
“From a global perspective, the API capability of India cannot be ignored. We account for the highest number of USFDA facilities pegged at 546 and EMA approved units besides other global regulatory agencies from Japan and Australia which has enabled it to take a big leap in terms of grabbing opportunities. Even though the country’s volume of production is lower compared to China, the global recognition for quality and variety of API products has created an opportunity to either partner with global players for marketing the APIs. It could also garner revenues from being a preferred source of supply for global pharma bigwigs,” noted GG Gurudatta, CEO, Estima Pharma.
According to Deloitte in its report on Life Sciences Outlook ‘Optimism tempered by reality in a new normal’, the companies are altering their business models as they are increasingly sourcing APIs from low-cost locations globally. However, monitoring the quality of these APIs is difficult and thus, a cause for concern.
Policy initiatives
The Union government is working on favourable policies for infrastructure, taxation and incentives. The Katoch Committee report on APIs has called for cluster development. The Katoch Committee on APIs, constituted by the Department of Pharmaceuticals (DoP), has made sweeping recommendations for revival of API manufacturing in India including tax free status to cluster developers and cluster participants for 15 years. The initiative is long overdue but the implementation and execution should not take a long time. The industry is looking for time-bound efforts. As it stands, the action is missing and we are unsure of how the government will take this forward. Now 2015 was declared as the Year for APIs, we are now in 2016 and wonder how many companies were aware of this, stated Manoj C Palrecha, managing director, Lake Chemicals and joint secretary, Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA) .
“The government will now need to put in place a mechanism for the SMEs (small-medium enterprises) to get the full benefit of the Katoch Committee report on APIs. In fact, it is the SMEs that are the backbone of the pharma industry manufacturing landscape and therefore they cannot be ignored", said Dr. Subhash C Mandal, assistant director, Directorate of Drugs Control, government of West Bengal and president, Indian Pharmaceutical Association Bengal Branch.
The API micro small and medium enterprises (MSMEs) continue to reel under a fund crunch to expand operations. This is primarily because of the government policies that only encouraged import of APIs and intermediates from China. We were unable to go for backward integration because of our laws and pollution control norms in the country. There is a serious lack of coordination between the ministry of commerce and the ministry of environment & forest with regard to pollution control norms. The Katoch Committee report fails to address these issues. The stark reality is that large API units with a turnover of Rs.3,000 crore do not find it difficult to invest around Rs.3 crore for pollution control systems for zero discharge and water treatment. But in the case of MSMEs, the situation is tough to even sustain production operations, said Palrecha.
Recently the Indian Pharmaceutical Association had communicated to the Union government that while it insisted on the speedy execution of Katoch Committee report, it has also emphasized on assistance to brownfield projects and bulk drugs manufactured through intermediates that are not imported among others requirements.
Thrust on quality
Minister of Chemicals and Fertilizers Ananth Kumar had pointed that when Indian pharma accounted for every third tablet exported to global markets, its high quality contents were for prime importance. India has been exporting to all the 200 countries in the world and accounted for the highest USFDA audited plants.
Further, the minister propagated the maxim of 3As: authenticity, availability and affordability for the pharma industry to continue to strive to make a mark in the global and national arena. Pharma industry had a big role to play in the area of health security, by following the rule of 3Ds: drug discovery, bulk drugs and medical devices.
The pharma sector will now need to move towards new engineering than re-engineering of drugs, work to bring down imports of bulk drugs from the current 60 per cent and adopt the concept of clusters and parks to bring down cost of product of medical devices by 30 per cent. Only if these sectors were brought under one roof, they could maximise the advantage of effluent treatment plants and power cost to save on manufacturing expenses, noted Minister Kumar.
Karnataka initiatives
Sunil Attavar, president, Karnataka Drugs and Pharmaceutical Manufacturers Association and managing director, Group Pharmaceutical Ltd, said that the major development for the state industry is that its pharmaceutical policy which now comes under the state directorate of industries and commerce is expected to incorporate certain needs of the industry. With the government identifying Mysuru, Hassan and Mangaluru for the Pharma Park, events like the just concluded India Pharma 2016 and the Invest in Karnataka 2016 meet held early this year were considered as ideal platforms to attract promising investors to set up facilities in the state.
Moreover the Karnataka government has also stated that it was looking at Yadgir district for bulk drug production and another location which is around 60-70 kilometres away from Bengaluru for formulation manufacture. These infrastructure development initiatives together with the state’s access to talent pool would surely bring Karnataka to the limelight, said Attarvar.
Outlook positive for API segment
The highly profitable biological API segment is experiencing positive spikes driven by an interest evinced by the Big Pharma. Similarly oncology API comprising of high potency active pharmaceutical ingredients (HPAPIs) are expected to be a major growth drivers worldwide. There has also been a paradigm shift in the use of innovative drugs to that of low-cost API drugs after the economic recession, thereby causing a positive impact on the overall growth of the API market.
Furthermore, the API scenario is anticipated to show further traction in response to the evolving regulations in the markets of North America and Europe. Consequently, the gear for growth opportunity in API manufacturing segment is shifting from local markets to the second in-line emerging markets of India and China.
Manufacturers adopting novel tech
In order to keep abreast with these changes, API manufacturers are adopting novel technologies to reduce the processing time in order to yield more. The HPAPI compounds are highly effective due to the targeted therapy. Hence, its application for cancers is a major driver. The market of North America is the largest and accounts for major share followed by Europe. But Asia is growing at a higher CAGR as compared to North America & Europe.
Indian pharma industry sees this as an opportunity as the country is known for its economical pricing and expertise supported by the large plants which have global regulatory compliance, stated industry observers.