Indian bulk drug industry: Maintain quality conscience to face competition

To gain long-term advantage, Indian pharmaceutical industry should compete on quality and not on cost

In last few months, there have been many news pertaining to regulatory issues with respect to some of the leading Indian-based pharmaceutical companies. US FDA and UK’s MHRA have issued many warnings to manufacturing facilities in India. While causes of these quality issues are being looked into, some experts point fingers at raw materials being used to produce drug formulations. It is a well-known fact that Indian companies import intermediates required for making active pharmaceutical ingredients (APIs) from China to become cost-competitive.

To control the menace of low-quality imports, it was reported that the Indian drug regulator may conduct routine inspections at Chinese manufacturing facilities, which supply APIs to Indian pharma companies. But the question is will this move curb imports? “It definitely will impact the supply. Our Government must have a dialogue with their Chinese counterparts to streamline their regulatory procedures. There have also been instances in the past of our DCG(I) having to ban imports of raw materials from some Chinese companies for supplying products without having the mandatory drug manufacturing standards,” said Daara B Patel, Secretary-General, Indian Drug Manufacturers’ Association.

Quality first!
Number of drugs coming out of patent are increasing, so are the quality standards of developed countries. Hence, companies need to work closely with suppliers who can help them meet the regulatory requirements and are also quality conscious. Quality can go beyond the product being manufactured, it can also encompass the sustainability strategy of the pharma companies.

Krishna Prasad, Managing Director, Granules India, a manufacturer of pharmaceutical compounds in granular form, commented, “Quality standards are becoming more stringent and this is a way for Indian API manufacturers to lock in business for the long-term instead of spot business. Also, going forward, customers in the international market will focus more on EHS so Indian pharma should use this opportunity to distinguish itself from Chinese pharma by investing in green technologies and bolstering safety practices. There will always be a Chinese manufacturer who is willing to undercut the competition on price so Indian pharma needs to focus on other ways to add value to the customer beyond price.”

If Indian pharma industry wants to be a leader in APIs, Patel believes that the plants should meet not only Schedule M standard, but should also meet WHO- GMP standard. He added, “For this, assured funding at low rate of interest and easy repayment schemes are necessary for upgradation or setting up new units. Our government is very much aware this and is initiating a few schemes. This support by Central Government for the development of the API industry should be in co-ordination with state financial institutions.”

Restricting imports
Indian API manufacturers can emerge as one of the leading exporters of APIs and intermediates, and recover lost ground to other competitors provided they are adhere to right quality and economies-of-scale. Industry has been urging government for extending support to create and increase capacities of APIs and basic chemicals to maintain its exports and affordability in domestic health care.

Patel said, “We have suggested various other solutions like reducing the Customs Duty on intermediates so that the API manufacturers could compete with China in providing APIs at far lower costs. Above all, if the industry has to survive and grow against the onslaught of China, a national direction for attaining world leadership needs to be urgently put in place involving all aspects like policy, regulatory issues, market dynamics etc.”

It is estimated that India is the third largest API producers in the world after China and Italy. However, by end 2015, India is expected to be the second largest producer after China. In general, India has larger export exposure to regulated markets such as US, UK, etc as its quality standards are considered to be high. And to consolidate its global position, India will have to maintain its quality standards.

Dr R B Smarta, Founder and Managing Director, Interlink Marketing Consultancy, agreed, “Certain steps need to be taken by India to sustain its growth level. Only then will India be able to protect the interest of the country as well as its API manufacturing industry. India has to frame import laws in such a way that it works in favour of our country. India can draw inspiration from the regulated markets which have stringent, water-tight import laws in place. Stopping imports is not an option that can be considered but having the right import laws in place would put India on the growth path.”

Be quality competitive
While China has been known for producing low-value, large-volume intermediates and APIs, Indian companies are specialised in manufacturing low-value, large-volume intermediates and APIs. Hence, it is imperative for bulk drug companies to tap niche segments instead of competing on price with Chinese firm. “Indian pharma has to figure out what market they want to go after. Not all components of the market are worth chasing because certain customers only care about price. Instead of focusing on having the largest market share, companies need to focus on maximising profits and buildings sustainable revenue,” said Prasad.