INDIAN PHARMACEUTICAL INDUSTRY;CHANGING DYNAMICS_Essay by DHANALAKSHMI M
- India’s
cost of production is nearly 33 per cent lower than that of the US
- Labour
costs are 50–55 per cent cheaper than in Western countries. The cost of
setting up a production plant in India is 40 per cent lower than in
Western countries
- Cost-efficiency
continues to create opportunities for Indian companies in emerging markets
& Africa
- India
has a skilled workforce as well as high managerial & technical
competence in comparison to its peers in Asia
- India
has the 2nd largest number of USFDA-approved manufacturing plants outside
the US
- India
has 2,633 FDA-approved drug products. India has over 546 USFDA-approved
company sites, the highest number outside the US
The
divisions in the Indian Pharmaceutical Industry are as follows:
A. API Manufacturers / Traders ( Bulk Drugs)
B. Formulation Manufacturers
C.
Contract Research and Manufacturing Services Companies
D. Biotechnology Companies
Bulk drug exports, constituting 80-90% of
total bulk drugs production, accounted for about 33% of total sales in the
pharmaceutical industry in 2013-14. The share of bulk drugs is higher in India
as compared with developed countries, where bulk drugs are primarily
manufactured for domestic consumption.
API Manufacturers / Traders (Bulk
Drugs)
The Bulk drug exports : 2008-09 :CAGR of about
18% between
2013-14 :to USD
11.9 billion
Of
this, exports to regulated markets, which had a 49% share, grew at a CAGR of
about 21% over the past 5 years. In exports to regulated markets, exports of
on-patent drugs are estimated to have surged at a 29% CAGR (on a low base),
while that of off-patent drugs maintained a growth rate of 15% over the past 5
years upto 2013-14.
API manufacturing to cut costs.
Major global innovators will not only extend
existing deals with Indian players but will also look to increase sourcing of
bulk drugs from Indian companies. Indian bulk drug exports have shifted in
favour of regulated markets. This is evident from the increase in the share of
these markets to about 49% in 2013-14 from about 43% in 2008-09.
The share of regulated markets in
Indian bulk drug exports to rise to about 51% by 2018-19, driven by Indian
manufacturers' better process chemistry skills, low manufacturing costs, a
higher number of drug master filings (DMFs), the expected expansion of key
generic markets and cost reduction initiatives by large global companies.
Formulation Manufacturers
The slowdown was mainly on account
of import alerts on Indian companies, slowdown of growth in Europe and
increased competition during the year. In the overall regulated markets,
exports to the US grew at about 11% to USD 3.4 billion, lower than the close to
22% growth seen last year. On the other hand, exports to the European Union
grew by just about 6% during the year to USD 1.5 billion in exports. This was
another consecutive year of slow growth, with 10% growth ~ seen in 2012-13.
Region-wise, the European Union market recorded an almost-flat growth in the
leading markets of the UK, Germany, the Netherlands, Belgium and Spain during
the year. Exports to semi-regulated markets grew steadily by an estimated 12%
y-o-y in 2013-14 led by exports to the African and Asian continent during the
year. Exports to Asia and Africa grew by almost 17% to reach close to USD 4.5
billion in 2013-14 (about 78% of the total semi-regulated market exports),
mainly led by growth in exports to the top 30 destinations out of the roughly
124 export destinations in these two continents put together.
Contract Research and Manufacturing
Services (CRAMS)
Contract Research and Manufacturing
Services (CRAMS) is one of the fastest growing segments in the pharmaceutical
and biotechnology industry. It pertains to outsourcing research services/ manufacturing
products to low-cost providers with world class standards, in line with
international regulatory norms such as USFDA, Australian-TGA, UKMHRA, and EMEA.
Pharmaceutical multinationals have traditionally been outsourcing manufacture
of intermediates, API's and formulations.
Indian CRAMS companies are the most preferred
players for global pharmaceutical companies due to their product mix being
skewed towards high-end research services, biologics and complex technology
services, at low cost. India offers an abundant pool of professionals in the
area of drug development and research chemistry with large number of
pharmacists and chemistry post graduates qualifying every year. According to
the Indian Government, by 2020, India would be one of the top five
pharmaceutical innovation hubs with one out of every five to ten drugs
discovered in India. CRAMS as a segment constitutes of Contract Research
Organization (CRO) & Contract Manufacturing Organization (CMO), of which
CMO constitutes a major portion (>60%) of the overall business. A Contract
Research Organization (CRO) is an organization that provides support to the
Pharmaceutical Industry, Biotechnology and Medical Device Industries in the
form of Research Services Outsourcing on a contract basis.
A CRO may provide such services as
biopharmaceutical development, biologic assay development, commercialization,
pre-clinical development, clinical research, clinical trials management, and
Pharma co-vigilance. CROs specifically provide clinical-study and clinical-trial
support for drugs and/or medical devices. CROs range from large, international
full-service organizations to small, niche specialty groups. CROs that
specialize in clinical trials services can offer their clients the expertise of
moving a new drug or device from its conception to Food and Drug
Administration/European Medicines Agency marketing approval, without the drug
sponsor having to maintain a staff for these services.
Significance of CRAMS
With
an increasing focus on managing costs and shortening time to market, many
pharmaceutical companies now outsource their clinical trials to CROs. CROs are
hired by pharmaceuticals companies and medical-device makers to provide
research services such as overseeing discovery, preclinical and clinical testing.
Biotechnology
refers to the application of scientific techniques using living organisms or
their parts to make or modify plants, animals, micro organisms or environment
to enhance their performance and values. In the recent years biotechnology has
emerged as a major focal point for the developed as well as the developing
nations. It has a greater vision to sectors such as human health, agriculture
and environmental science for the future. The Biotech Industry comprising Bio-Pharmaceuticals, Bio-Services, Bio-
Agriculture, Bio-Industrial and BioInformatics is among the country's
rising sector and is growing at CAGR of 20%.
The market size of this sector was
estimated at around USD 4 billion in 2013-14. India is among the top 12 biotech
destinations in the world and ranks second in Asia, after China. The Indian
biotechnology industry has evolved over the last three decades and the sector's
revenue has rapidly increased from USD 300 million in 2002-03 to USD 4 billion
in 2013-14. The Indian Biotechnology sector is presently divided into five
segments based on the products and services offered. These segments are
Bio-Pharmaceuticals, Bio-Services, Bio- Agriculture, Bio-Industrial and
BioInformatics.
Bio-Pharma is the largest sector contributing
to 62% of the total revenue followed by BioServices, Bio-Agri and
Bio-Industrial sectors which contribute 18%, 15% and 4% respectively.
Bio-Informatics is still at a nascent stage contributing to only 1% of the
total revenue. Bio-Pharmaceuticals This constitutes the largest segment of the
Indian biotech industry both in terms of domestic and export revenues. In
2013-14, bio-pharma generated revenues of USD 2.5 billion comprising
approximately 62% of the domestic biotech industry. The Bio-Pharma sector
includes vaccines, therapeutics and diagnostics. The highest growth was
witnessed in the year 2003-04 when the growth crossed the 50% mark. The growth
rate dwindled thereafter reaching a low of 12% in 2009-10. However in 2013-14,
the growth saw positive signs and again increased to 18%.
Bio-Services
Bioservices is the second largest
sector of the Indian Biotechnology industry with revenues amounting to USD 600
million. The growth rate of this segment could be attributed to the fact that
India has become a popular destination for clinical trial, contract research
and manufacturing activities. The sector witnessed a growth of 16% in 2013-14.
The highest growth of 104% was witnessed in the year 2003-04.
Indian Biotechnology
The
global biotechnology industry is undergoing a transformation, thereby creating
enabling factors that can lead to the growth of the Indian Biotech Industry. Increasing
cost of bringing a new drug to the market: India can play a key role in
reducing cost and time to market for new drug development through outsourcing
of various components of the drug ü development process Top pharma companies
spend a large part of their research for in licensing new modules: There is an
opportunity for R&D focused Indian biotech companies to enter into such
alliances through collaborative development projects Inflammatory &
Infectious disease segment high on agenda: In the Indian context these are the
two of the strongest disease segments with a huge domestic market Early stage
deals are more common compared to the middle and late stage deals: Indian
companies with limited financial resources can optimize business models by
partnering with larger companies for product development and licensing at an
early stage
Regulatory Environment in India
The Pharmaceutical Industry is
characterized by maintenance of high quality standards as it concerns the lives
of people. Regulatory bodies impose regulations to ensure that drugs meet the
safety and quality standards. Regulatory bodies not only ensure that
pharmaceutical companies meet the set quality standards, but also ensure that
the pharmaceutical companies do not charge unreasonable prices from consumers.
The stringency of regulatory procedures varies across countries. On the basis
of established regulations and patent laws, the global pharmaceutical industry
can be broadly classified into regulated and semi-regulated markets.
Regulated markets include the USA,
EU and Japan that have established systems of patent laws regulated markets
include countries such as China, India and South Africa, which have less
stringent systems of patent laws and less sophisticated regulatory systems for
drug quality control.
The Pharmaceutical regulatory
environment in India comprises of the participants as displayed in the
schematic arrangement below. The Drugs and Cosmetics Act, 1940 (Drugs Act) and
Drugs and Cosmetic Rules, 1945 (Drug rules) regulate the import, manufacture,
distribution and sale of drugs in India. Under the provisions of these Acts,
the Centre appoints the Drugs Technical Advisory Board (DTAB) to advise the
Central Government and the State Governments on technical matters. Under the
Drugs and Cosmetics Act, State authorities are responsible for regulating the
manufacturing, sale and distribution of drugs, whereas the central authorities
are responsible for approving new drugs and clinical trials, laying down the
standards for drugs, controlling the quality of imported drugs, and
co-ordinating the activities of State drug control organisations.
The Drugs Controller General of
India (DCGI) is the central body that co-ordinates the activities of state drug
control organisations, formulates policies and ensures uniform implementation
of the Drugs Act throughout India. It is also responsible for approval of
licenses of specified categories of drugs, such as blood and blood products, IV
Fluids, Vaccine and Sera. Indian Pharmaceuticals Industry is mainly regulated
on the basis of patents, price and quality Central Government DCGI State DCO
Regulatory Bodies Co-ordinating activities
• Approval for setting up manufacturing
facilities
• License to sell and stock drugs
•
Recall of sub-standard drugs
• Licensing of drug testing laboratories State
Government
•
Formulating policies
•
Ensure uniform policy implementation across India
• Policy approval and standards
•
Clinical trials
•
New drug introduction
•
Import licenses for new drugs
The India Advantage in the
Life sciences Industry
India has emerged as a pharmaceutical supplier
in the international markets. This is not only because of a lowcost
manufacturing, operations and research base but also a combination of
additional factors such as process improvements in manufacturing API, faster
recruitment for conducting clinical trials, availability of skilled manpower
and developed regulatory skills. In Contract Research Business, India is also
an ideal location due to availability of skilled manpower and a large patient
population which results in faster recruitment of patients. With low costs,
highly competitive market and only process patents till recently, Indian
companies have developed expertise in process innovation.
Low Cost Labour costs in India are about 1/7th
the levels in developed countries and offer an obvious cost advantage. American
or European generics companies without API capabilities almost always have to
source from India or China. Strong Product Pipeline Geographical
Diversification Cost Competitiveness Assured API Supply Control over front end
Biogenerics
Biopharmaceuticals are defined as
pharmaceuticals manufactured by biotechnology methods, with the products having
biological sources, usually involving live organisms or their active
components. Biopharmaceutical drugs (or biologics) address areas of clinical
need that are unmet by conventional therapeutics (including many cancers and
genetic diseases). Biosimilars/ Biogenerics are essentially generic versions of
Biopharmaceuticals. The introduction of similar biological medicinal products
(biosimilars) into clinical practice presents new challenges that are not
ordinarily presented by small-molecule generic medicines. This is because a
biosimilar can only be proven to be similar and not identical to its reference
product.
In addition, all biotechnology
products, including biosimilars have a potential to cause immunogenic events
that are not caused by smallmolecule products. Some countries already have
widely prevalent biogenerics in their pharma markets. China, Eastern Europe,
India and South America already have biogenerics marketed along with other
formulation generics. Biogenerics already command high prices in many
countries, especially the USA, and are expected to be potential sources of
sizeable future income for the generics industry, with profit levels expected
to be higher than those of traditional generics. Most biological drugs command
a higher price than traditional formulations because of their difficult to make
nature and high stress on quality.
The cost of entering into the Biosimilars
market is considerably higher than that of generic pharma manufacturing.
Besides Dr. Reddy's, Wockhardt and Shantha Biotech, many other companies like
Intas Bio, Zydus Cadila, and Emcure are developing various molecules in the
biogeneric segment.
Product
pipelines of Indian players such as Ranbaxy, Dr. Reddy's, Aurobindo, and Sun
Pharma are comparable with that of global generics giant. Indian companies
received final approval for 154 ANDAs during the year 2013 from US FDA and 38
tentative ANDAs approval during 2013. The US FDA has approved a total 400 final
ANDAs during the year 2013 as against 476 in the previous year and it approved
total 86 tentative ANDAs during 2013 as against 94 during 2012. Out of the
total approvals, Indian companies grabbed 38.5% final approval during 2013 as
against 37.4% in the previous year.
Thus,
generic manufacturers are leveraging this opportunity by increasing their ANDA
filings. b) Low-cost Manufacturing Base Production cost in India is about
50%-60% lower as compared with developed countries, such as US and Europe, because
of lower labour cost which is 50%-55% cheaper and capital cost of setting a
production plant in India is 40% lower than in western countries. As a result,
outside the US, India has the second-highest number of USFDA-approved plants
after China. India is home to more than 523 USFDA approved drug manufacturing
facilities as on March 31, 2014.
Key advantages for Indian companies
Ø process
development
Ø synthesis
skills
Ø quality
Ø cost
effective manufacturing facilities.
The
product range encompasses a wide variety of therapeutics and from
pharmaceutical intermediates to finished dosage forms (formulations). Contract
Research Segment (CRS) is an end result of the discovery process being
outsourced to cost-efficient destinations like India and China. The process is
a mix of drug discovery, pre-clinical and final clinical development, leading
to a new chemical entity. This being a time and capital consuming process is
well aided by CROs across the globe.
Declining
R&D Productivity Increasing Cost base 1,000 Compounds Screened 700,000
Screening Hits 12 Candidates 1 Product 3 2 1 50% fail in Preclinical 30% fail
in Phase I 50% fail in Phase II Attrition on the R&D Process 6 Candidates
Discovery Exploratory Development Full Development PhaseI PhaseII PhaseIII
Contract Research & Custom
Synthesis (CRS) -
There is a clear realization that
small volume intermediaries can be economically sourced from countries like
India without any compromise in quality. This opportunity is expected to grow
as the product patent regime has kicked in, giving significant comfort to big
pharma with respect to IP protection. Drug Discovery & Development (CRS) -
As per industry estimates, the gobal outsourcing market for drug discovery
services was pegged at USD 10 billion, and is expected to cross USD 15 billion
by 2020. Drug discovery services include areas such as Analogue Research,
Combinatorial Chemistry, Chiral Chemistry, New Drug Delivery Systems and
Phyto-Medicine. Other services include combinatorial chemistry synthesis,
compound purification and characterization and finally creation of different
types of libraries of novel compounds. Biology Services (CRS) - These services
include
i) identifying and characterizing targets
involving genomics, proteomics, structural biology, computer modeling and
protein functioning technologies
ii) screening including assay development and
iii)
lead optimization for enhancing qualities of lead candidates using ADMET
(absorption, distribution, metabolism, efficacy and toxicity) predictive
techniques and structure activity relationship (SAR).
Clinical
Research (CRS) - More than 40% of drug development costs are incurred in
clinical trials, and India in addition to its vast and diverse genetic pool has
a distinct cost advantage in the area. As per industry estimates, the cost of
conducting clinical trials in India is between 40-60% of equivalent trials in
US or Europe. Also, companies are potentially looking at undertaking quick
small trials to lead to fast and cost effective go/no go decisions, especially
for new indications.
The
Indian Pharma industry is showing signs of healthy growth and is likely to be
in the top 10 global markets by value by 2020. The major drivers of increase in
revenues would be the branded generics segment and the emergence of the
contract research and manufacturing services.
Cost Advantage in Clinical Research
Outsourcing to India
With adequate support from the
Government, the clinical research industry would definitely witness greener
pastures. The sector has significant cost advantage as compared to other
geographies in the world. In addition to this, the diverse patient pool and
highly skilled manpower will indeed make India into an attractive clinical
research destination. India by virtue of its cost effective human resource pool
and currency, offers direct operational cost advantage in the conduct of
clinical trials. A large part of the cost advantages also stem from the
potential time saving by undertaking concurrent trials in India - aided by
large patient population, better patient accruals, a reasonably good pool of
ICH GCP aware clinical investigators, amongst others.
Road Ahead:
The Indian
pharmaceutical market size is expected to grow to US$ 100 billion by 2025,
driven by increasing consumer spending, rapid urbanisation, and raising
healthcare insurance among others. Pharma sector’s revenues are expected to
grow by 9 per cent year-on-year through fiscal 2020.Going forward, better
growth in domestic sales would also depend on the ability of companies to align
their product portfolio towards chronic therapies for diseases such as such as
cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on
the rise.
The Indian
government has taken many steps to reduce costs and bring down healthcare
expenses. Speedy introduction of generic drugs into the market has remained in
focus and is expected to benefit the Indian Pharmaceutical companies. In
addition, the thrust on rural health programmes, lifesaving drugs and
preventive vaccines also augurs well for the Pharmaceutical companies.
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