The launch of ‘2015 – Year of Active Pharmaceutical Ingredients’ could mark the beginning of a new chapter in the Indian pharma. Industry leaders share their views, apprehensions and expectations on this move By Usha Sharma
Active pharmaceutical ingredients (API) are defined as building blocks of any pharma product or prescription medicine which make it biologically active. Over the years, from the early 1960s upto the early 1990s, many API fermentation plants as well chemical based API manufacturing units have been forced to shut production as cheaper imports made their existence unviable. India thus has become very dependent on imports, often from a single country, for most basic chemicals, intermediates and APIs for many commonly used medicines.
After many decades of stagnation, there is hope that this situation might finally be addressed. In recognition of the situation, Department of Pharmaceuticals has declared 2015 as the ‘Year of Active Pharmaceutical Ingredients’ and is due to release a new policy focussing on bulk drugs by this month. Awareness programmes and meetings will be subsequently organised throughout this year at key API manufacturing hubs like Hyderabad, Ahmedabad, Mumbai and Bangalore with state ministers and senior officials from the health, industry and environment ministries of these states along with industry stakeholders.
The government has promised to take measures to facilitate the growth of the sector and also interact with the industry on a more regular basis to improve government to business (G2B) interactions and promote better and more coordinated efforts to achieve the objective of the ‘Make in India’ initiative of the Narendra Modi Government, in the contect of the API sector. It is expected that under this initiative, the government will introduce many industry-friendly policies and incentives to give a major thrust to the growth of the bulk drug industry in India in order to make it a formidable force globally.
Speaking about the initiative, Dr VK Subburaj, Secretary, Department of Pharmaceuticals said that there is an urgent need to bring about self-sufficiency in the field of APIs. He said that the government is taking steps to reduce dependence on imports and initiate good policy measures to support the industry.
Market size
Calculating the size and capabilities of API manufacturers in India, BG Barve, Joint Managing Director, Blue Cross Laboratories informs, “India’s API production was valued at approximately $4.70 billion (Rs 29,000 crores) in 2012 and India could become the second largest API producer (after China), provided the government supports industry initiatives and works in close collaboration.” He is a member of Indian Drug Manufacturers’ Association (IDMA) and on a sub-committee of Bulk Drug Manufacturers Association (India) (BDMA). According to him, the number of API manufacturers have reduced to 250 from over 600 a few years ago.
The Indian API manufacturing industry is the third largest in the world after China and the US. According to EXIM (Export-Import) database, India’s API imports have grown at a compound annual growth rate (CAGR) of 18 per cent in the last decade, from a base of about $800 million in 2004 to about $3.4 billion in 2013 across 400 APIs. India depends on China for imports of nearly 80-90 per cent including APIs needed to manufacture Vitamin C, antibiotics — (metronidazole, ofloxacin, livofloxacin). The dependence is much higher in intermediates than APIs, according to Barve.
Expressing his concern over extensive imports of API and bulk drugs from China, Anant R Thakore, Chairman, Pharma Vision 2020 Committee opines, “We are heavily dependent on import of infective bulk drugs (penicillin, cephalosporin’s and macrolides) which are produced through the fermentation route and intermediates for diabetes, pain killers – products like paracetamol.” He concedes that pharma exports from India are more than imports but the concern is that there is heavy dependence on import of pharma intermediates and bulk drugs from a single source, i.e. China.
According to Pharmaceuticals Export promotion Council of India (Pharmexcil) data, around 1,600 manufacturer/ exporters of bulk drugs are their members but there could be around 15 per cent more such manufacturers who are not Pharmexcil members. India’s imports of bulk drugs during financial year 2014 was Rs 19,000 crores.
Tapping the opportunity
Various industry associations like Pharmexcil, IDMA, BDMA etc have sent inputs and suggestions from their member companies to the government in order to help form the bulk drug policy. But will it be out in time to achieve results?
Commenting on the feasibility of the deadline, Dr PV Appaji, Director General, Pharmexcil says, “The government has already carried an exhaustive exercise on this subject. We feel it is possible. We expect a comprehensive policy addressing several issues like, infrastructure development, effluent treatment, continuous power availability at low cost, low cost finance, support for technology development, appropriate import / export policies etc.”
Barve too seems optimistic about the deadline and says, “It should not technically be an issue, as we understand that the Katoch Committee has submitted their study and made many recommendations.”
Policy makers fianlly seem to be awake to the urgency of the situation. Speaking at an industry event, Ananth Kumar, Union Minister of Chemicals and Fertilisers had commented that bulk drugs constitute the backbone of the pharma industry and the sector needs to be incentivised so as to take on the challenge from cheap imports. The minster added that there can be no compromise on the quality, environmental requirements or regulatory necessities but the issues hampering the growth of the industry have to be addressed. He also said that over-dependence on imports from one country for bulk drugs is detrimental to the country’s interest and hence, a paradigm shift is necessary.
DG Shah, Secretary General, Indian Pharmaceutical Alliance (IPA) comments critically on the government’s past record of policies for the pharma industry and says, “A lot of preparatory work has been done to help the government to frame the (bulk drug) policy. It is doable. The policy should at least address the issues that led to increased dependence on the imported materials and encourage domestic production thereof and promote use of indigenous raw materials in the manufacture of APIs.”
However, Nipun Jain, Chief Executive Officer, Pharmachem feels, “The government will not be able to frame a policy on bulk drugs in March 2015. And the API industry technically has the skills and knowledge but need extra support from the government.”
Journey so far
The Indian pharma industry comprising formulation and bulk drugs has clocked a spectacular growth in the last 30 years. Many small bulk drug units which started in the 1980s and 1990s have become large units today. The general view is that Indian entrepreneurs and technocrats are capable and have expertise to manufacture bulk drugs at a competitive international price provided there is a level playing field. China is in a position to offer bulk drugs at low prices as they have the full support of their government by way of subsidised land cost and infrastructure, R&D support, finance at a very low cost, and lax environmental laws. All these factors enable Chinese bulk drug units to sell in India and globally at a low prices. As a consequence, bulk drug manufacturers in India are unable to compete.
Jain agrees with his industry colleagues and says, “The Indian API industry has its own strengths as we are very competitive in some segments but the problem lies with the lack of support from the government or you could say hurdles created by different government agencies.”
When questioned on the capabilities of Indian bulk drug industry in manufacturing and producing expertise, Barve points out, “Many Indian bulk drug manufacturers comply with all international cGMP guidelines such as US FDA, EU etc and it is a known fact that Indian API manufacturers have the highest number of US DMFs (Drug Master Files) and European Directorate for the Quality of Medicines and Healthcare (EDQM) CEP applications. A high percentage of India’s API exports are high value, servicing highly regulated markets like Japan, the US and the EU.”
But having said this, he concedes, “We have to realise that many more manufacturers, especially in the SME segment, have to be helped with soft finance for technological up-gradation, compliance with WHO GMP, US FDA EU standards etc.”
Based on the government’s initiative, BDMA has proposed that a series of meetings are to be conducted with the state governments’ health and industry ministers, senior government officials and stakeholders at Hyderabad in May/ June this year, Ahmedabad (July/ August 2015), Mumbai (September/ October 2015 ) and Bangalore (November/ December 2015).
Listing some other factors which impact the sector, Thakore remarks, “Frequent changes in pricing policy would be counterproductive and restrict long-term growth. The weakening of the formulation industry will have a direct impact on the growth of bulk drug industry. The concept of market-based price control may continue to encourage industry to continue investing in R&D in novel drug delivery system (NDDS) and dosage forms which will also directly help bulk drug units.”
Leading by example
Some states have been more supportive than others. For instance, Maharashtra has been a traditional hub for the pharma industry, both in terms of manufacturing as well as supply of materials. There are around 3,139 pharma units and corporate offices located in the state, with major centres in Mumbai, Thane, Tarapur, Nashik, Aurangabad and Pune. The state also leads in vaccine production and a number of Special Economic Zones (SEZs) have also been notified.
Commenting on the potential of the state of Maharashtra, Barve mentions “Many pharma companies enjoy success largely because their major operations are based in Maharashtra. The government support received by the industry has been substantial and the presence of a pragmatic and stable state. The (state) government has been one of the main reasons the state has managed to remain a principal destination for all pharma companies whether domestic or MNC.”
But things can always be improved further in Maharashtra as well. As Barve suggests, “The newly set up state government has to take a serious look at a few areas that are hindering the further development of the pharma industry in Maharashtra such as the highly pro-labour laws, time-consuming and bureaucratic procedures without adequate facilities, and too many inspections which are expensive for industry in terms of time and money. These can be curtailed and rationalised considerably. Infrastructure and traffic problems are very acute and progress very slow forcing people to think of other states, which are also more economical in terms of property costs/ rentals, cost of living and overall business expenses including wages.”
Maharashtra is definitely a more attractive state for the pharma industry and companies will be eager to come back if it offers attractive benefits. The state government must encourage more cluster-based projects by providing state-of-the-art common facilities to help the SME sector to share costs and enhance quality, productivity and innovative capabilities. and to allow expansion of existing units to meet growing domestic and international demands. It also needs to urgently provide financial and technical support to revive many SSIs that had to close down due to their inability to conform to stringent Schedule M norms, adds Barve.
He suggests, “It is now necessary that the Maharashtra government takes more proactive steps to further the growth of this industry by allowing better incentives, tax sops and investment in talent creation. This will be crucial in order for the industry to sustain its current growth momentum to make sure that the bulk of Indian pharma activity remains within Maharashtra. The Maharashtra government should make all out efforts to encourage the pharma industry to set up manufacturing plants in the state, now that the tax/Excise Duty benefits in states like Himachal Pradesh, Uttarakhand, Jammu and Kashmir etc have been reduced, while at the same time provide tax incentives and subsidies to encourage newer players to enter into the fray and help more established ones to build on their foundations.”
Diligent efforts …
Thakore explains how the SME pharma sector has played a significant role in developing and shaping India’s stature. Many small volumes life saving drugs are produced by SMEs, which are thus cost-effective vital resources of skill, knowledge and employment and have helped reduce prices and increase rural penetration. The irony is that after playing an important role, these units are today fighting for survival. Given this reality, Thakore feels, “There is a need to upgrade at least 250 units to US FDA / EDQM / TGA and other international standards by 2017. Assured funding at low rate of interest and easy repayment schemes are necessary for upgradation / setting up new units.”
Barve explains the state government’s understanding saying, “The government has recognised that the entrepreneur-driven Indian pharma industry is best suited to take our country to the top and hence is in discussions on how to revive the public sector units and how to make better use of their land, manufacturing facilities, personnel etc.”
Information available in the public domain shows that Indian pharma exports have slipped slightly in the last one to two years due to various reasons. Appaji explains, “One of the reasons our exports of bulk drugs is affected is undue internal competition. We wish India’s API producers’ may come together to avoid this undue internal competition and expand the spectrum of bulk drugs availability among themselves.”
“India’s bulk drug manufacturing expertise is amply demonstrated over the years. They have helped the formulation industry with its supplies. India has manufacturing capabilities of almost every therapeutic category. Presently, the industry requires assistance in creating huge capacities to compete at international levels and also to help the domestic industry to balance its healthcare expenditure,” points out Appaji.
But is the Indian bulk drug industry capable of making the best use of such a policy push? Shah replies, “We have the capability, but not the requisite infrastructure to be competitive.”
… but impact still distant
The industry faces many challenges and expects a lot from the Narendra Modi government. Highlighting the industry’s concerns, Thakore elaborates, “We stress that Indian manufacturers were at disadvantage on many fronts; from land to cost of money, utility and services. India’s dependence on pharma intermediates and bulk drug can be addressed and India’s bulk drug industry can manufacture most intermediates and bulk drugs at competitive prices once issues raised by the IDMA are addressed. Long-term policy for growth of pharma industry should address not only the requirement of large capital intensive plants for manufacturing high volume intermediates and APIs but also small volume intermediates and APIs which are also life saving and important.”
Thakore notes down his expectations/ recommendations that if the government needs to provide support on some key areas and factors for the industry’s future growth and development: it needs to work on areas such as revival of PSUs, land, finance / banking / working capital, utilities and services /environmental issues and R&D. All eyes are now on the government to deliver on this latest promise.
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