Contract manufacturing sees 20% growth in India

SMEs predicted to be main beneficiaries.

For the basic manufacture of medical products and drugs, India has a far superior edge over nations such as China, Vietnam and Ireland, due to resources including manpower, technically knowledgeable work force, and WHO-GMP approved production premises. A substantial 40% lower cost of operation and production is clearly the highlight for multinationals to consider India for their outsourcing needs.

With the advent of multinational pharmaceutical organisations, and their rapidly growing presence in the country, the concept of contract manufacturing has steadily evolved and quickly adapted, so as 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 step is an incentive for many pharmaceutical organisations to focus on India, as the cost savings could be enormous.

Also it is estimated that patented drugs worth $85 billion in potential annual sales in the US will be off patent during 2014–2020. Price competitiveness and manufacture of these generic drugs in the most cost efficient manner would be the key drivers boosting the prospects of the Indian players as India is known to have the world’s best known low-cost manufacturing centers, with the highest number of U.S. Food and Drug Administration (USFDA) approved manufacturing plants outside the US.

The government is also looking at incentivising the upgradation of Schedule M facilities to WHO GMP complaint units with the help of soft loans, which would lead to additional 1000 units being certified WHO-GMP compliant, further corroborating the manufacturing processes.

Dr P.V. Appaji, Director General, Pharmexcil, highlights that multinational companies in India have switched from manufacturing some products — including brand leaders — to outsourcing them to Indian manufacturers, without compromising their market share.

The rising cost of manufacturing coupled with some ageing plants in Europe reaching the end of their life cycle may present enormous opportunities for India’s contract manufacturing companies, as European companies are also considering to either relocate those units in cost-efficient centres, such as India, or to outsource to India manufacturers.

Furthermore, innovative products introduced during the last 5+ years do not command very large market value; they do not have the blockbuster status enjoyed by earlier products. Research pipelines, which are getting moderately filled, may have only moderate advantage over the existing products and only fraction of them may go on to become real blockbusters. Hence MNCs are now marketing the brand even after the product goes off patent by slashing their brand’s price to match that of generics.

To obtain the maximum mileage from their brands they are looking to outsource their manufacturing to more cost-efficient, centres, such India, and yet retain their quality and brand image. This is a more novel opportunity opening up to contract manufacturing.

This trend is on the rise in the domestic market and India is making an appropriate move by inviting Japan’s pharma industry to locate their units in India, wholly owned or in joint partnership with India-based companies. Japan’s companies are considering India’s offer with keen interest. “Our idea is to promote Indian generics in international markets. Around 20 Japanese companies have already evinced interest in leveraging the contract manufacturing benefits from the US FDA-approved facilities in India,” said Dr P V Appaji.

The contract manufacturing space in India is expected to grow by 17–18% on a compound annual growth rate, as efficiency in manufacturing and maturity of business models will significantly contain the cost of manufacturing.