But opportunities will emerge as branded drugs go off-patent
Hyderabad, until now India’s bulk drugs capital, is finding it difficult to retain the crown, with production capacities having remained almost static for some time. This is largely due to restrictions on the expansion of capacity or the setting up of new units in Hyderabad and five other adjoining districts that have been in force since 1998.
However, business is flourishing in Gujarat. Industry experts feel that it is a matter of time before Gujarat noses ahead of Andhra Pradesh in bulk drug production.
Industry executives said growth in the 1990s and the early years of the 21st century was 30-35 per cent a year, but this slowed to 25 per cent in the last few years, and to just 17 per cent last year, due to the recession. Growth was just picking up after being affected due to the recent turmoil in Andhra Pradesh for and against a separate state and a reduction in exports to European countries.
According to K Nityananda Reddy, president of the Bulk Drug Manufacturers Association (BDMA), the Indian bulk drug industry has emerged as a major supplier of active pharmaceutical ingredients (APIs) to the global markets. It produces around 730 APIs, meeting 90 per cent of domestic requirements.
The Indian market is expected to grow from the current $10 billion to $32 billion by 2015. The industry, comprising about 1,400 units (mostly small enterprises) supplies 50 per cent of the world’s bulk drug requirements.
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India has more than 100 US FDA-approved manufacturing facilities, the largest number of such facilities outside the US.
India’s bulk drug industry is estimated to be worth Rs 80,000 crore and Andhra Pradesh accounts for about Rs 25,000 crore, including Rs 18,000 crore in export revenues.
The state has 10 major bulk drugs units, 50 medium and over 200 small units, which employ a total of about 400,000 people. SMEs contribute 55 per cent of the revenues and employ more than 60 per cent of the work force.
In 1998 the state government had imposed a ban on pharma units expanding their capacities or setting up new units in Nalgonda, Ranga Reddy, Hyderabad, Medak and Mahabubnagar districts, as part of the efforts to curb pollution. This restricted the growth of several companies. The bigger companies now want Visakhapatnam and Vijayawada as new destinations for the industry.
However, since 1998 the industry has invested about Rs 250 crore in improved waste handling systems, effective moisture vapourators and incinerators, to fulfill court stipulations. For instance, big companies like Dr Reddy’s and Aurobindo boast of zero-discharge facilities at their plants. The state government, of late, has been allowing expansion of capacities on a case-by-case basis, depending on the technology and pollution control apparatus.
The off-patent regime coming in two years will be a boon to the Indian pharma industry and most of the generics can be produced in Andhra Pradesh. The FDA office of generic drugs indicates that $20 billion worth of branded drug sales will shortly lose patent protection. The market opportunity will increase even more in the following years, with branded drugs with sales of more than $50 billion to go off-patent in three years.
An industry representative said that investments worth Rs 2,000 crore have been lined up in API capacity augmentation in Hyderabad alone, to take advantage of the opportunity.