India’s strength in pharmaceutical formulations depends on a high-quality, cost-efficient and reliable supply of the required raw materials and building blocks. Whilst India has strong capabilities in active pharmaceutical ingredients (APIs), the domestic market has become increasingly crowded, marked by a heavy reliance on imports from China. “India had to manufacture the drugs that were remunerative for the country,” explained Jayant Tagore, national president at the Bulk Drug Manufacturers’ Association (BDMA). “Because of the lagging infrastructure, the restrictions on expansion and the lack of needed facilities, the industry experienced a significant cumulative drop over 15 to 20 years. Whatever India dropped, China picked up.”

Manufacturing sectors in countries such as China and Japan have seen a huge amount of government support in recent years in the form of subsidies and other means, far surpassing that of the Indian government for its pharmaceutical industry. Nevertheless, India’s API capabilities are extensive and the scales may be tipping back in the country’s favor in supplying both the national and international markets. Whilst China certainly has a cost advantage across many products, the mass-volume producer is considered by many to be an unreliable supplier, particularly due to unpredictable factory closure, primarily a result of environmental challenges. “There is a plan to de-risk Chinese supply as it can be unreliable, particularly since the government began to try to control the pollution issue, which has caused a lot of plants to close down or relocate their operations, creating an extreme disruption to supplies,” commented Ketan Shah, managing director at Eskay Specialty Chemicals and Eskay Fine Chemicals. “This has resulted in buyers approaching Indian API-producing companies to overcome their dependence on China entirely. Therefore, whilst not yet that significant, there is a small shift towards preference for Indian API producers and stated government intent to indigenize or reduce dependence on all imports for India’s pharmaceutical sector.”

Eskay Specialty Chemicals and Eskay Fine Chemicals are each divisions of SK Group, which also comprises Anuh Pharma and S Kant Healthcare. In APIs, the group’s biggest focuses are antibiotics, steroids and some antimalarials. The group has an extensive global presence, with 55% of revenue from exports.

India would be much better positioned if a robust API network were in place in case of potential supply shortages. Although the Indian government is aware of a need to improve national API capabilities, even branding 2015 the “Year of the API”, so far, not much improvement has been seen, to the frustration of the industry. However, change could be on the horizon. In line with the government’s Make in India initiative, there is greater pressure on companies to procure raw materials from India and many companies anticipate a push in policy intervention amid discussions regarding import restrictions and the establishment of bulk-drug parks.

Environmental challenges remain of primary concern to Indian API manufacturers and a threat to their competitiveness. “The lack of support mainly comes down to environmental issues,” commented Shah. “The government needs to coordinate with the Ministry of Environment and focus on resolving environmental problems so that other steps for improving the industry can fall into place. We need to improve quickly or else we will lose the opportunity to capture the global market. India has become the most regulatory-compliant and cost-effective producer of APIs globally. It is a world leader in ibuprofen and naproxen among many others. With the right investments, the country is moving towards number one in the world by 2022.”

Commenting further on environmental challenges faced by Indian API companies, Dharmesh Shah, chairman and managing director at BDR Pharmaceuticals International, a vertically-integrated pharmaceutical company focusing on life-saving medicines, echoed: “Companies are currently unable to expand because of the drawn-out process of obtaining a personal hearing and permission from the central government. Therefore, the Indian government should create special industrial zones for API-producing companies with a common effluent treatment plan and common utilities. This will help companies become backward-integrated and work through the advanced stages into final production.” 

Indeed, a large number of formulation companies have chosen to venture into API production and vice versa, ensuring greater security of supply and demand. This move will also help to capture more value within the country – a big challenge in India’s pharmaceutical industry, where international companies often add a great deal of value after the products are exported.

A global outlook

At a global level, India’s contribution to the API business is relatively low. There is still a great deal of scope and opportunity, and Indian API manufacturers will likely find their sweet spot in more complex molecules with higher regulatory challenges. However, in order to fulfil the industry’s potential, a more supportive framework is needed. “Currently, it is not easy to set up API manufacturing facilities in appropriate areas as there is a limited scope to set them up within one’s desired timeframe and cost structure,” highlighted Shireesh Ambhaikar, president operations, API, at Wanbury, a company specializing in APIs and domestic formulations. “The gestation periods are very long, and the permit process takes a long time too. A bit more leniency in the regulatory framework would be helpful.”

Wanbury is widely known as a metformin company, producing about 10,000 tons per year and exporting to regulated markets such as the United States. The company also has a strong presence in tramadol and sertraline and plans to expand further into the U.S. and European markets and increase business in South and Central America, while continuing to focus on the domestic market.

As companies globally continue to seek high quality and affordability from their suppliers coupled with consistency of supply, Indian manufacturers are in a favorable position. However, like India, many countries are aiming to increase local production and reduce imports. Certain measures in place must therefore be circumvented. “Since President Trump’s election, many companies are setting up small API facilities in the United States to complete the final step towards a finished product so that it may be labeled as “Made in the USA”,” commented N. R. Munjal, vice chairman and managing director at Ind-Swift Laboratories Ltd and vice chairman at Ind-Swift Ltd. “By having an API plant with last-stage production in the United States, Indian companies are able to divide cost and product availability. Since the API is released in the United States, fewer questions are asked.”

India’s primary focus should be on developing its own national supply chain to cater to the domestic industry, which will require support at a policy level. In the longer-term, a well-established framework will provide self-sufficiency and security of supply, and potentially a leading position in the export markets. 

Building blocks: Intermediates and Excipients

Projected growth in India’s API sector also brings an opportunity for Indian suppliers of intermediates and excipients. However, there are relatively few domestic manufacturers of these formulation ingredients; many downstream companies source their raw materials and feedstocks from China, for example.

India’s largest excipient company is Signet, reaching a turnover of US$177 million in FY 2016. Whilst the company does not manufacture itself, it provides an access point for companies to enter the Indian market through its range of partnerships and today has over 650 customers across 1250 manufacturing locations in India. “We offer a very synergistic approach because it is usually a big challenge for foreign companies to reach so many customers in India,” stated Harish Shah, managing director at Signet. “Unlike other countries that have a few multinational companies dominating the pharmaceutical space, India has a fragmented market with hundreds of companies spread all over the country. As the industry has spread geographically, Signet’s role has become more and more relevant… We have a stellar track record and have never lost any of our current 29 partners.”

Signet is also currently very active in the Middle Eastern markets and Bangladesh and has a growing presence in the Indian biotechnology space.

Also in the excipients business is S. A. Pharmachem, a specialty food and pharmaceutical manufacturing and marketing company supplying innovative specialty ingredients. The company has created a new concept through its product Dicom, a directly compressible granulated excipient premix, which has been submitted for patenting. “Customers are provided with premixes of different excipients for different APIs and different release forms and only requires the customer to purchase the API,” explained Anil Jain, S. A. Pharmachem’s director. “This allows customers to have complete control over the API quality and consistency, which is the heart of the product. By providing customers with the right delivery system, they are guaranteed the release profile that they desire.”

Whilst capacity for the product currently sits at only 4,500 tons per annum, the company is optimistic for the potential scope and scale of Dicom. Indeed, the global excipient market is projected to reach US$8.1 billion by 2021, presenting an opportunity for companies with effective growth strategies in place to capitalize on.

One of the key advantages for India’s oleochemical producers into pharmaceutical applications is their proximity to raw material markets. India’s own large palm oil refining industry provides a strong benefit to local companies using its by-products to manufacture fatty alcohols and other excipients and intermediates. However, whilst India has a notable cost advantage over other parts of the world, companies supplying specialty chemicals and intermediates are still under a great deal of pressure. “Times are tough in the chemicals industry,” noted Nadir Godrej, managing director at Godrej Group, an Indian conglomerate and household name, comprising divisions across consumer goods, real estate, appliances, agriculture and many other areas. “We need to lower costs and move on to more value-added derivatives and specialty chemicals. The focus is now largely on derivatives of basic oleochemicals and the fermentation products, such as sophorolipids. We are also open to opportunities in other fermentation products. We are very hopeful that bio-products (like sophorolipids) will in the medium to long term become a significant business for us. With longer approval processes, these initiatives would take time to fructify. Whilst we are not looking at biosimilars, there could be some pharmaceutical applications.”

Godrej exports its products, including a range of long-chain fatty alcohols, glycerol esters, polyol esters and stearic acids, to over 80 countries worldwide.

India is well placed to develop its strengths across all aspects of the pharmaceutical supply chain, in turn providing a stronger manufacturing base and security of supply to the industry. By focusing on the sector’s building blocks, the industry would be better positioned for growth and increased global competitiveness. Equally, with India’s favorable production costs, export potential for companies in possession of the required accreditation and regulatory approval is immense.