Look for support on technology upgrade, brand promotion and marketing to perform better in the domestic and export markets.
Small and medium enterprises (SMEs) in the pharma sector are looking to the government for support on technology upgrade in manufacturing, brand promotion and marketing, to perform better in the domestic and export markets. Marketing and regulatory constraints are putting pressure on SMEs, say pharma manufacturers’ associations.
There are around 10,000 pharmaceutical manufacturers in India producing bulk drugs and formulations, of which some 7,000 are SMEs, contributing 35 per cent of the total domestic turnover of Rs 45,000 crore.
The opportunity is mainly in contract manufacturing, for both MNCs operating in India and Indian companies, which are looking to outsource manufacturing activities for the domestic market and focus on exports to regulated markets like the US and Europe.
But SMEs first have to upgrade their capabilities to comply with manufacturing standards like Good Manufacturing Practices (GMPs) set by the Indian government and the World Health Organisation (WHO). For this, they need financial support from the government, says S V Veeramani, vice-president of the Indian Drug Manufacturers’ Association (IDMA) and chairman and managing director of Chennai-based Fourrts (India) Laboratories Pvt Ltd.
“The size of the domestic pharma industry is more than Rs 45,000 crore, of which contract manufacturing is almost 30 per cent or about Rs 15,000 crore. It is growing by around 20 per cent, well above the industry growth rate,” he says.
“Upgrading facilities according to the WHO-GMP and Indian GMP standards needs liberal funding from the government and some financial incentives, but without so many restrictions,” he adds. The government has implemented financial assistance programmes like the Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgrade of small-scale industries to enable them to comply with GMP standards with the revised Schedule M norms under the Drugs and Cosmetics Act.
However, pharma sector officials say it has been of little use, as it was implemented long after the rules came into existence and there are restrictive terms and conditions. Lack of support from select banks authorised by the government to issue the incentives has also affected the free flow of funds allotted under the scheme, he adds.
Besides, the government also announced a Pharmaceutical Technology Upgradation Assistance Scheme (PTUAS) that provides a five per cent interest subsidy for SMEs to upgrade their facilities to WHO-GMP standards. Complying with these standards will help companies export their products to a large number of countries that have accepted the WHO standards for manufacturing and marketing medicines.
“All these are welcome. But, more can be done by the government in providing finance to all SMEs, with subsidies, reduced interest and without high collateral security,” says Veeramani.
SMEs also face the challenge of eligibility barriers, including fixed turnover limits and ORG rankings set by institutional buyers in their bidding process for medicine procurement. Small enterprises, which rely on government and institutional supplies, could perform well if these restrictions are removed. Further, the government could also provide SMEs with soft loans for brand promotion, the association thinks.
On drug pricing, raw material procurement costs are higher for SMEs in some instances, while large companies can negotiate prices through bulk purchases. The association has been requesting the National Pharmaceutical Pricing Authority (NPPA), the drug price watchdog of the central government, for a sympathetic approach towards SMEs on this.
However, T S Jaishankar, chairman of the Confederation of Indian Pharmaceutical Industry (CIPI), a consortium of small pharma manufacturers, and managing director of Quest Life Sciences, says the major issue faced by small units is not lack of funding or government support.
“Of course, these are challenges. But the major problem for small units is the inability to adapt to the changes that are happening in the domestic and global pharma industry,” says Jaishankar. It is time for SMEs to consolidate among themselves for better manufacturing and marketing capabilities, he adds.
