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China Plus One strategy being pursued by global multinational companies (MNCs) has only affirmed the position of India as the most preferred destination for outsourcing research and development along with manufacturing of APIs (active pharmaceutical ingredients), said Manoj Mehrotra, president, Pharmaceuticals, Hikal.
Covid pandemic saw the advent of the China Plus One model which is a calculated business strategy to avoid investing only in the Dragon Land. The intent was to divert the manufacture to other countries. This helped to offset the dependence only on one country in the wake of supply chain disruptions.
During the phase of the Covid spread, Mehrotra said that the Indian API manufacturing industry garnered extensive support from the Union government as various policies and initiatives like the Make in India campaign and the establishment of special economic zones (SEZs) came in. Additionally, the government made concerted efforts to improve the regulatory environment. It also announced the production linked incentives (PLI) scheme. In addition, the industry has also seen an increase in investment from foreign companies and an increase in the number of domestic companies opting for API manufacture, he added.
India’s comparative advantage comes from its chemistry-savvy workforce, vibrant entrepreneurial ecosystem, and a well-trained personnel who comprehend the global regulatory requirements. This also provides an impetus to the highly cost-efficient contract manufacturing setup in India, Mehrotra told Pharmabiz.
API industry in India is the second largest globally in terms of volume, and it also contributes approximately 57 per cent to prequalified list of the WHO. Quoting a recent report, Mehrotra said that this segment is valued at Rs. 798 billion in 2020 and is projected to reach Rs. 1,307 billion by 2026, at a CAGR of 8.57%.
One of the major factors driving the growth of the Indian API industry is the increasing demand for generic drugs. The Indian generic drugs market stood at US$ 24.53 billion in 2022 and is expected to grow at a steady CAGR of 6.97% during the forecast period. As the patents of many branded drugs expire, generic versions of these drugs are available at much lower prices. Indian API manufacturers will be able to capitalize on this trend by producing high-quality generic drugs at a fraction of the cost of branded drugs, noted Mehrotra.
The PLI scheme is expected to supplement further to India’s comparative advantage and reduce the import dependence of key starting materials (KSMs), from China. This will further boost API manufacturing, enable manufacturers to expand operations and increase their competitiveness in the global market, he said.
Therefore the future of Indian API is promising as the demand for generic medicines is expected to increase not just in India but from global quarters too. With an increasing focus on research and development and supportive government policies, Indian API manufacturers are well-positioned to capitalize on this growth opportunity. However, the industry also needs to address the issue of quality infrastructure to ensure that Indian-made APIs meet international standards, said Mehrotra.
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