North India which had proved to be a prime location for in-house and contract manufacture for pharma companies in the country is now facing a problem of plenty. Pharma industry and consultants are now cautiously optimistic about the prospects of this region.
On the one hand there is a speculation over the survival of small units in the region, on the other there are worries over lenient approvals for issuing drug licenses which is leading to low quality of production practices. There is also a concern of adequate skill availability as most of the personnel are poached from the existing units . Thus the region accounts for high levels of attrition, said an industry observer.
The multiple tax benefits offered by the governments in Himachal Pradesh and Uttarakhand had attracted big pharma companies to expand their base in the north region. However, as the excise benefits in north have gone down, majority of the pharma companies have started shifting their base to north-east region that offers full exemption from income tax and excise duty, apart from a 30 per cent subsidy on investment in plant and machinery, together with interest subsidy of three per cent on capital loan and a reimbursement of 100 per cent insurance premium under ‘North East Industrial and Investment Promotion Policy (NEIIPP), 2007, said Dheeraj Aggarwal, CFO, Venus Remedies Ltd.
The region came to limelight after the Union government in 2005 identified excise free zones which saw an influx of companies towards the region to set up production bases at Baddi in Himachal Pradesh, Uttaranchal, Sikkim and Jammu & Kashmir. Owing to the tax breaks and other incentives, pharma companies had flocked to set up their world class manufacturing units in these locations.
The MRP-based excise duty was fixed at 16 per cent in 2005 which was later reduced to eight per cent in 2008 which brought about a level playing field between plants in these areas and outside. In 2012, it was reported that around 40 per cent of the drugs manufactured in the country are from here. The reduction in the excise duty benefit has led the pharma companies to lobby for sops, tax holidays, weighted deduction for in-house R&D increasing from 200 per cent to 300 per cent from the Union Budget 2013-14 .
“In the past five years, the North Indian pharma emerged as a powerhouse of pharma research and development facilitated by the initiatives of over 800 medical and pharma companies like Cipla, Venus Remedies, Ranbaxy Laboratories, Jubilant Organosys, Surya Pharma Nectar Lifesciences, Panacea Biotec, Ind-Swift, Fresenius Kabi Oncology, the erstwhile Dabur Pharma and so on,” said Aggarwal .
Presently the large pharma companies are focusing on emerging market to support top line growth. Baddi is still having maximum share among excise free zone in terms of production. All small and medium sized units doing contract manufacturing have strong presence in Baddi, said SM Mudda, executive director- technical & operations, Micro Labs Ltd and the chairman, Regulatory Affairs, Sub Committee, Indian Drug Manufacturers Association (IDMA).
Companies from Karnataka which have invested here are Bal Pharma and Micro Labs. While Bal Pharma started production at Uttaranchal in 2009, Micro Labs commenced manufacture in 2007 at Baddi and been maximizing the capacities.
"We have put on hold the USFDA and MHRA audits because of the current competitive environment. Our game plan for the present is to use the current capacity to cater to the needs of non-regulated regions globally and domestic markets . However, we have proposed for an ANVISA audit after which we will take on other clearances", says Shailesh Siroya, managing director, Bal Pharma.
For the Rs. 1750 crore Micro Labs, Baddi plant has been designed to regulatory standards and the systems. The facility was built to cater the needs of domestic market for solid dosage form covering tablets & capsules. It is designed to handle multi product, producing anti-diabetics, CVS, CNS, anxiolytics and general category drugs.
"The production is always under the supervision of dedicated, key and experienced personnel who have been with us from long time and have handled these product at earlier locations at Hosur, Bengaluru and Puducherry,” said Mudda.
As part of a forward looking strategy, Micro Labs invested in Sikkim too. “Our Sikkim project was set up at an investment of Rs 180 crore and keeping in line with the philosophy of the company is designed to meet the global regulatory standards. As evidenced from the standards followed by Baddi plant, the company believes in uniform standards for medicines , be it domestic or for export and it is driven through its Corporate Quality Management System, informed Mudda.
In the wake of the current fluctuation in the global market, we do not see any impact on this facility. In fact, it will be more competitive. Our investment in Baddi is in line with the growth plans of the group, he added.
The excise free zones have seen a large component of contract manufacturing with an increasing number of US companies opting for outsourcing R&D and manufacturing to reduce operating expenses. The special schemes of the Government have helped the home grown entrepreneurs to grow well and reap benefits of the patent expirations. Due to the larger patent expiry in the US and EU, big pharma have started outsourcing contract research and manufacturing to cater to the rising demands for generic drugs over off patent products, said Aggarwal.
Baddi: hub for manufacture and research
Located in the south western part of Solan district in Himachal Pradesh ,Baddi accounts for over half of India's pharmaceutical production, mainly formulations. There are over 300 units including Alembic, Dr. Reddy Lab, Alkem, Mankind, Torrent, Lupin, Cadila, Indswift Lab, Unichem, Morepen, Klitch, Ranbaxy, Nector, Surya, Cachet, Indchemie, Galpha among others.
Venus Remedies
Venus Remedies Ltd, the Haryana-based company is one among the 10 leading fixed-dosage injectable manufacturers in the world which has set up its R&D centre and production site at Baddi.
The Baddi unit is engaged in production of small volume parenterals, catering to the super specialty segments besides complex and novel formulations for oncology injections, lyophilized products in the pre-filled syringes along with cephalosphorins and others. The key brands like Doxol, Paxol, Citabol, Epirol, Ronem, Immunox, Pimcef, Fejet IV, Parin-E, Vanconex, Dobutacard, Sulbactomax, Supime, Tobracef and Pirotum said Aggarwal.
The facility has received over 15 GMPs( good manufacturing practices) from regulated and emerging nations. The warehousing capacity handles 1,900 pallets. The operations are managed by a team of 350 personnel and 52 employees work at Venus Medicine Research Centre, he said.
Micro Labs
Providing an update of the production plant at Baddi, Mudda said that the manufacturing facility started operations in April 2007 to produce tablet & capsule products for the domestic market. The facility received clearances from Local Licensing Authority, Himachal Pradesh, for the manufacture of Oral Solid Dosage form and follows WHO cGMP guidelines . It was certified by the Government of India Central Drugs Standard Control Organization (North Zone) for Certificate Of Pharmaceuticals Products as per WHO Certification Scheme. The unit has also bagged the prestigious IDMA quality excellence Award - year 2009, 2010 ,2011 and 2012 (Gold trophy) besides it was declared the winner of the Gold Award in the pharma sector, large business , by the jury of ET-IMEA 2012 in partnership with Frost & Sullivan.
“Therefore the Micro Labs Baddi plant has displayed a culture of manufacturing excellence, proved utilization of maximum capacity, maintained optimum inventory, identified activities to reduce the wastage of all resources, decrease cost, increase efficiency and ultimately provide greater customer satisfaction. The total manpower at Baddi plant is 275 comprising senior, line function staff and operators,among others. Different team of experts with long experience appraises the plant, personnel and practices. Currently, the facility caters to the domestic market but plans are chalked out to start export to Europe and other regulatory markets from here for the future, said Mudda.
There has been an ongoing expansion to meet the high production requirement for the future. Thus, the granulation area was extended from four granulation suites to five suites with highly automated, time saving, flame-proof granulators-cum-fluid bed-processor. Also the compression suites have been extended from six to nine with biometric access control to have better management on operations. Similarly, packing line is also extended from nine to 11 with automation by adding auto cartonator line with built-in camera system for defect free product. The stores facility has been modified with mobile rack system for maximum utilization of vertical space and fully air conditioned for maintain quality of materials. Quality Control department has been expanded and the number of High-performance liquid chromatography (HPLC’s) increased from six to 12 and Dissolution machine three to six some with auto sampling facility. Effluent Treatment Plant (ETP) plant has been also modernized and expanded to higher capacity. All these developments helped us to enhance quality and productivity, said Mudda.
Emerging trends
The pharmaceutical industry in northern region has long focused on the sales of low-cost generics and contract manufacturing in high volumes. But today, certain pharma companies in north India are breaking the mould by investing in a complete business model with their own line of generics. Apart from this, there is an increased focus on research and development for investing and innovating novel products and export of generics are also on the rise. The industry is witnessing the rise of a more sophisticated and advanced pharma activity in the region. There are high-tech R&D laboratories, looking to develop new lifestyle drugs, USFDA approved facilities, strategic tie-ups and huge investment in expansion of cGMP facilities and adoption of latest technologies, said Aggarwal.
Problems faced in remote locations
There are certain issues that the pharma companies face with having their plants in remote locations. These range from availability of skilled manpower to transportation and logistics.
In remote locations, pharma companies usually face the problem of paucity in skilled manpower. The shortage of skilled professionals covering doctors or PhDs for the research and development impacts drug discovery and innovations. Movement of goods for the purpose of manufacturing, trade and consumption hinders the whole process, thereby affecting time and money, opined Aggarwal.
But Mudda differs on certain issues stating that there are no major issues as overall the government and authorities are helpful.
More sops sought to set-up plants
The government should offer more sops for companies in the northern region. This may include the extension of the tax free regime in the north, better infrastructure like an international airport in the northern region particularly in Chandigarh, tax breaks such as weighted tax reduction for the research and development expenditure, contract manufacturing and so on.
The announcement for tax and central excise concessions by the Government to attract investment for special category states have played a vital role in developing the northern and north-eastern pharma industry. Moreover, the infrastructure development in this region like roads, power supply, telecom and so on is good enough to encourage pharma operations. So the government must ensure the regulatory improvements for the enforcement of quality control, pointed out Aggarwal.