Resonance Laboratories Pvt. Ltd., a bulk drug and speciality chemicals major is now working on some niche classical old molecules, which are essentially drug intermediaries. The Bangalore-based company is headed by Dr K N Subbaswami, who is also the president of the Karnataka Drugs & Pharmaceutical Manufacturers' Association (KDPMA). Dr. Subbaswami did his PhD in chemical technology from UDCT and National Chemical Lab in Pune and did his post doctorial in the US. After he returned to India, he worked at the erstwhile Astra IDL (now AstraZeneca Pharma India and later SmithKline & French (now GlaxoSmithKline Beecham) and was responsible in setting up the production facilities.

In a tête-à-tête with Nandita Vijay of Pharmabiz.com, Dr. Subbaswami talks at length the problems and prospects of the pharmaceutical sector in India. According to him, Karnataka could be a promising pharma destination, only if the government provides adequate infrastructure support. Excerpts:

What have been the significant investments in Karnataka's pharma sector in the last two years?

There have been no significant investments in Karnataka in the last few years, except for expansion plans by AstraZeneca Research Foundation where its parent company invested $10 million for setting up a dedicated R&D cell, Kemwell Group, a loan licensed manufacturer starting a liquids-sterile preparation plant, and the acquisition of Recon by Zydus Group.

How has the industry performed in the State?

As regards performance, I am happy to note that pharma manufacturers here have done well. Karnataka contributes about 8 percent earnings to the national turnover and 8 percent of export earnings. This speaks for the performance of the units for two reasons: The quality consciousness of the manufacturer, which is because of enforcements implemented in the 80s and 90s. Some of the units are of international standards and many multinational companies utilise these facilities for contract manufacture, which is a key evaluator. Another way to ascertain performance is the availability of technical manpower. The State has the highest number of educational institutions producing maximum number of pharmacy and medical graduates. The level of awareness and product performance is quite high in the State.

What is the future of pharmaceutical industry in Karnataka?

For the future, the State government has to take a lead to improve investments. What has happened today is that, in our enthusiasm for IT and to some extent biotechnology, every body wants to run behind what is in the limelight worldwide. But if we want to operate with a vision, I would say that biotechnology, which is the buzzword today, must be integrated with pharmaceutical business. Biotechnology (BT) will not be able to survive without the support of pharmaceuticals unlike IT, which can operate on a stand-alone-basis. It is not practical for a biotechnology company to take up research, which is a capital-intensive exercise that takes time to bear fruits.

Do you think there is a lull in the Karnataka pharma sector?

The lull experienced in Karnataka is more in terms of investments and not performance. While the Indian pharma sector is growing at 15 percent per annum, Karnataka has managed to keep pace with almost the same growth rate. There are around 250 companies in the State and the active performers are only 50 in the small, medium and large sector. Out of these 60 percent are formulation units. Some of the major players are Micro Labs, Astra Zeneca Pharma India, Medreich Sterilabs, Kemwell, KAPL, Bal Pharma, Strides Arcolabs and RL Fine Chemicals. There are only a handful of survivors among the bulk drug units because of the cutthroat competition. There are a number of 'go-betweens' or middlemen who mar the pricing of the products, has ruined the potential to earn in the international market. Karnataka could be a promising pharma destination, only if the government provides adequate infrastructure support. We already have the manpower, but need matching infrastructure support.

Last year, at the opening of the KDPMA office, you mentioned about a Pharma Park. What are the developments?

We did talk about the Pharma Park and the State government had shown some interest. The members of KDPMA had meetings with the related agencies but what came out of those deliberations is that the State government is not keen on having a Pharma Park any where in the vicinity of Bangalore instead the suggested venue was Hassan where the chances of investments bleak. Unless the government is serious about infrastructure, industries cannot function. If IT and BT are encouraged to come up in and around Bangalore, there is no need for pharmaceuticals to be neglected as it is equally a manpower and capital-intensive industry. Bangalore has the infrastructure to support the growth of pharmaceutical sector.

Who in your opinion would be some of the survivors in the post-2005 regime?

To survive in the 2005 regime, it is necessary for two things to happen: Firstly India must focus on the products and processes that will cease to exist from 2005. Secondly, the Central and State governments would have to guarantee IPR (Intellectual Property Rights) and under no circumstances encourage infringement. If this message is conveyed, then I think there will be a rush for investments. As a State if we are able to protect against infringement of a technology properly and value the industry, people will respect the State and invest.

Steps to be taken by the State are that at least in post 2005,they need to safeguard IPR for the industry. The State should recognize the pharmaceutical sector as an intellectually driven industry. In fact, the pharma industry is more intellectually-driven than information technology industry because of the complexities in production, research, development and operations of the plant and the project itself requiring a multidisciplinary approach. This sector requires a team having specialised knowledge for operating a drug unit.

The need of the hour is to create an industrial zone especially for production of formulations within a stone throw of Bangalore where people who are highly qualified are willing to reside and work because more than capital, manpower is important in pharma industry. Therefore their needs must be met in terms of education and infrastructure.

What should be the vision of the Government as regards to the pharmaceutical sector?

There should be a vision that along with food production, pharmaceutical production is required. The future is a little more uncertain as pharmaceuticals is a high-risk industry going by its investments.

India has so long provided a platform for growth of the pharmaceutical sector. Between the bulk industry and formulations unit, the latter is progressing far better than the former. The situation is more of a threat for the bulk drugs industry with stiff competition from China and more recently Taiwan for large volume production. There is a need for new molecules or highly advanced intermediaries otherwise the bulk industry will have a tough time, unlike formulations where these countries are not that advanced. The Drugs Price Control Order (DPCO) has sent the wrong signals. The government needs to take a closer look at the pricing as when we produce a drug at a particular price and sell under DPCO rates, we will be no where.

What about India's strengths in pharma?

India's strengths in pharma are its quality, variety and technical talent. India has done more that its share in producing the most complicated molecules at much lower costs. The investments in plant and infrastructure are much lower than what it is in Europe and US. However abroad, the level of precision and set-up is different. But one thing is that our investments and production is very cost-effective. Many of the units have maintained the global quality standards.

What are the problems faced by the sector?

The main problems I foresee is the lack of R&D support within the industry. We have the capability to produce the latest and most complicated molecules at a fraction of the price. It is therefore my opinion that instead of taking up someone else's technology and product for which we cannot take any credit, India must have brand equity to be able to sell its capabilities to the world. In exports we have faired better now than 10 years ago. The total turnover of the pharmaceutical sector is Rs 18,000 crore of which Rs 8,000 crore is from exports.

Could do give details about your company, Resonance?

Resonance specialises bulk drugs, speciality chemicals and intermediates. The company was initially started in Mumbai where it no longer has a presence. The company was started in Bangalore in 1985 at the Karnataka State Industrial Investment & Development Corporation (KSIIDC) shed in Yehalanka. An investment of around Rs. 8- 10 crore was made its second facility at Doddaballapur on the KIADB (Karnataka Industrial and Area Development Board) land. It has been exporting for over seven years. Currently, the company is working on some niche classical old molecules, which are essentially drug intermediaries. As a company, it gives me a lot of consolation that we have never violated the IPR and have not dealt with any product that comes in the purview of IPR. We are a very development-oriented company. I was a researcher myself and was a development man at Astra.