The bygone year  witnessed dynamic changes all over the world. Change and freedom were  the zeitgeist of the year. Right from the Arab Springs ,Occupy Wall Street to the  crusades of Anna Hazare, this spirit of change was reflected in many parts of the world and in many spheres of activity. Thus as we  stepped  into the new year, we see a  world with a  changed  gestalt of life. As Europe and America were pole-axed by the economic funk, Asia emerged as a vaulting David pitted against  a wobbling Goliath.

Perhaps the changes had its echo in pharma sector also.  The epilogue of the last years' pharma script had  a positive ending with the emergence of the new   drug pricing policy. Nearly after 12 years, Indian pharmaceutical industry will be  having a new drug pricing policy in the current year.  And the prognosis is quite promising for the coming years.

The new draft pricing policy  is all set to give  a big boost to the country's ailing bulk drug sector. It is almost after 16 years, the government is mulling to take  out the bulk drugs from the purview of price control. The price control in the API sector is one of  the key reasons for the discontinuation of production of several essential drugs in the country during the last 10 years.  This has also led to large-scale import of cheap and low quality APIs from China. Now, the proposal to do away with the price control of bulk drugs and fixing prices of formulations on the basis of market prices of bulk drugs in the proposed pricing policy will be a major relief to the entire drug industry.

In this context it is pertinent to recall that till the ‘60s, medicines were imported and the pharma industry was dominated by foreign companies. Today  the complexion of the industry is distinctly Indian, and India has acquired a dominant position in the pharmaceutical sector. From depending on importers of finished formulations from the West, India has emerged as  one of the leading global players in the manufacture of  both APIs and formulations. It is now 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.

As API is the most critical component of any pharmaceutical product , API manufacturing is the key growth driver of the  pharmaceutical industry. Indian API industry has steadily gained mojo on account of its strengths in chemistry, quality of products and the global scale of operations. Globally, India ranks  fifth in terms of API manufacturing having over 3,000 API manufacturers. API exports are expected to witness a robust growth in the coming years, and are likely to reach US$12.75 billion by 2012, according to some estimates.  

The growth has been phenomenal and India is today recognized as one of the leading players in the manufacture of generics – both APIs and formulations. India 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.

India has more than 250 FDA-approved plants – the largest numbers of such plants outside the US in addition to approximate 90 UK MHRA-approved plants. As rising healthcare costs have forced the western nations  to look at alternative destinations,  APIs and formulations from India are seen as an ideal option for their affordability and quality. Moreover several blockbuster drugs 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 pharmaceutical companies have also invested significantly in capacity and increasingly gained recognition by raising their standards and quality, as well as general compliance which are   in tune with the international needs.

Indian  manufacturers maintain high standards in purity, stability and international safety in production and supply of APIs in international market and pass through stringent assessment by regulatory authorities in those importing countries. The biggest advantage with Indian manufacturers is global quality standards at an affordable cost due to the stringent requirements of the Indian regulatory system.

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.

Indian players are also partnering with global innovator pharma companies to manufacture complex APIs for innovative products to enable speed to market these

formulations. This is an outcome of growing reputation of Indian players in terms of conformance to global quality standards and growing trust levels with respect to IP protection.

The seizure in the financial system, reduction in healthcare budgets, high priced prescription drugs, administrative costs, spending on chronic diseases, rise in life expectancy and increase in the ageing population is causing Governments the world over to curtail  healthcare costs. These straitened times are leading them to look for affordable therapeutic alternatives. Indian APIs and formulations are seen as an ideal option for their affordability and quality.

At the same time globally, API manufacturers are under tremendous pressures due to prevailing industry trends and the complexity involved in manufacturing along with stringent regulatory regime.  Hence the success of the API business hinges on conformance to global quality standards, chemistry skills, talent pool and the global scale of operations.

Indian manufacturers have developed capabilities in manufacturing complex products  which have limited suppliers globally. The reputed track record of  Indian companies in supplying quality products have helped them  move up the global pharmaceutical supply chain. As a result there is an increased presence of Indian companies in the synthesis and manufacture of late stage intermediates and APIs.

However everything is not rosy with the API sector. Some of the recent trends in globalization, mainly the competition from China which  has  large volume production plants sponsored by the state, is impacting  API manufacture in India, according to an IDMA position paper .Chinese government offers several benefits to manufacturers, thereby, reducing the overall prices of their products.

Extremely low prices of APIs from China have increased our dependence on China to dangerous levels.  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, the paper points out.

Transaction costs in China are far lower than  in India. For instance, provinces in China provide large areas of land  at  very nominal costs. Though these may   not be possible in India, land cost can be subsidized by central to state governments, who can then  allocate land at low cost to the industry with extended period of repayment, it adds.

For setting up API plants meeting WHO- GMP standard, assured funding at low rates of interest and easy repayment schemes are necessary. The support by the central government for the development of the API industry should be in co-ordination with state financial institutions, the paper points out. It also stresses the need for more Common Effluent Treatment (CETP) facilities  near the industrial estates.
The paper also calls for modifying  the sclerotic environmental laws  taking into account the smaller tonnage of APIs as compared to the chemical industry and also the extent to which the API pollutes the environment.  

In order to  turbo charge this sector,there must be a concerted move by  both central and state governments to focus on the economies of scale, providing land at economical rates, strengthening of R&D & manufacturing and funding , it adds.

Indian API manufacturers have opportunities to lead the world provided they are supported to seize it. A national direction for attaining world leadership  involving all aspects like policy, regulatory issues, market dynamics etc needs to be evolved in order to undergird this sector.

Moreover there is an urgent need for creating and increasing capacities of APIs and basic chemicals, to maintain exports and affordability in domestic health care, it points out.
The API industry requires whole-hearted support from the Government in terms of realistic costing and price controls. Also support from Indian formulators in sourcing their API requirements indigenously will make a lot of difference to the hard hit API manufacturers.

Understanding industry issues and a focused move to resolve them will go a long way in improving the vim and vigour of indigenous pharma companies. With Government’s active support and policy impetus, and removing the roadblocks , there will be no holding back the Indian pharma  industry from achieving  self-sufficiency in APIs and basic chemicals, it says.

With the global pharma industry witnessing numerous challenges in the form of pricing pressures, drying product pipeline and increase in patent expiry, the  Indian pharma industry  has a promising future and the Indian API industry is all set to scale new peaks.