IMPACT OF MAKE IN INDIA CONCEPT-TO FACE ISSUES & CHALLENGES IN

PHARMACEUTICAL INDUSTRIES PRODUCTIVITY.

Ms. Shenbagavalli .T Research scholar, East Point College of Higher Education

Ms Nalini Kantha.C Lecturer, East Point College of Higher Education

Abstract

Indian pharmaceutical industries are playing a leading role in a competitive global market.
For this, world class quality manufacturing facilities with high level of productivity with
innovative capabilities are required. However, these are on one hand very capital intensive
and cannot be established and opened by Pharma Manufacturing Units especially the SMEs
at their own due to financial constraints while on the other hand global level technical
expertise is an adverse handicap. The pharmaceutical industry is growing exponentially; there
is a constant thirst for working capital and the brightest of employees. After information
technology, the pharmaceuticals industry is grappling with the highest level of attrition rate of
30 to 35 per cent, according to a recent survey of Indian pharmaceutical companies by
Interlink Marketing Consultancy. The article discusses about how make in India concept
helps the pharmaceutical industries development like the nature of manufacturing is
changing. Low-cost automation and robotics are making pure labour cost arbitrage less
important. Lead times and a flexibility of supply chains are far more important, leading many
companies to move manufacturing back closer to the big markets, the United States and
Europe. The Government of India has unveiled 'Pharma Vision 2020' aimed at making India a
global leader in end-to-end drug manufacture. It has reduced approval time for new facilities
to boost investments. Further, the government has also put in place mechanisms such as the
Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the
issue of affordability and availability of medicines.

Key words: - Pharmaceutical Industries, Make in India, R&D, Drug,

 1. INTRODUCTION

Make in India is a new national program designed to transform India into a global
manufacturing hub. It contains a raft of proposals designed to urge companies local and
foreign to invest in India and make the country a manufacturing powerhouse. Sectors covered
the focus of Make in India programme is on creating jobs and skill enhancement in 25
sectors. These include: automobiles, aviation, chemicals, IT & BPM, pharmaceuticals,
construction, defence manufacturing, electrical machinery, food processing, textiles and
garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality,
railways, automobile components, renewable energy, mining, bio-technology, space, thermal
power, roads and highways and electronics systems. The Indian pharmaceutical industry is
one of the most attractive investment destinations in the world. With ever increasing returns,
lowering risks and anticipated multifold growth, investors are more interested in this industry
than ever before. Since 2000, the drugs and pharma sector has attracted one of the highest
foreign direct investment (FDI) inflows of approximately $12,689 million (April 2000 to
September 2014). Unlike many other countries, the involvement of the Indian government in
the pharma industry has been deep and often controversial. The government has made
numerous efforts to stimulate organised growth of the industry. In the pursuit of achieving
global leadership in the manufacture of end-to-end drugs, the government unveiled its
Pharma Vision 2020, which inter alia, provides for reduction in approval time for new
facilities to boost investments. Further, robust mechanisms such as the Drug (Prices Control)
Orders and the National Pharmaceutical Pricing Authority (NPPA) have been implemented to
address the issue of affordability and availability of medicines. The growth story of the
Indian pharma industry into a mammoth industry is an impressive one marked with numerous
important turning points. These turning points have typically stemmed from the issues faced
by the industry and have changed the nature and mechanisms of the industry, and to a large
extent have sculpted the trends in the industry. This article aims to explore a few issues and
challenges that have affected the Indian pharma industry and how make in India concept
helps to face it.

2. OBJECTIVES OF THE STUDY:-

Following are the main objectives of the study:

 (a) To identify the various issues and challenges faced by pharmaceutical
industries in India.

(b) To identify the current position of Indian pharmaceutical sectors.

(c) How make in India concept helps the pharmaceutical industries to prove
their performance benchmarks.

3. REVIEW OF LITERATURE

(A) Huge amount of R&D expenses for development of a drugs

This diagram shows the steps:

This complicated diagram illustrates the attrition risk, and the approximate time involved at
each step. Importantly, what’s called “basic research” and then “discovery research”
component is the “research” part of the R&D. What follows, through trials is actually
considered the “development” component. There are four key variables that influence overall
R&D cost estimates:
A) 1. Out-of-Pocket Costs: - These are the direct costs spent on trials
(A)2. Success Rates: - These are the cost incurred on identify the potential drug.
(A)3. Development Times: -These are the cost met by the SMPIs to develop other papers
from phase I to phase III.
(A)4. The Cost of Capital: - Cost incurred to generate for its owners
The New Estimate
For this new analysis the R&D cost is based on, 97% of the new product (drugs) development
cost- through the confidential surveys of pharmaceutical companies. The aggregated costs
and then averaged costs for each component of research and development, estimating the
overall probability of success of any single drug at 7%. (i.e.)
97% of R&D cost affects the 7% of profitability of each drug.
Source: New England Journal of Medicine.
From the above analysis the R&D cost affects 7% of the profitability of each drug, is more
for the small and medium scale pharmaceutical Industries. Because of this, majority of
SMPIs are Manufacturing the drugs depending upon the specification given by the large scale
pharmaceutical industries
(B) Exits from the sector by key players:
The companies are exiting the business in entirety or selling certain brands, those companies
are under complete and partial acquisitions. Because of the acquisition, the companies which
are being acquired completely are exiting the business to invest its discharged money in non-
related sectors like energy, financial services. Those which are selling only certain brands
leading to partials acquisitions are the ones which aspire to stay and grow in the
pharmaceutical sector itself. The pharma industry is plagued by many top-notch industry
bigwigs quitting the sector.
 Ranbaxy was sold to a Japanese company  Daichii Sankyo for US $4.6 bn in
2008.
 Abbot bought Piramal healthcare for US $ 3.7 bn making it the market leader and
it gained access to 350 brands of Piramal healthcare & trademarks.
Since 2001, 100 % FDI was allowed in the Pharmaceutical sector both in Brownfield &
Greenfield investments.  
(C) Survival strategy of the Indian pharmaceutical companies.
There are certain hindrances to the development of Indian pharma Industry, especially in the
wake of the sell-offs that have happened off late. Indian the companies are looking towards
developing innovative drugs. Right now the bulk drugs contribute to a minority of their
income. The following diagram explains the manufacturing process of small and medium
scale pharmaceutical industries helps to manufacturer only limited generic drugs.

4. ANALYSIS.
Let's have a look at five challenges that the 'Make in India' could face.

1. Creating healthy business environment will be possible only when the

administrative machinery is efficient. India has been very stringent when it comes to
procedural and regulatory clearances. A business-friendly environment will only be
created if India can signal easier approval of projects and set up hasstle-free clearance
mechanism.

2. India should also be ready to tackle elements that adversely affect competitiveness
of manufacturing. To make the country a manufacturing hub the unfavourable factors
must be removed. India should also be ready to give tax concessions to companies
who come and set up unit in the country.

3. India's small and medium-sized industries can play a big role in making the country
take the next big leap in manufacturing. India should be more focused towards
 novelty and innovation for these sectors. The government has to chart out plans to
give special sops and privileges to these sectors.

4. India’s make in India campaign will be constantly compared with China's 'Made in
China' campaign. The dragon launched the campaign at the same day as India seeking
to retain its manufacturing prowess. India should constantly keep up its strength so as
to outpace China's supremacy in the manufacturing sector. 

5. India must also encourage high-tech imports; research and development (R&D) to
upgrade 'Make in India' give edge-to-edge competition to the Chinese counterpart's
campaign. To do so, India has to be better prepared and motivated to do world class
R&D. The government must ensure that it provides platform for such research and
development.

FDI POLICY- MAKE IN INDIA

 100% FDI is allowed under the automatic route for Greenfield projects.
 For Brownfield project investments, up to 100% FDI is permitted under the
government route.
 The government may incorporate appropriate conditions for FDI in Brownfield cases,
at the time of granting approvals.
 ‘Non-compete’ clauses are not allowed except in special circumstances, with the
approval of the Foreign Investment Promotion Board.
 The FDI is subject to applicable regulations and laws.
Make in India concept increase and open up a new dimension. The ‘generic’ model is
slowly getting changed as more and more companies are gradually carrying out R&D
in original drugs. Some of the pharma companies like Dr.Reddy’s, Glenmark had
already started investing money in the R&D sector as early as 90’s. Today 40% of
Dr.Reddy’s production counts for original drugs and 60% for generic drugs make in
India concept gives 100% confident those Companies such as these had an added
advantage for companies like Piramal which was based on 100% generic production
in 2020. 
 STATISTICS

 The country’s pharmaceuticals industry accounts for about 2.4% of the global pharma
industry by value and 10% by volume.
 Industry revenues are expected to expand at a CAGR of 12.1% during 2012-20 and
reach USD 45 Billion.
 The healthcare sector in India is expected to grow to USD 250 Billion by 2020 from USD
65 Billion currently.
 The generics market is expected to grow to USD 26.1 Billion by 2016 from USD 11.3
Billion in 2011.

GROWTH DRIVERS.

 Between 2011 and 2016, patent drugs worth USD 255 Billion are estimated to go off-patent
leading to a huge surge in generic product and tremendous opportunities for companies.
 In 2011, India’s OTC drug market stood at USD 3 Billion and a rise to USD 6.6 Billion is
forecast by 2016.
 With increasing penetration of chemists, especially in rural India, OTC drugs will be readily
available.
 Pharma companies have increased spending to tap rural markets and develop better
infrastructure. The market share of hospitals is expected to increase from 13.1% in 2009 to
26% in 2020.
 Following the introduction of product patents, several multinational companies are expected
to launch patented drugs in India.
 The purported rise of lifestyle diseases in India is expected to boost industry sales figures.
 Over USD 200 Billion is to be spent on medical infrastructure in the next decade.
 Rising levels of education are set to increase the acceptability pharmaceuticals.
India’s patient pool is expected to increase to over 20% in the next 10 years, mainly due to
the rise in population.

Through Make in India concept the government gives subsidy to share some
portion of the expenditure. The following chart gives the clear picture about the
current scenario
 R&D BENEFITS:
Industry/private sponsored research programs:

 A weighted tax deduction is given under section 35 (2AA) of the Income Tax Act.

 A weighted deduction of 200% is granted to assesses for any sum paid to a national
laboratory, university or institute of technology, or specified persons with a specific
direction provided that the said sum is used for scientific research within a program
approved by the prescribed authority. Companies engaged in manufacture having an
in-house R&D centre:

 Weighted tax deduction of 200% under section 35 (2AB) of the Income Tax Act for both
capital and revenue expenditure incurred on scientific research and development.
Expenditure on land and buildings are not eligible for deduction.

 A national centre to help develop bulk drugs and facilitate their research is being set up
in Hyderabad.

R&D destination
The privatisation and globalisation policy of the government of India in the mid-1990s
provided incentives to R&D in the pharma sphere. Innovative products were given exemption
from price control, a number of financial schemes were made available to firms for
undertaking R&D, technology collaborations were brought under the automatic approval
route, and patent rights were granted for a period of 20 years for products as well as
processes.

 Cost effectiveness: The cost of setting up world class R&D facilities in India cost a
fraction of what they do in the west. The overall R&D costs are about one-eighth and
clinical trial expenses around one-tenth of western levels;17
 Skill: A large pool of English speaking technical skill power is available at a low cost
with highly developed R&D oriented skill sets;
 Established R&D centres: Pre-established state of the art R&D centers offer logistic
convenience and cost effectiveness;
 Growing biotechnology industry: Indian biotechnology industry has grown by leaps
and bounds and has some world class players;
 Market access: India is one of the fastest growing markets in the world. R&D in
India allows companies to gain a foothold in this new and growing market;
  Rising household incomes: The growing middle class in India is an attractive market
for drugs. With increasing disposable incomes, the market for non-essential drugs, is
set to grow rapidly;
 Governmental incentives: Post the liberalisation era, the Indian government has
offered numerous incentives to R&D in India; and
 Biodiversity: Some drugs aimed at the Indian market require certain gene specific
R&D and clinical trials. India’s rich genetic bio diversity offers a perfect destination
for such R&D and clinical trials.

Pharma R&D in India is expected to witness exponential growth in 2020 and with the growth
of the economy and pharma industry in India; innovation assumes new economic importance
in the Indian pharma industry.

5. CONCLUSIONS
(i) Producing pharmaceuticals is a complex process that requires a reliable, high quality
supply of raw materials, technical expertise and a stable supply of electricity, gas and other
utilities, plus sufficient human resource capacity with PhD-level scientists and expertise in
pharmaceutical process and regulation. Pharmaceutical plants are capital intensive and take
many years to develop and tend to be located in countries with good infrastructure, reliable
utilities and access to technical expertise.

(ii) “To make India the Largest Global Provider of Quality Medicines at Reasonable Prices.”
The Vision is to be achieved as per the following Mission:

• Develop Human Resources for Pharmaceutical Industry and Drug Research and  
Development

• Promote Public‐Private Partnership for development of pharmaceuticals Industry

• Promote Pharma Brand India through International Cooperation

• Promote environmentally sustainable development of Pharmaceutical Industry

• Enable availability, accessibility and affordability of drugs  

(iii) Future of Indian pharma

The Indian pharma industry has come a long way and made significant progress in
infrastructure development and technical and R&D capabilities. With the integration of the
Indian pharma market with the global market, new issues are being faced and tackled by the
industry. Some old challenges such as IPR and pricing continue to be contentious issues in
the market. The trends of increased foreign interest in the markets and increased investments
in R&D are expected to stay. With numerous strengths and a growing consumer class, the
pharma industry in India may face certain legacy and new issues, but it is expected to grow
multifold and continue to be an attractive investment and reach the destination in 2020

References:

1. FDI statistics, Department of Industrial Policy and Promotions, Ministry of

Commerce and Industry, Government of India. Available at
(http://dipp.nic.in/English/Publications/FDI_Statistics/2014/india_FDI_Septe
mber2014.pdf)
2. Current Issues in Indian Pharmaceutical Industry -
iPleaders http://blog.ipleaders.in/current-issues-in-indian-pharmaceutical-
industry/#ixzz3iAqDl0bA

3. Source:- http://www.sciencebasedmedicine.org/?
4. #Data pertains to Q2 2014-15 STATUS OF MANUFACTURING SECTOR
The situation of the manufacturing sector in India is a cause of concern
5. :http://www.sciencebased medicine .org/?
6. : http://www.indiainfoline.com/article/news-economy/state-of-indian-
economy-banking-factoring-services-rbi-
113111801586_1.html#sthash.oVWiUPY1.dpuf
7. Source: New England Journal of Medicine
8. Book Source 2: Financial Management-I.M.Pandey, Vikas Publishing

 
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