Shifting Pharma Production To India
posted in Outsourcing News and Top Outsourcing deals, New Outsourcing Destinations |Source: www.business-standard.com
At first, leading Indian pharmaceutical companies, such as, Dr. Reddy’s Laboratories, Ranbaxy Laboratories, and Aurobindo Pharma made big ticket acquisitions in Europe and USA. Now, however, they are rapidly shifting production to their Indian facilities.
Dr. Reddy’s, for instance, acquired Betapharm, the fourth-largest generic (off-patent) German drug firm, for $572-million last year, which will now, soon be feeding the entire product pipeline from India, hoping to get regulatory approvals to source all of the firm’s 20-products from India, within a year.
Satish Reddy, COO and Dr. Reddy’s Managing Director confirms the action plan, saying: “The contract with the German suppliers to Betapharm will be cancelled, as soon as, we get the approvals.”
As in other markets, greater competition, as well as, government intervention has led to erosion and a slash in the prices of generic medicines in Germany, for institutional procurement.
Betapharm, according to analysts could make a significant savings of at least 15-20% by sourcing products from India, while relocating production to India, could help Indian firms that enjoy a 22% share in the $65-billion global generic drug market, to improve their the bottom line of their overseas subsidiaries by, as much as, and over 10%.
On the other hand, Ranbaxy, has adopted a slightly different strategy and has made Terapia, the Romanian firm it acquired for $324-million in 2006, the hub for all its European operations, and manufactures medicines in Romania’s EU approved facilities, using raw materials or bulk drugs sourced from India.
“Going forward ‘Terapia Ranbaxy’ will become the strategic hub of the company’s operations in the EU and CIS markets, and we see significant operational efficiencies to be derived in the future. Recently, we made additional investments in the critical areas of manufacturing and R&D, which reinforces our commitment to this region,” says Ramesh Adige, Executive Director, Ranbaxy.
Another Indian pharmaceutical, Aurobindo Pharma that acquired UK based - Milpharm Limited, a generic formulation pharmaceutical company, for an undisclosed sum in 2006, also plans to use its overseas subsidiary as a marketing base.
Similarly, Dabur Pharma’s overseas acquisition in Thailand - Bio-science is being leveraged as its marketing arm, for the supply of cancer medicines produced by Dabur in India.
Ramaprasad Reddy, Managing Director at Aurobindo indicates, his firm has sufficient manufacturing capacity in India to cater to its overseas marketing arms. In other words, any future acquisitions by Aurobindo will be based on a firm’s marketing skills and not its manufacturing capacity.
As the country acknowledged only process patents and not product patents till 1st January, 2005, it helped Indian firms develop strong skills in process chemistry, or the ability to re-engineer a product through different processes. This has led to over 100-generic drug facilities in India that have the approval of United States Food and Drug Administration (FDA), which gives Indian pharmaceutical companies a distinct edge over their global generic competitors.
Since, USA FDA standards are amongst the toughest on a global scale, Indian manufacturing facilities having USFDA approvals, find it significantly easy to negotiate drug regulator approvals in European countries.
