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With the bulk drug manufacturing policy expected to come in soon, the sector is upbeat. Bulk drug manufacturers expect the policy to revive India's active pharmaceutical ingredients (API) market and trigger fresh investments worth Rs 30,000-40,000 crore in setting up new manufacturing facilities and augmenting existing ones.
Bulk drugs or APIs are basically the active raw materials used in a drug that gives it the therapeutic effect. Bulk drugs currently constitute only 10-12 per cent share in the country's Rs 80,000 crore-domestic pharmaceutical sector. India is primarily dependent on China for its imports of bulk drugs. According to industry estimates, 70-80 per cent of the requirement of the industry is met by imports from China, varying across categories.
Government officials declined to share the salient features of the upcoming policy. However, they said many of the Katoch Committee recommendations would be implemented. The committee under former secretary (health research) V M Katoch was formed to suggest how India could reduce its dependence on China for bulk drugs.
Incentives such as land at concessional rates, tax holidays, soft loans, setting up of mega pharma parks, allocation of power at concessional rates etc are expected to be a part of the upcoming policy.
"China raced past us in manufacturing bulk drugs as the Chinese government offers several incentives to the local industry, thereby reducing their cost of manufacturing. China can offer bulk drugs at prices at least 15-20 per cent cheaper than us," said Jayant Tagore, president, Bulk Drug Manufacturers Association (BDMA).
He feels once the bulk drug policy comes up, it could trigger investments by the domestic companies to the tune of Rs 30,000 40,000 crore. Tagore says that after the Telangana government decided to come up with a pharma city project over 9,000-11,000 acres of land about 80 km from Hyderabad, BDMA's internal survey showed there was demand for about 4,000 acres of land among its members. Hyderabad and Ahmedabad are considered the hubs of manufacturing bulk drugs.
A senior official at Ahmedabad-based API player Dishman Pharmaceuticals & Chemicals, too, welcomed the government's move saying: "While we are more focused on niche bulk drugs and on exports, if the policy incentivises investments, it could bring in fresh investments in the sector." However, he did not comment on the quantum of investment the company could line up after the policy is announced.
Sun Pharma, Aurobindo Pharma, Lupin, Alembic Pharma and others have moved up the value chain in the past few years and reduced their focus on APIs in the domestic market, primarily because it is a low-margin business. For example, Vadodara-based Alembic Pharma shifted its focus on niche APIs targeted at the regulated markets as a strategic move, from the domestic market and now 85 per cent of its API sales come from the regulated markets or customers. Alembic uses nearly 30 per cent of its API production for captive usage. Similar is the case with Lupin, which uses a significant portion of its API production for captive usage. On the whole, sales from the segment contributes 9-10 per cent to its sales. The company, however, did not wish to share its comments on the matter.
On the exports front as well, things have not been rosy for the bulk drugs sector. According to P V Appaji, director-general, Pharma Export Promotion Council, bulk drugs constitute nearly 25 per cent of the pharmaceutical exports from the country. "Pharmaceutical exports from India are Rs 98,000 crore, and bulk drugs and intermediates account for nearly 25 per cent of it. Growth of API exports is, however, in the negative territory for the past two years, the reason being competition from China as well as internal competition among companies," he said, adding that there has been a crash in bulk drug prices in the international market, further eroding the value of exports.
"There has been a 5-10 per cent fall in prices of different bulk drugs in the international market. So, while the volume of exports from India is on the rise, the value has fallen," said Appaji.
Experts caution that while the upcoming policy is likely to give a boost to the bulk drug sector, several minor issues such as state governments' role in subsidising land etc need to be taken care of. The owner of a bulk drug company and a senior official at an industry association said: "The details of the policy would require fine-tuning as several issues like power subsidies, land at concessional rates etc could be difficult to implement unless technicalities are worked out judiciously."
