Contract manufacturing in pharmaceutical industry is set to grow 10 per cent to 15 per cent in the near term and is expected to double in the next five years after the approval of US healthcare bill as the bill has opened up opportunities for the use of more generic drugs in the US market.
US healthcare bill, approved by the US Congress recently, aims to bring an additional 32 million people under the insurance net and also plans to reduce the healthcare bill of the state. Moreover, the bill prohibits insurance companies from excluding people with pre-existing medical conditions and dropping policy holders on account of coverage limits.
“The demand for generic drugs will increase in the US market as this bill aims to reduce the healthcare spending of the state. As India is a prime destination for manufacturing generic drugs due to its low manufacturing cost and the availability of good facilities, contract manufacturing industry will definitely see a rise,” Goutam Das, chief operating officer of Syngene International Ltd, a wholly-owned subsidiary of Biocon said.
The contract manufacturing industry will see a 10-15 per cent rise in the near term as many global generic drug companies will place manufacturing orders to feed this new demand, he said.
The domestic Indian drug industry, pegged at Rs 40,000 crore by 2009-end, will get support as many drugs will go off patent by 2013, throwing opportunities for generic drug makers.
“Many global drug makers like Pfizer, GlaxoSmithKline, Aspen among others have entered into manufacturing agreements with Indian companies and these deals are expected to grow in future,” Das said.
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The last two years have witnessed many such deals being struck between global and domestic pharma companies. In March 2009, Pfizer and Aurobindo had entered into an agreement for the manufacture of 60 products for the regulated market in the latter’s facility in India. Pfizer also has similar arrangements with Claris Lifesciences. Moreover, Biocon and Mylan Labs have an arrangement to develop and manufacture monoclonal anti-bodies in Biocon’s facility. Recently, Aspen entered into a drug supply pact with Indoco.
“India, which has over 95 facilities approved by the US heathcare regulator, is expected to contribute 3-4 per cent of the market share in the manufacturing space in near future,” Sanjay Singh, Associate Director, KPMG said.
While 70 per cent is contributed by generics in pharma drug industry, their contribution in value terms is around 15 per cent, which is set to improve, he added.
Not only is the cost factor driving more outsourcing deals for India, factors like scarce pipeline of new molecules will also contribute to it.“Global pharma companies don’t have a sound pipeline of new molecules as of now. So, pharma companies have to opt for generics to protect their topline,” R D Joshi, Senior Consultant of a pharma consultancy firm-Interlink Marketing said.
He also said India had a definite edge over countries like China, Vietnam and Ireland because of its manpower, good quality facilities and cost effectiveness.
However, some companies are of the opinion that it is too early to gauge the impact of the US healthcare bill.
“We have to wait and watch for the possible opportunities thrown after passing of this bill rather than jumping into conclusion,” Abhaya Kanoria, chairman and managing director of Anglo French Drugs and Industries Ltd, said.