India is one of the three most attractive countries for direct foreign investment. On a visit to CPhI/P-MEC India in Mumbai Hilary Ayshford found out why
No one who has attended a trade show in recent years can have failed to notice the increasing presence of companies from the Indian subcontinent. With sound economic fundamentals and robust legal and accounting systems, the world's largest democracy is now a significant resource for the global pharmaceutical sector in terms of technology, products and services.
Along with China and Thailand, India is one of the three most attractive destinations for direct foreign investment and, according to Smilesh Shah of the Pharmaceutical Export Promotion Council (Pharmexcil), offers a higher return on investment than the other two.
Certainly, India has advantages over some of the other low-cost economies: a large pool of technical skills, scientists of international calibre, a strong English language base and a democratically elected government committed to attracting foreign investors to work with Indian partners. It also boasts the largest number of US FDA-approved facilities outside the US.
growing affluence
There is also a large and increasingly affluent population. There are now 300 million people in the "consuming class", and by 2010 more than 500 million Indians are expected to have an annual household income in excess of US$10,000 in PPP (purchasing power parity) terms. GDP is increasing by 8.5% a year, the domestic market grew by 17% in 2007 and by 2032, India could be among the largest economies in the world.
According to Shah, investment opportunities are at peak levels, and could exceed $500bn across all sectors over the next five years. A quarter of all the Fortune 500 companies have set up r&d operations in India and even Chinese companies are investing there.
One company that is successfully bridging the gap between the US, China and India is family-owned Chemwerth. Established 25 years ago as an API development company, its primary focus is on generics, but it also supplies products for New Drug Applications to companies like Novartis.
Its main supply base is China, but it also sources from India, Europe and the US. It has an FDA-approved lab and r&d facilities in Shanghai, and for the past year, it has been involved in an API manufacturing jv with finished dosage manufacturer Sichuan Credit.
In India it works with Ranbaxy, to whom it sells APIs from China to be used in the manufacture of the final product for export to the US.
However, Chemwerth recognises that "the pie is becoming smaller" and it cannot continue to be merely an API seller. It is therefore becoming ultra special-ised by developing finished dosages and assisting with NDAs.
In the 2006/07 financial year exports of drugs and pharmaceuticals from India were US$6.13bn, representing 5% of total overall exports from India. But not everything in the garden is as rosy as it seems at first sight.
strengthening currency
Although exports are likely to continue to grow apace in dollar terms, the rising value of the rupee is affecting growth measured in the national currency. The Indian government has given additional benefits to nine industry sectors to help reduce the impact of the rupee appreciation, but the pharmaceutical industry is not one of them.
"We fail to understand the rationale for such step-motherly treatment," said Shah. "The pharma industry employs 4.2 million people and deserves full consideration from the government to extend the same benefits that are being extended to other industries."
If there was any hesitation previously on the part of European and US pharma companies to enter into relationships with Indian manufacturers, it was mainly down to doubts about the regulatory status of the industry and particularly the protection afforded to intellectual property.
Regulations follow the industry and its practices and are a reaction to the scenario prevailing in the pharmaceutical industry, according to Dr M. Venkateswarlu, Drug Controller General of India (DCGI).
Between 1947 and 1960, India was totally dependent on imports. There was very little manufacturing - the multinationals started some activity, but this was mainly limited to repacking bulk product.
golden era
He describes the period from 1962 to 1970 as a "golden era" as GMP came into existence in both global and Indian markets. At that time, Indian entrepreneurs took their rightful place in the Indian pharmaceutical industry, while the multinationals also decided to set up manufacturing facilities.
From 1970 to 1990, APIs started to take off, leading to backward integration into chemistry and bulk API manufacture. Formulators contributed to growth, and companies such as Cipla and Ranbaxy came up with novel drugs that enabled them to compete head on with the multinationals. But during this time patent legislation was in place for processes but not for products.
But this gave the country the capability to develop innovative processes to get around existing solutions, for example by reducing the number of synthesis steps, enabling it to compete in a global marketplace.
changing focus
The 1990s saw certain changes in the pharma industry. In particular, there was a realisation that patents had to be respected, culminating in the signing of the International Patent Treaty in 2005. The focus then shifted to drug discovery and research and significant investment took place.
The industry was manufacturing products of international quality and selling them into the Indian market. The ancillary industry sectors supported the move into the global market by, for example, manufacturing pharmaceutical machinery at prices domestic producers could afford. "One of the inherent strengths of the Indian pharma sector is its ability to produce in volume because of the size of the population," Dr Venkateswarlu points out.
Glenmark Pharmaceuticals, one of India's leading research-led, integrated pharma companies, has just reorganised its business into speciality and generics. Both parts of the business have grown rapidly, to the point where they have distinctive needs, skill-sets, objectives and growth imperatives requiring aligned management teams.
As a result of the reorganisation, Glenmark has transferred its generics and API businesses to its subsidiary, Glenmark Generics Limited (GGL), which will handle the development, manufacture and distribution of generic formulations and APIs. It will inherit Glenmark's Goa plant for formulations, the three API plants in India, sales units in the US and UK and the Argentina oncology operations.
The parent company, Glenmark Pharmaceuticals, will continue to manage directly the novel r&d, biologics and branded formulation businesses. The branded business will remain in Glenmark Pharmaceuticals and retain all remaining assets, branded sales groups in India and overseas and all remaining r&d operations related to nces, biologics and brand formulation development .
According to Glenn Saldanha, ceo and managing director of Glenmark Pharmaceuticals, the reorganisation marks the company's transition from an India-centric branded generics player into a global, researched-based, integrated pharma company.
India has also become a favourite destination for outsourcing and contract services, and a favoured destination for clinical trials and formulation development. Today, the CRO business is valued at $300-400m and could reach $2bn within 2-3 years.
The Indian market is fast paced compared with the US, says Colorcon. There is strong pressure to become the fastest to market, resulting in a "different sense of urgency". With production facilities in Pale and Bangladesh, and a manufacturing platform established in Goa in 2003 to produce film coatings and enteric systems, the company produces mainly for the domestic market.
Film coatings and starch are in greatest demand, but novel drug delivery systems, such as timed release, are growing. Combination drugs are also a promising area, especially as a way of remarketing existing formulations. Anticounterfeiting coatings and finishes also have potential.
One of the most significant changes over the past 60 years has been the attitude to quality. In the 1950s and 60s, quality in the early stages of a product was everything, but after experiences of quality failure in the manufacturing stages, the focus extended to systems.
Dr Venkateswarlu acknowledges that there needs to be a move from quality control to quality assurance right through to dispensing and procurement. Standards must also be adapted to meet future trends, such as personalised medicines.
globalisation challenges
Today, India is facing the challenges and the opportunities of globalisation. The question now is how to reassure the global market about the quality of the Indian pharma sector, says the DCGI.
Dr Venkateswarlu believes that the time has come for an autonomous, independent body - a Central Drug Authority. But regulation is a science in itself, he says, and the question is how to monitor, document and police activities.
A number of defining new things are needed. First, QA needs to be enshrined in the regulatory system. Second, consumers need to be better educated and informed about medicines, but at the same time advertising needs to be controlled - widespread illiteracy makes people vulnerable to advertising and this must be carefully monitored.
Third, there must be regulation of the 10,000 manufacturing units. This large number, together with an extensive retail sector, means that there is great difficulty in recalling products should the need arise.
The country has the capability to oversee all the activities required by the international market, including licensing clinical trials, pharmacovigilance to prevent the abuse of habit-forming drugs, and creating regulations to deal with new technologies and changing practices.
"Regulations are always in a dynamic state, depending on how the pharmaceutical industry is moving," said Dr Venkateswarlu. "The ultimate aim is to ensure the patient gets the right quality drug at the right price."