MNC generic players tap India as cheaper manufacturing lures

Sep 26 2013, 08:23 IST
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Pharma MNCs are convinced about India’s potential as an R&D base. Pharma MNCs are convinced about India’s potential as an R&D base.
SummaryBig Pharma is increasingly targeting the fast-growing generic drug markets in India and elsewhere.

our site selection criteria, including the availability of qualified workers, physical infrastructure and the favourable business environment,” Yonatan Beker said.

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Top-notch innovators like GlaxoSmithKline Sanofi-Aventis and Pfizer – and to an extent, Novartis and Roche as well – have been in India for decades. They are convinced about India’s potential as an R&D base and say that if the country’s intellectual property regime were more liberal, their investments could increase.

Bristol-Myers Squibb and Boehringer Ingelheim had set up wholly-owned Indian subsidiaries before 2005, expecting benefits once product patents were in place; however, these companies haven’t scaled up significantly.

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India is among the top-five pharma-emerging economies in the world with a spending power of $14.3 billion in 2011, which is expected to grow at a compounded annual growth rate of 14-17% during 2012-2016.

“If foreign drugmakers are going to serve emerging markets like India, Brazil or China and have high-priced plants elsewhere, its not going to work. So, you have to be near those locations or at those locations which are generating that demand,” PricewaterhouseCoopers executive director Sujay Shetty said, adding India has a long history of exporting to US markets.

India’s 170-180 US FDA-compliant manufacturers and the consequent high quality of drugs has made it a hot destination for foreign drugmakers, says Shetty. Cheaper capital equipment and lower engineering costs which have reduced overall manufacturing costs by at least 40% too add to the allure.

The biggest takeovers of Indian drug makers in recent years include that of Ranbaxy Laboratories Ltd by Daiichi Sankyo, Matrix Labs by Mylan and Piramal Healthcare by Abbott.

Highlighting the regulatory concerns over brownfield pharma FDI, a parliamentary panel recently said these investments have not added fresh capacity in terms of production. With the trend of foreign generic drug-makers setting up facilities in India, these fears are unfounded, analysts feel.

Pallavi Ail

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