The global pharmaceutical industry has maintained an upward growth trajectory despite regulatory changes, constant public scrutiny and high demand for temperature and time controlled shipments. In this fast evolving marketplace, India has established itself as a global manufacturing and research hub, in which a well-organized logistics and supply chain sector has played an important role.
Shreya Bhattacharya
India’s rapid growth in the pharmaceutical sector is set to bring it among the top 10 global markets by 2020. The Indian pharmaceutical market, which is the largest supplier of generic drugs globally, is expected to rise to $55 billion by 2020, representing Compound Annual Growth Rate (CAGR) of more than 15 per cent. However, to sustain the growth rate, supply chain- the link between the laboratory and the marketplace, needs to be strengthened and taking note of India’s high growth potential, logistics companies are investing heavily in it. KWE India, the Indian subsidiary of Kintetsu World Express and part of the Japanese global conglomerate Kintetsu Group, recently unveiled a Good Distribution Process (GDP) warehouse at the Hyderabad airport cargo satellite building to exclusively handle pharmaceutical logistics. The facility will provide logistics support for shipments, for export and import trade. The state-of-the-art facility is equipped with 24x7 temperature ambient control, CCTV, control access, racking, temperature and humidity indicators, alarm system and skilled and trained manpower to follow GDP compliant process throughout shipment handling. “We have been at the forefront of introducing innovative logistics solution in India and this project marks a new milestone in our journey to carve a niche in offering contemporary solutions to address unique needs for the growing economy,” says Karthi Baskar, Deputy Managing Director, KWE India, while commenting on the initiative. The dedicated warehouse has evoked interest among various pharma companies in the region. Following this response, KWE is keen to further expand its warehousing space and has reserved two additional blocks in the upcoming cargo satellite building of GMR Hyderabad. KWE now also plans to set up similar warehouses in Mumbai, Delhi, Bengaluru and Ahmedabad, in a phased manner, reveals Baskar. In terms of volume, the Indian pharmaceuticals market is the third largest and in terms of value it is the thirteenth largest, as per a report by independent equity research initiative, Equity Master. The country is also the largest provider of generic drugs globally with the Indian generics accounting for 20 per cent of global exports in terms of volume. “Indian pharma companies have emerged as world leaders for low-cost innovation and production of Active Pharmaceutical Ingredients (API), Contract Research and Manufacturing Services (CRAMS), Formulations and Biosimilars. Advantage of strong generic pharma industry in India and strategic sourcing of raw materials from domestic and foreign sources help in supplying drugs at a low cost to the world,” says Mike Chew, CEO, Air India SATS Airport Services (AISATS). “India exports half of its production of pharmaceuticals, which account for a major share of the perishable exports from India.” In October 2016, AISATS, commenced trial operations of India’s first integrated on-airport perishable cargo handling center “AISATS COOLPORT”, at Kempegowda International Airport, Bengaluru. The state-of-the-art, 11,000 sq. metre facility is expected to meet the ever-increasing demands and handling requirements of temperature-sensitive cargo especially pharmaceutical along with perishables globally. “The AISATS COOLPORT at Kempegowda International Airport, is poised to play an important role in boosting pharmaceuticals and perishable products trade from South India. With a 40,000 tonnes per annum handling capacity, this dedicated state-of-the-art facility, a one-stop-shop, comprises of in-house Customs Clearances, a well-equipped Drug Testing Lab and Plant Quarantine Certification Facility. On the first day of trial operations, which was 1st October 2016, 25 tonnes of temperature-sensitive pharmaceutical shipments were accepted at the AISATS COOLPORT,” reveals Chew. The facility will become fully operational by early 2017 and going by the current demand for pharmaceutical exports, AISATS COOLPORT is expected to handle 18,000 tonnes during the first operational year, he adds. India is a preferred hub for pharma manufacturing as the country has one of the lowest manufacturing costs in the world. Manufacturing cost in India is approximately 35–40 per cent of that in the US as installation and workforce costs are low. Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied by Indian pharmaceutical firms, as per data available from the Ministry of External Affairs. The UN-backed Medicines Patent Pool has signed six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus Labs, allowing them to make generic anti-AIDS medicine TenofovirAlafenamide (TAF) for 112 developing countries. Also, the US Food and Drug Administration’s (USFDA) approvals to Indian companies totaling to 201 in FY2015-16, up from 109 approvals received in FY2014-15 clearly reflects the preference given to India for pharma manufacturing. While India continues to be a major exporter of generic drugs to traditional markets such as US, UK, Russia, etc, it is also increasing its reach to other nations like Canada, Germany, Brazil, Japan, etc. “While growth in developed markets will slow down, emerging markets will become increasingly important in the coming decade. The Indian pharmaceuticals market, along with the markets of China, Brazil and Russia, will spearhead growth within these markets,” says a McKinsey & Company’s report ‘India Pharma 2020: Propelling access and acceptance, realizing true potential’.
M & A to tap new markets Taking into consideration the fast changing business environment, pharma companies are finding new way of doing business. Mergers and acquisitions, improving R&D productivity, reducing costs are some of the factors which are being closely monitored. Today, in the competitive business environment, the size of economy and scale of operations are of great importance in tapping new markets. Pharma companies are increasingly using the tool of mergers and acquisitions to consolidate their positions as global player. The firms, in this process, strengthen their core competence areas and shed extra burden of departments in which they are not competent enough. According to analysts, mergers are critical for the long term benefits of the pharmaceutical industry and for their short and long term survival. India’s third largest drug maker Lupin recently completed the acquisition of US-based Gavis Pharmaceuticals and Novel Laboratories, in a deal worth $880 million, which is expected to enhance its product pipeline in dermatology, controlled substances and high-value speciality products. Another major Cipla has also announced the acquisition of two US-based companies, InvaGen Pharmaceuticals and Exelan Pharmaceuticals for $550 million. Also, Glaxosmithkline Pharmaceuticals has started work on its largest greenfield tablet manufacturing facility in Vemgal in Kolar district, Karnataka, with an estimated investment of Rs 1,000 crore ($ 149.11 million). Political and economic trends The acquisitions, together with the political and economic trends are now shaping the general commercial environment. The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for greenfield pharma. 100 per cent FDI is also allowed under the government route for brownfield pharma in which upto 74 per cent FDI is under automatic route and beyond 74 per cent is under government approval route. According to data released by the Department of Industrial Policy and Promotion (DIPP), the drugs and pharmaceuticals sector has attracted cumulative FDI inflows worth $ 13.85 billion between April 2000 and March 2016. “Low cost production, policy changes in the pharma sector such as allowing 74 per cent FDI in brownfield pharma through the automatic route in addition to the existing 100 per cent FDI for Greenfield pharma through the automatic route has seen a surge in pharmaceutical manufacturing facilities in India. Doubling of US Food and Drug Administration (USFDA) approvals to Indian companies verifies this increase,” claims Chew.
Major investments in pharma manufacturing Some of the very recent major investments in the pharma sector include Sun Pharmaceutical’s distribution agreement with Japan's Mitsubishi Tanabe Pharma Corporation to market 14 prescription brands in Japan; Syngene International’s proposed plan to set up its fourth exclusive Research and Development (R&D) center for a US-based biotechnology company Amgen Incorporation in Bengaluru; Lupin’s plan to file its first biosimilar Etanercept for approval in Japan apart from its plan to acquire a portfolio of 21 generic brands from Japan-based Shionogi & Co Ltd for Rs 10.08 billion ($150.3 million); Cipla Limited’s plan to invest around Rs 600 crore ($89.47 million) to set up a biosimilar manufacturing facility in South Africa for making affordable cancer drugs and growing its presence in the market; Rusan Pharma, a firm which specialises in de-addiction and pain management products, plans to invest Rs 100 crore ($14.91 million) in a R&D centre and a manufacturing unit in Gujarat. International Finance Corporation (IFC), the investment arm of the World Bank, also plans to invest upto $75 million in Glenmark, which is looking to raise around $ 200 million for expansion and the launch of several new products in India and other emerging markets over the next three years. An increase in pharma manufacturing would lead to an increase in the export volume of pharmaceuticals and this would require supporting infrastructure for efficient transportation across borders. “The pharmaceutical industry currently relies and will continue to rely heavily on air transport for its speed, reliability and efficiency in delivering high-value, time-sensitive, temperature-controlled cargo. Besides addition of new airports and inaugurating new trade routes, airports have to be equipped with necessary warehousing facilities conducive for pharmaceutical products. Development of end-to-end cold supply chains for storage and transportation of temperature sensitive pharma products for preservation and enhancement of the product shelf-life should be the focus in near future,” says Chew. Shipping temperature and time-sensitive pharmaceuticals has always been a tricky issue. Today, changing global requirements and a more complex supply chain are driving more innovative approaches to temperature control. In a competitive environment logistics providers have to adopt latest techniques to survive and to facilitate pharma logistics. Real-time GPS technology, better IT connections, and controlled shipping temperatures could improve the shipment of sensitive pharmaceuticals.