Contract manufacturing in India grows at 20%

SMEs predicted to be main beneficiaries of this growth

Finished generics supplied from India account for 20% of the global generics market
Photo courtesy of India Brand Equity Foundation (IBEF)

The overall pharma contract manufacturing industry in India is growing at 20%, providing opportunities for small and medium enterprises, according to the President of the Indian Drug Manufacturers' Association (IDMA), S V Veerramani.

The current market value is estimated at 50% of domestic production, which roughly translates to US$5.3bn. Multinationals hold a 20–25% stake in the domestic pharmaceutical market.

For the basic manufacture of medical products and drugs, India has a superior edge over China, Vietnam and Ireland, Veerramani says, due to the labour pool, a technically knowledgeable workforce, and WHO-GMP approved production plants. A 40% lower cost of operation and production is also a reason why multinationals are considering India for their outsourcing needs.

With the rapidly growing presence of multinationals in India, the concept of contract manufacturing has steadily evolved and quickly adapted to encompass services such as basic manufacturing of medicinal products, formulation development, stability studies, and various stages of clinical trials. In addition, scale-up of drug syntheses, and late clinical trial studies have also been profitable protocols in this sphere.

The Drug Technical Advisory Board (DTAB) has agreed to grant a waiver to Phase III studies of certain drugs in India, which are from the regulated markets of US and EU. This has been an incentive for many pharmaceutical firms to focus on India, as the cost savings could be enormous.

It is also estimated that patented drugs worth US$85bn in potential annual sales in the US will be off patent during the period 2014–2020. Price competitiveness and the manufacture of these generic drugs in the most cost-efficient manner will therefore be the key drivers boosting the prospects of Indian players, says Veerramani.

With the rapidly growing presence of multinationals in India, the concept of contract manufacturing has steadily evolved

India is also known to have low-cost manufacturing centres, and the highest number of US Food and Drug Administration-approved manufacturing plants outside the US.

The Indian government is looking at incentivising the upgrade of Schedule M facilities to WHO GMP complaint units with the help of soft loans, which would lead to an additional 1,000 units being certified, further corroborating the manufacturing processes.

Dr P V Appaji, Director General of Pharmexcil, says multinational companies in India have stopped manufacturing some of their products and are outsourcing them to Indian firms. Products which are brand leaders in their segments are also outsourced to many Indian companies, yet could retain their market share.

The rising cost of manufacturing and some of the ageing plants in Europe reaching the end of their lifecycle may open up enormous opportunities to India’s companies in contract manufacturing since European companies are also considering either relocating those units to cost efficient centres such as India or outsourcing to manufacturers in India, he says.

Multinationals are looking to outsource their manufacturing to more cost-efficient centres, like India

Dr Appaji says over the last five years or so the innovative products launched have not commanded a high market value, nor are blockbusters as they were formerly. The research pipeline, though now getting moderately filled, may have only moderate advantage over existing products and hence very few of them may go on to become real blockbusters. Hence multinationals are now marketing the brand even after the product goes off-patent and are slashing prices to the level of generics.

To get the maximum mileage out of their brands, multinationals are looking to outsource their manufacturing to more cost-efficient centres, like India, and yet retain their quality and brand image.

This trend is on the rise in the domestic market and India is inviting Japan’s pharma industry to locate their units in the country, either as wholly owned enterprises or in joint partnership with Indian companies.

'Our idea is to promote Indian generics in the international markets. Around 20 Japanese companies have already evinced interest in leveraging the contract manufacturing benefits from the US FDA-approved facilities in India,' says Appaji.

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