Despite the fact the global pharma is increasingly looking at Asia for Contract Research and Manufacture Services (CRAMS), whether India will be on their radar to outsource needs to be seen, opined industry experts.
The burgeoning South East Asian markets have now proven to be hubs for outsourcing generics and branded formulations, said Gurudatta GG, chief executive officer, Estima Pharma Solutions.
Markets of the future for contract manufacture are Philippines, Vietnam, Korea, Indonesia and Malaysia. China, a leader in active pharmaceutical ingredients manufacture will take a while to enter formulation development. But it is a pity that India has stagnated in contract manufacture forcing global pharma to look beyond India. The expertise of India is not attractive compared to South East Asia and Africa. Although existing contract manufacturing assignments will continue for many companies in the country, it is the new units set up for outsourcing production that would find it difficult to succeed, said the Estima chief.
The companies in South East Asia which have so long produced pharmaceuticals for local and neighbouring markets are now gearing up to build the required expertise to entice global majors for contract manufacture orders. The region is now setting a new direction in growth in pharma outsourcing and is now scouting for competent consultants to trigger many global audits.
Factors driving South East Asia and Africa are extensive government assistance to ensure regular supply of affordable power, availability of land and dependable public service utilities.
With India no longer an attractive contract marketing destination due to its rising labour costs, the West is now increasingly turning to South East Asia and possibly Africa too. In final conversion cost for contract manufacture orders, South East Asia is approximately 20 per cent more advantageous than India.
The South East Asia comprises Cambodia, Laos, Myanmar, Thailand, Vietnam, Philippines, Indonesia and Singapore among others. Korea is part of North or East Asia. Vietnam and Philippines particularly have existing production plants which need to be audited to adhere to US FDA, MHRA and EMA standards. “Here companies are looking for experts to guide and this is where Estima can chip its expertise,” said Gurudatta.
Global pharma majors in the US and UK insist on stringent quality and time line deliveries at affordable costs. So long, India was a hub for contract manufacture as it was recognized for cost-effective human resources, along with 161 US FDA, 90 MHRA, and 1000 WHO-GMP approved production facilities. “But the high cost of human resources has proven to be a serious deterrent and the western world is now more cautious about the costs. They have ascertained that the South East Asia and Africa are a far more reasonable to fit. Estima too views the regions as the growth engines of the future,” he said.
Although industry estimates indicate that outsourcing of activities such as manufacturing and R&D work to India leads to cost-arbitrage of more than 50 per cent when compared to developed countries, the CRAMS is now seen as difficult proposition for Indian pharma companies, said sources.
Contract Research offers huge scope in India, provided we evolve our mindset and strive for excellence. India has its strengths in cost advantage and flexibility. But it will need to improve its competencies to take advantage of the opportunity, said an expert.
India is strong in India’s contract research valued at $1.5 billion and is registering a compound annual growth rate of 12 per cent annually. The leading players in the space are GVK Biosciences, Syngene, a subsidiary of Biocon, Synapse Labs in Pune, TCG Life Sciences , Vimta Labs, Rubicon, STAR part of Strides Arcolab, Neuland Labs and Semler.
However, the industry’s present challenge is to get the pharma products into India within 30 days from its date of manufacture for stability studies as per the regulatory requirements. Now this unfortunately is a big hurdle today due to our present system of getting no objection certificate (NOC) from the Drugs Controller General of India (DCGI) office New Delhi, stated Suresh Khanna, chairman, Stabicon Life Sciences, a contract research provider.
Sources pointed out that the international pharma companies are staying away from India because it is a difficult location to conduct research. It is disheartening to note that India despite its scientific talent and infrastructure is overlooked by the global pharma majors who are serious on pursuing their research projects either in China or Korea. The main reason is that in these two countries, the tailwinds coming in are not just from the pharma companies but from their respective governments which allow them to make a smooth landing and take-off. On the contrary, the policy headwinds stop them from considering India to pursue their research projects.
Indian pharma companies had invested in additional plants in hope of strong order flows from the West. But the global slowdown and changing dynamics of the market, particularly in Europe, led to an over capacity in CRAMS, while margins came under pressure due to slashing in R&D budgets with companies not going for high-value drugs. Some EU nations introduced a tendering process, which led to a decrease in regular off-take from domestic CMOs while the erosion in prices of generics worldwide posed more challenges.
Experts have indicated that the Indian market for CRAMS is estimated at $1.2 billion and growing at 15-20 per cent annually over the earlier estimates to have a growth of over 25 per cent.
Prospects in the contract manufacture have been sluggish reporting fall in growth from 25 per cent to 15 per cent. On the research outsourcing front, the sector registered around 10 per cent growth. Yet pharma consultants are confident that the long-term potential of contract manufacturing would be favourable going by India’s strengths of having the highest number of USFDA plants outside the US along with MHRA, TGA MCC South Africa complaint units. It would give international companies confidence to engage in outsourcing of products. In the area of contract research and clinical trials, there has been a lull following the subdued global economic scenario. Moreover, the recessionary phase has led the global pharma companies to take a relook at saving costs and not off load many projects to India.
The major outsourcing happens at two stages. These are in the drug making process which is the developmental stage and manufacturing stage. The emergence of CRAMS revolves around the fact the global pharma companies wanted to undertake only core activities like R&D and marketing. The non - core areas like chemical synthesis, clinical trials and manufacturing were outsourced from regions like China and India primarily because it was much more cost -effective.