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Appropriate policies could make India the leading producer of APIs

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Adefemi Adenuga

Acive Pharmaceutical Ingredients (APIs) are a crucial component of drugs regardless of governments’ austerity measures to counter soaring healthcare expenditures. Consequently, API manufacturers, particularly in India – a low-cost market, are poised to continue to reap significant benefits. Currently, the Indian pharma market is ranked third globally in terms of volume and 13th in value terms, accounting for about 10 percent of the world’s production by volume and 1.5 per cent by value. Despite the lower ranking in terms of value, a result of the significantly low prices of medicines in the country, the market is one of the fastest growing in the world. Furthermore, it ranks fourth in terms of production and 17th in terms of export value of bulk products and dosage forms. Although India’s strides to establish itself as a dominant force in the global pharmaceuticals marketplace are noteworthy, certain issues require urgent attention before it can stake its claim as being the global leader in API manufacturing.

Pertinent quality issues

According to India’s Department of Pharmaceuticals, the country currently has over 100 FDA-compliant pharmaceutical manufacturing plants outside the US, the largest number in the world. Furthermore, it has about 793 WHO-GMP-approved pharmaceutical plants and over 153 European Directorate of Quality Medicines (EDQM)-approved plants with cutting-edge technology. Clearly, these statistics aid API manufacturing in India. However, quality problems, which have led to product recalls and import bans being imposed on India-based drug makers such as Ranbaxy and Wockhardt, are a cause for concern in a global industry where trust and quality are crucial. Between 2010 and 2011, exports accounted for about 44 per cent ($8.9 billion) of turnover in the Indian pharma industry. However, this is being threatened by quality problems.

Uncertainty surrounding policies

The proposed ban on Foreign Direct Investment (FDI) by the Indian parliamentary panel has added to the air of uncertainty, which already includes intellectual property (IP) protection and significant price cuts. While a ban on FDI on brownfield (existing) pharma projects in the country would possibly increase domestic participation and keep drug prices low, it could also backfire by weakening local drug makers’ ability to build capabilities. Instead, the Indian government should focus on ‘clustering’, a strategy that encourages FDIs by multinational companies and also fosters rapid technological and infrastructural development – potential gains for India’s API manufacturers.

The way forward

The FDA’s aim to increase its inspection of foreign-based drug manufacturing facilities, a decision aided by new fees levied by the regulatory body on companies with manufacturing facilities outside the US, bodes well for API manufacturers in India. Although margins will possibly be decreased, it should force them to step-up their focus on quality. India-based API manufacturers already have significant technical skills and scale for global success. In addition, there is a growing demand for APIs, be they for branded or generic drugs, worldwide. With the appropriate policies and schemes, such as the government’s recent establishment of national centers for R&D in phytopharmaceuticals and API at Hyderabad, and increased focus on quality, there is no reason why India cannot be the leading producer of APIs.

Adefemi Adenuga, Industry Dynamics Senior Analyst, GlobalData

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