Events & Issues

New Delhi, 26 December 2008

Global Economic Crisis

INDIAN PHARMA industry LETHARGIC

By Radhakrishna Rao

Not long back, the buoyant and fast growing Indian pharmaceutical industry had raised hopes of turning the country into a veritable “pharma power house” of the world in the not too distant future. Spurred on by a steady growth in the export of drugs, formulations, vaccines and outsourcing of various services, the pharma sector was justifiably optimistic of making it to the world’s top ten by value in the near future. However, the global economic slow down coupled with a credit crunch prevailing in the Indian market has conspired to slow down the industry’s prospects.

Accordingly, a spokesman of the Indian pharma industry admits that “a perceptible slow down in industrial production and economic growth have been a major causative factor for a decline in our growth projection.” A forecast by Pharmexcil, a Government of India agency that monitors the export volume of drugs and pharmaceutical products reveals that exports are likely to drop by 5 per cent during the current financial year i.e. these will touch Rs 361-billion as against the original projection of Rs 382-billion.

Incidentally, pharma exports account for 6 per cent of the total export from India. However, appreciation of the US green buck against the Rupee has not in any way gone to benefit the Indian pharma exporters. “The depreciation gains are being offset as imports have become more expensive now. India imports its raw materials for manufacturing drugs and pharma products from China and other countries. But the Rupee depreciation has disabled us” reveals an industry spokesman.

The US, which happens to be the world’s largest market for generic drugs accounts for half of India’s total pharma and drugs export. However, the ongoing slow down in the American economy has resulted in a decline in the sale of pharma products and this could in turn exert a negative impact on the volume of pharma products exported to the US.

 “With the new Obama Government, we expect sales to drop further. This means that the bottom line of the Indian companies, which export to the US, will be affected. We expect our global exports to grow by 14-15 per cent during 2008 in comparison to 20 per cent last year” observes the head of Pharma Exports Council of India.  However, there is a silver lining for the pharma industry: in recent years, European countries have emerged as a lucrative alternative market for Indian pharma products and services.

The ongoing global economic melt down has also adversely affected the expansion plans of the pharma sector. For instance, Reliance Pharmaceuticals is mulling a scale down of its planned products portfolio from an initial 75 products to just 25. Earlier, the company had drawn an ambitious and comprehensive plan for an impressive foray into the regulated US and European markets with its high value generics. This apart, industry sources are also worried about a possible decline in “outsourcing”, considered a growth area of the Indian pharma industry,  in this recent financial crisis.

In the meantime, the Indian pharma companies are hopeful of making good the projected loss on the export front through increased sales in the domestic market. The rural hinterland is tipped to be the growth area for their products. Fortunately, all said and done, the Indian drugs and pharmaceutical sector looks at the current slow down as a temporary phase and is quite optimistic of surging ahead with renewed vigour once the crisis blows over.

This can be said, following a major triumph for the industry, wherein Hyderabad-based Dr.Reddy’s Laboratory has announced that Betapharma AG, its wholly-owned subsidiary has been offered eight drug contracts in different regions of Germany. Says its spokesman: “for the eight products offered, we expect a significant increase in volume though at relatively lesser margins”.

Indeed, the global excellence achieved by the Indian pharma industry, including cases such as Dr Reddy’s and Ranbaxy, and the strides made by the research organizations and biotech outfits in developing novel drugs and enzymes are slowly turning India into a major hub for clinical trials of drugs and vaccines developed by the Western pharma giants.

Thus amidst all this, clinical research is one of the most promising growth areas for the Indian pharma sector. As a fallout of a steady increase in outsourcing by western pharma and drug firms, the number of Indian outfits in the area of clinical research has crossed to 100 from less that 10 a few years ago. Not surprisingly then, keen on getting a slice of  the highly lucrative clinical research outsourcing market, many pharma and biotech companies in India are busy setting their house in order and preparing themselves for being world-class clinical research units.

In fact, by all counts there is a growing realization that India would need to strengthen its infrastructure for trial sites and enhance its quality level of clinical trails through ramping up of the operations with a particular focus on training and evaluation of test procedures. As pointed out by Dr.Ramananda Nadig, President, Clinical Research Education and Management Academy (CREMA) “India’s clinical trial industry will require at least 20,000 investigators and over 30,000 managers by 2010”

A fact-filled status report brought out by global consulting firm McKinsey reveals that India has the potential to become the third largest market for pharma products and services in terms of incremental growth, after the US and China. By 2015, this market is expected to assume a size of US$20-billion.

Moreover, with a rapid and sustained expansion of health care services, the demand for new and innovative pharma products and novel therapies is expected to go up by substantial extent. As things stand now, Indian pharma industry is poised to move up the value chain by making transition from reverse engineering to discovery and development of new molecules. India has also emerged as a preferred global supplier of high quality drugs and intermediaries at an affordable price.

In the ultimate analysis, there is no denying the fact that the Indian drugs and pharmaceutical sector has made rapid forays into the global arena, across varying business segments and has clearly shown its ability to play a leadership role in each of these, notwithstanding the global economic crisis. –INFA

 (Copyright, India News and Feature Alliance)