Navigating the shift from low-cost to highest value

As we wind up another year and mark Express Pharma’s 29th anniversary, let us review the government’s expectations from the life science segment, which are both aspirational and inspirational.

At the recent CII 5th Life Sciences Summit 2023, Arunish Chawla, Secretary, Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers, said, “India has the potential to grow 3-4 times in value by achieving a shift from 10 per cent share of Pharma and MedTech in the manufacturing sector in 2020 to a 20 per cent share in 2030.”

The DoP Secretary highlighted the sector’s achievements, such as having the largest number of US FDA approved plants outside the US, exports valued at more than $50 billion to 200 countries, and meeting two-third of the WHO’s global vaccines requirements.

As a reality check, he also listed areas for improvement. Even though there is innovation happening in India, (citing evolution of MedTech, assistive technology, and smart medicine), there is a need for a streamlined innovation strategy and breaking the silos between academia, laboratories, and industry.

The CII statement goes on to recommend a shift from publications to patents. Further, it states that a mechanism for research-oriented sponsored degrees from industry is the need of the hour to foster innovation. India must utilise its technical resources, demographic dividend, skilled manpower, forward-looking government policies, and economies of scale to become a world leader in pharmaceuticals.

Do we have the right policies, infrastructure, and mindset to achieve these aspirations?

On the policy front, a quick look at the 21-page approach paper of the Draft National Pharmaceuticals Policy 2023, currently open for stakeholder comments, lists initiatives started in the past few years. These include setting up the Production Linked Incentives (PLI) scheme, Bulk Drug Parks, the Pharmaceutical Technology Upgradation Assistance (PTUAS) Scheme, the National R&D Policy, and the Promotion of Research and Innovation in Pharma-MedTech (PRIP) Scheme.

More importantly, perhaps acknowledging the less than satisfactory response or implementation of these initiatives, the draft policy admits that ‘the pursuit of Vision 2047 for Amrit Kaal necessitates a reinvigorated, concentrated, and results-driven holistic approach.’

A significant statement is the stated need for India’s pharma manufacturing to shift from the existing mindset of focusing on “exceptional quality at low cost” to “exceptional quality at the highest value.” The draft suggests that this shift would come from a focus on innovation and, at the same time, retain the cost competitiveness and scale of India’s advantage in generics.

The draft policy comes against the backdrop of persistent Good Manufacturing Practices (GMP) violations, and authorities nudging manufacturers to upgrade to the revised Schedule M. In the latest instance, eye drops made by Mumbai-based Kilitch Healthcare India were withdrawn from pharmacies in the US. As per the inspection report, US FDA inspectors observed violations like staff working without proper protective gear in sterile areas and others filing backdated test results to show batches of eye drops were sterile.

Will the implementation of the draft policy live up to the stated vision? No one disputes that all change needs time, effort, and patience to show results.

On the infrastructure front, some relief comes from early predictions that the industry is already on course.

For instance, on the bulk drug side, a CRISIL study of 55 bulk drug makers, which accounted for over 20 per cent of the ~Rs 1.35 lakh crore segment’s revenue last fiscal, offers some cheer. As per the CRISIL study, import dependence is expected to somewhat reduce over the medium term, as domestic production increases gradually because of capital spending under the PLI scheme.

Of the originally envisaged capex commitment of ~Rs 6,500 crore under the PLI scheme for bulk drugs, domestic companies have already committed ~Rs 4,100 crore. Aniket Dani, Director-Research, CRISIL Market Intelligence & Analytics, points out that a large portion of the upcoming capacity is for two key APIs: para-amino-phenol and penicillin, which, once commissioned and ramped up, will be sufficient to almost entirely replace imports for these products. He adds that at the aggregate level, too, new capacities under the PLI scheme will help reduce import dependence for bulk drugs by ~one-fifth.

This month’s edition is also a CPHI India Special edition, and a survey by the organizers confirms that India has the highest confidence in outsourcing growth globally among its pharma professionals. As per a release, executives from India have offered up the most positive outlook for 2024 – with 61 per cent being ‘highly positive’ and a further 37 per cent ‘moderately confident’. This result contrasts with a global average of just 37 per cent ‘highly positive’ and 54 per cent ‘moderate’ in all executives.

Thus, on the mindset front, while we do not lack confidence, we need a large dose of a quality mindset to reduce GMP violations. If we want a global footprint, we must also live up to global regulatory standards.