But while identifying such opportunities is not so difficult, tapping them is tougher. For instance, the fact that some consignments of counterfeit medicines were traced to India in the past contributes to a fear in the minds of Japanese patients. In the wake of this situation, the industry has called for unstinting support from the Japanese Government in the form of policy, infrastructure and financial benefits in the form of special incentive schemes etc.
Archana Dubey Mitra Asso. Vice President API & Exports, Bal Pharma Today |
Archana Dubey Mitra, Associate Vice President API and Exports, Bal Pharma stresses, “Today, the pharma industry is moving towards the emerging markets due to less competition and fair good margins compared to the US and Europe. Japan, being one of the highest category regulated market (which is recognised as the second largest in the world), has not been tapped due to its strict regulations, which are now easing out to support Indian players to establish their presence.”
Surinder Raina President – International Mktg., Inventia Healthcare |
Surinder Raina, President —International Marketing, Inventia Healthcare highlights, “The emerging markets are expected to grow each year by 15-16 per cent whereas, markets in the US and EU are going to grow by three to five per cent and one to three per cent respectively. Increase in accessibility and affordability in the emerging markets are the growth drivers in the pharma market, which present huge opportunities for the Indian pharma companies. In case of generics market in the EU and the US, there is a tremendous price pressure and as soon as the number of competitors increases to more than six, there is a fast erosion within the market, which does not leave much earnings for the players. The shifting focus in the emerging markets is going to help improve the bottom line of the companies because most of the emerging markets have a branded generic market, which gives better returns when compared to the generics especially the commodity generics sold in the US and the EU market.”
N R Munjal Vice President cum Mng. Director, Ind-Swift Laboratories |
Enumerating his suggestions, NR Munjal, Vice President cum Managing Director, Ind-Swift Laboratories, who was also elected as the Chairman of Pharmexcil says, “The pharma sector is capital intensive. Besides R&D expenditure, regulatory requirements require huge funds. Establishing a large number of bio-equivalence centres through soft funding would lower the costs of bio-equivalence tests and more registrations / exports can happen from India. All quality investments should be treated at par with R&D to provide incentive to the industry (as cost of quality investments is very high in EU).”
Identifying the opportunities
Recently, IMS released a listing of 17 emerging markets, which together are expected to have 24 per cent market share in the global pharma market in 2014. China falls into the tier-I category followed by India, Russia and Brazil in the tier-II category. The tier-III category consists of countries such as Poland, Argentina, Indonesia, Vietnam, Thailand, Taiwan, Egypt, Romania, South Africa, Turkey, Mexico, Ukraine and Pakistan.
Munjal pointed out that export of drugs and fine chemicals stood at $10.3 billion during 2010-11 with a year-over-year growth of 15.1 per cent. An analysis of the export performance of Indian drugs, pharma and fine chemicals for the last six years (See Table 1: Export performance of Indian drugs, pharma and fine chemicals sector) shows a steady upward track bearing out the potential.
| Table 1: Export performance of Indian drugs, pharma and fine chemicals sector | ||||||
| Year | 2005-06 | 2006-07 | 2007-08 | 2008-09 | 2009-10 | 2010-11 |
| Value in $ (million) | 4994.52 | 5939.75 | 7644.05 | 8802.64 | 8878.27 | 10400.00 |
| Source: Pharmexcil | ||||||
Meanwhile, an analysis of region-wise exports of India’s drugs and fine chemicals for the 2009-10 fiscal reveals that the established markets, North America and the EU still make up the bulk (more than 40 per cent) of exports. (See Table 2: Region-wise exports of India’s drugs and fine chemicals for 2009-10). Experts predict that this will balance out and reverse in the years to come.
| Table 2: Region-wise exports of India’s drugs and fine chemicals for 2009 -10 | ||
| Region | Value (Rs crore) | % of contribution |
| North America | 9888.31 | 24% |
| European Union | 8196.33 | 19% |
| Africa | 6657.17 | 16% |
| Middle East | 3559.99 | 8% |
| LAC | 3274.37 | 8% |
| ASEAN | 2947.67 | 7% |
| CIS | 2497.64 | 6% |
| Asia (including Middle East) | 1909.78 | 5% |
| South Asia | 1724.30 | 4% |
| Other European countries | 664.60 | 2% |
| Oceania | 614.10 | 1% |
| Other America | 99.62 | 0% |
| Unknown | 58.04 | 0% |
| Source: Pharmexcil | ||
Readiness to embark
Tracking these shifting export patterns come under the purview of the Pharmaceuticals Export Promotion Council (Pharmexcil) an autonomous export promotion council (EPC), was set up by the Ministry of Commerce and Industry, Government of India on May 12, 2004. With a focus to take Indian healthcare and pharma products to the global arena, the organisation has taken various initiatives to set up collaborations with associations in other countries.
Some of its recent initiatives include an MoU signed between Drug Information Association, India (DIA) and Pharmexcil with the sole objective of functioning as a forum for quality information exchange leading to better medicines and enhanced health and well being. DIA is a professional association having 18,000 members worldwide who are involved in the discovery, development, regulation, surveillance or marketing of pharma or related products, with its headquarters in the US and offices in Switzerland, Japan, China and India.
Apart from this, an MoU was signed between Pharmexcil, and The Myanmar Pharmaceutical and Medical Equipment Entrepreneurs Association on January 11, 2011 in order to ensure cooperation and to promote the development of pharma trade between India and the Republic of the Union of Myanmar.
But these initiatives with overseas partners will not be enough if the Indian government does not put in place adequate supportive policy. Elaborating Munjal says, “To maintain the leadership of Indian pharma research in frontier areas, initiatives need to be taken up through government supported R&D programmes in order to boost innovation especially in the Micro, Small and Medium Enterprises (MSME) sector. One of the major concerns for SSI and SMEs has been their limitations for upgrading their facilities and to achieve compliances for most regulated markets. Ministry of Commerce is looking into various suggestions and models to support SMEs in their endeavour to export to even highly regulated markets. Further, efforts are on to sensitise banks to provide necessary funding support for exports and R&D.”
Munjal further adds, “Pharmexcil will take up the matter of availing easy financial assistance especially for SMEs for their growth acceleration ensuring that the units are capable to tap the international markets with competency.”
Munjal gives an example of companies incurring huge expenses towards fulfilling statutory requirements in the buyer country including product registration charges. The Indian Government does make this pain somewhat bearable as it currently reimburses 50 per cent of this amount, subject to a ceiling of ` 50 lakh per year for each exporter, under the Market Access Initiatives (MAI) Scheme in accordance with the guidelines set out. Inspite of this, the data of the past six years on product registration reimbursement amounts (See Table 3: Disbursement of reimbursement of product registration charges) shows dips and peaks which could point to the the ebb and flow of Indian pharma exports. Clearly, while the sector has potential, players have been cautious in some years. The heartening fact is that 2010-11 has seen a clear rise over 2009-2010, though it has not yet reach anywhere near the 2008-09 level.
| Table 3: Disbursement of reimbursement of product registration charges | |
| Fiscal year | Disbursement amount (Rs in lakh) |
| 2005-06 | 13.47 |
| 2006-07 | 57.18 |
| 2007-08 | 4.20 |
| 2008-09 | 646.64 |
| 2009-10 | 45.69 |
| 2010-11 | 156.29 |
| Source: Pharmexcil | |
Strategy re-look
The Indian pharma industry needs to focus on regions having high growth potential against the backdrop of the level of international compliances required for export. Since regulatory procedures and achieving compliance for exports is a long drawn process, which normally takes years, it is better to focus on less regulated markets (the pharmerging markets) for the short-term period. Conscious effort towards achieving the compliances required for markets like EU and the US should be taken into account, which is likely to have a high growth potential in terms of value as seen in Table 2, which charts the region-wise exports of India’s drugs and fine chemicals for 2009-10.
Raina says, “As far as global pharma markets for APIs is concerned, the top three markets for APIs are the US, Europe and Asia Pacific. The API market in the Asia-Pacific region witnessed a growth of 6.7 per cent from 2005 – 2010 and is going to see the growth of 9.6 per cent till 2016. The perceptible shift in API manufacturing is being noticed from the western markets to emerging markets like India and China.”
In the Asia Pacific Region, Japan and China enjoy the highest market share for API with 42.8 per cent and 20.8 per cent, respectively. India accounts for 10.3 per cent, while South Korea holds 8.1 per cent market share. To avoid price erosion, which is now seen in the US, Indian manufacturers have started exporting more APIs to Japan. This has also been supported by the prevalent trade deficit and subsequent import of Chinese goods, which rose to $43.5 billion in 2010-11 from $17.5 billion in 2006-07 and exports lagged far behind, up-to just $19.6 billion from $8.3 billion over the five years. The current bilateral agreement Comprehensive Economic Partnership Agreement (CEPA) between India and Japan will also act as a catalyst to boost pharma export growth to Japan. The agreement will ensure access to a highly developed Japanese market for the pharma sector and for the first time ever, Japan has committed to give the same treatment for Indian generics as their domestic industry.
Mitra avers, “The shift will boost Indian pharma companies to re-look at their lost business strategy. Chances of building a brand is still high as these countries operate on branded generic model like India. The industry need to work on better margins specially when expenses of a manufacturing unit along with growing regulatory requirements are too high. Though we have good competition from across the world but our quality, technology and rock solid infrastructure will always be in lead.” Munjal further says, “The need of the hour for India is to create a strategic orbit, where the world would be able to recognise India’s pharma sector as authentic, safe and affordable. Moreover, India needs to be recognised as global pharmacy of the world in the highly competitive market.”
He informs that this image build up is already underway, with Pharmexcil initiating a brand building project in association with India Brand Equity Foundation (IBEF). On a cautioning note, Munjal says, “It is of paramount importance that the brand promotion efforts synergies with all stakeholders and industry contribution in terms of inputs and financial contribution.”
A successful business strategy is when both buyer and seller benefit equally. For example, the Japanese Government is under tremendous pressure due to an ageing population and resultant increasing healthcare cost. Japan currently has only 19 per cent penetration in generics by volume, compared to 68 per cent in case of the US; one reason for the high cost of healthcare in Japan. Even though it is highly challenging to meet the local regulatory requirements, this government push to reduce healthcare cost by increasing generic penetration makes Japan a very attractive market for Indian generic pharma companies.
Experts say similar opportunities, based on evolving demographic and disease profiles exist in South East ASEAN countries, LATAM and CIS where Indian companies already export products in categories spanning NDDS anti-diabetics, GI, CVS and CNS. This shows that Indian pharma companies have made the strategic move from plain vanilla generics to branded generics. Hopefully, with better returns, the industry will evolve to the next level faster.