Report from India

With the $12-billion valued Indian pharmaceutical industry expected to grow at an compound annual growth rate (CAGR) of 16%, the Indian government plans to capitalize on the growth potential in an effort to beat the competition from its Asian counterparts in the generic-drug and API manufacturing market.

Plans to increase pharmaceutical exports

"The idea is to double pharmaceutical exports to $25 billion by 2013–2014,'' says India's Health Minister Ghulam Nabi Azad. The Indian pharmaceutical sector has already emerged as one of the major contributors to the country's overall exports, with earnings rising from a negligible amount in the early 1990s to a value near the $12-billion mark. With generic-drug exports to the United States and Europe likely to increase, Azad says the time has come for India to be recognized as a global pharmaceutical manufacturing leader.

India's Department of Commerce has advised its Pharmaceuticals Export Promotion Council (Pharmexcil) to undertake a Brand Pharma India campaign to improve the sector's global positioning. The campaign will raise awareness of the Indian pharmaceutical-sector success story and acquaint international audiences with India's growing expertise in generic-drug manufacturing. A component of the campaign will focus on improving the global perception of quality standards in India; much attention has been paid to counterfeit drugs in the region of late and the country is working to put an end to such practice.

"We need to establish India firmly as the first choice partner for the entire global pharma fraternity and with regards to the entire spectrum of pharma services. If aggressive growth drivers kick in, the domestic market is primed to reach $74 billion at a CAGR of 20% within no time,'' says P.V. Appaji, executive director of Pharmexcil.

In 2010, India exported $10.3 billion worth of pharmaceutical products, registering 17.5% growth since 2009. By March 2012, exports are likely to record a growth of 19%, says Appaji. India's largest export destination is still the US, followed by the United Kingdom, Germany, South Africa, and Russia. Segment-wise, generic drugs account for 58% of total exports, APIs account for 40%, and traditional medicines account for the remaining 2%.

"We need to aggressively promote export growth of high value products that have a strong domestic manufacturing base. This will be the lynchpin of our overall export growth strategy,'' says Union Minister of Science and Technology and Earth Sciences Vilasrao Deshmukh. He added that, with help from the government, India could easily take a large share of the API market from Europe.

India is currently at par with Europe in terms of the number of type II drug master file (DMF) applications submitted. In the second quarter of 2011, Europe filed 3150 DMFs and India filed 3084 to their respective authorities. "Moreover, the quarter-on-quarter DMF filing rate of India is slightly higher than Europe. The rate is continuously increasing,'' says Tarun Shah of MP Advisors, a specialized healthcare investment advisory firm based in Vadodara, Gujarat.

Glen Saldanha, chairman of Glenmark Pharmaceuticals based in Mumbai, agrees. "Today, many Indian firms have already established themselves as leading API manufacturers and generic players in the US and other western markets. Indian firms have made their presence felt in developed markets and if we continue to do quality work, then gaining market share in these markets should not be difficult. Government impetus is bound to boost the process.''

Incidentally, Glenmark has transitioned from supplying APIs to semi-regulated markets to servicing the regulated markets. The company claims it has the unique distinction of servicing nearly all the leading generic-drug manufacturers in the US.

Already making gains

Generic-drug companies have historically sourced APIs from European manufacturers, explains Y.K. Hamied, chairman of Cipla. He says that several API producers based in China and India are posing a threat to the future of European API manufacturers, particularly those in Italy. He was referring to a January 2012 generics and API intelligence report by Thomson Reuters, which stated that, during the past four years, the number of Italian producers capable of supplying APIs to regulated markets has decreased. The report added that generic-drugs companies' willingness to source APIs from India and China was particularly damaging to their counterparts in Italy.

"The total market share in the world generic API market held by Italy and Spain, which are traditionally the two leading producers of generic APIs, has fallen and is forecast to further decrease. China and India could capitalize,'' says Hamied, who is quick to add that China and India are not taking over the branded API market. "European API producers still score on patent noninfringing process,'' he said.

With pharmaceuticals valued at more than $30 billion set to lose patent protection this year, Indian firms are waiting to grab the opportunity, including by teaming up with competitors in China and Japan.

Asian power

Although the Indian government has set a global export target of $25 billion by 2013–2014, intense competition closer to home as well as outside of Europe could derail the process. In a statement to the Indian Parliament on Dec. 19, 2011, India's Commerce Minister Jyotiraditya Scindia said that Indian pharmaceutical exporters were facing intense competition from China, particularly in the bulk-drugs sector and in formulations.

Double-digit growth propelled Indian bulk-drug exports past $1 billion in 2010, but China continues to hold the lead with bulk-drug exports valued at $6 billion. To close the gap, the Indian government has decided to increase sales to China and Japan.

"China is not the only threat. Japan is the second largest pharmaceutical market in the world, predicted to be worth $87 billion by 2014. The Japanese government is also encouraging generics and expects [that sector] to account for 30% of its market share by 2012. We will have to explore new markets other than the US and Europe to meet the $25 billion export target,'' says N.R. Munjal, president of the Indian Drug Manufacturers' Association.

At the association's golden jubilee celebration held in Mumbai on Jan. 7, 2012, Rajeev Kher, a secretary in the Ministry of Commerce, said that Japan had opened its generic-drug market to the Indian drug industry. "The Indian industry needs to draw a plan based on regulatory mechanisms to tap that market efficiently.'' He added that India is set to enhance its global image at the forthcoming CPhI–Japan conference taking place in March in Tokyo.

Deepak Chander, business director at DSM Anti-Infectives India, is of the opinion that competition need not be labeled a threat. DSM has three plants in China that are manufacturing intermediates and antibiotic APIs, and has sales of $1.5 billion in China. The company has a plant in Toansa, Punjab, as well.

"Big Pharma trusts Indian firms to make the intermediates and APIs for even their most sensitive new products. We should think of this as an opportunity,'' says Chander. Pursuing this course would ensure an accelerated growth path for India, thereby enabling it to break into the top tier of the global pharmaceutical market.

A. Nair is a freelance writer based in Mumbai.