CMOS- SUPPORTING THE PHARMA INDUSTRY
The Indian pharma industry has shown tremendous progress on several indices such as infrastructure, technology, product range, GMP, regulation compliant manufacturing facilities. Also, the high quality standards of purity; stability and international safety; health and environmental protection under which bulk active ingredients are manufactured and supplied by Indian pharmaceutical companies ensure that they will pass through several rounds of stringent assessment by various regulatory authorities. India has already gained a foothold in the global arena of export due to its high proficiency in manufacturing fantastic quality of drug products. Moreover due to the high number of CMOs available, Indian pharma is looking for better prospects.
The Indian Pharma industry poised to grow to $100 billion by 2025 has unfailingly been on a strong growth trajectory for many years now. But given the very nature of its business, the pharmaceutical industry is continuously faced with challenges such as cost aspects and stricter regulations, to name a few. In this regard, the industry’s response has always been towards creating novel approaches and techniques to overcome the obstacles and move forward. Outsourcing of various development and manufacturing operations to third party vendors is one such approach pharma companies have been seeking for quite some time. At present, with around 700 US
Food and Drug Administration (USFDA) approved pharmaceutical manufacturing facilities, accounting to close to 40 per cent of the total facilities, India has the highest number of such facilities outside the US.
But the very recent ban on 328 combination drugs announced by the government has come across as a big blow for many domestic pharmaceutical firms. These fixed-dose combination (FDC) medicines, which are a cocktail of two or more active drugs packed in a single dose, accounts for at least one-fourth of the total pharma market which is valued at Rs 1.3 trillion. What remains to be seen is that how this development
will impact the pharma sector in the long run.
The present pipeline of pharmaceutical products is increasingly complex and requires specialized facilities, equipment and operational expertise. Small molecule drugs account for nearly 90 per cent of the therapeutics in the pharmaceutical market. Last year, FDA’s Centre for Drug Evaluation and Research approved 34 small molecule drugs. This represents an annual growth of nearly 56 per cent, signifying the growing importance of contract manufacturing in the overall pharmaceutical industry.
Over the years, the contract manufacturing market has grown into a prominent and promising segment of the overall pharmaceutical industry. Since 2000, globally close to 150 new Contract Manufacturing Organisations (CMOs) have been established, offering cost-efficient solutions to several stakeholders in the industry.
The current global CMO market is highly fragmented but characterized by multiple mergers and acquisitions (M&A) as stakeholders strive to broaden their respective service portfolios. This has enabled several CMOs to
start offering end-to-end services, ranging from drug development, including preliminary R&D, preclinical and clinical trials, to commercial scale production and regulatory filings.
A continued high level of M&A activity is expected over the next five years, leading to further consolidation of the contract services market. The key driver is the desire of contract manufacturers to provide integrated service offerings across the entire pharmaceutical development cycle from discovery to commercialization (APIs and formulated drug products) and lifecycle management. The number of CMOs transforming themselves into contract development and manufacturing organizations (CDMOs) reflects this trend, as does the rise in the number of primary contract manufacturers that have expanded into secondary (finished dose) manufacturing (and vice versa) through mergers or acquisitions.
Understanding the Dynamics
As per the Mordor Intelligence 2017 report, the dynamics of the global pharmaceutical contract manufacturing market can be better understood by means of two broad segmentations- Region and Type. By region, the five market segments are North America, Europe, Asia Pacific, Latin America and the Middle East & Africa. North America holds a lion’s share of the market, with an approximate share of 36 per cent, followed by Europe and Asia-Pacific.
The emerging markets of China, India and Japan are spearheading the growth in the Asia-Pacific region.
By type, the three Pharma market segments are active pharmaceutical ingredient (API), final dosage formulation (FDF) and secondary manufacturing. The growth in the API market is driven by several factors such as the increase in development of biological
APIs, increase in demand for API packaging, upsurge in demand for abbreviated new drug applications (ANDA) and rise in drug master files (DMF) from Indian companies. Also, API packaging is a significantly revenue-generating sub-segment. Even though captive manufacturers are currently leading the API market, they are expected to eventually partner with contract manufacturers to overcome the challenges of complex and costly in-house API manufacturing and increasing competition.
Due to restructuring of the pharmaceutical industry, API CMOs are expected to witness a strong surge in demand, particularly in the generics sector. Additionally, regulatory developments in the markets would let generic drug companies develop and manufacture products for export, worldwide. However, demand for specialized technologies and improvements in pharmaceutical manufacturing capabilities, could
steer some companies to return to sourcing their APIs from suppliers. But contract manufacturing, like other forms of shared services or outsourcing has two sides to it. There are both benefits and risks associated with it. The nature of possible risks that could possibly have performance repercussions could range from direct economic ones, such as poor contracting decisions and expensive renegotiations; and the other contingency factors such as quality risk arising out of the aging manufacturing facility.
With more than 100 pharma companies and 500+ units involved in contract manufacturing, India is the third largest pharma manufacturer in terms of volume and thirteenth in terms of value, contributing about 10 per cent to the global production. The country is way ahead of its competitors in Drug Master File (DMF) filings that is going up more than three times for the last few years. India is the largest exporter of formulations in terms of volume, with 14 per cent market share and 12th in terms of export value. Drug formulation exports from India reached $ 7.25 billion during April to November 2017.
The Indian pharma industry has shown tremendous progress on several indices such as infrastructure, technology, product range, GMP (Good Manufacturing Practices), regulation compliant manufacturing facilities. Also, the high quality standards of purity; stability and international safety; health and environmental protection under which bulk active ingredients are manufactured and supplied by Indian pharmaceutical companies ensure that they will pass through several rounds of stringent assessment by various regulatory authorities in the importing countries of buyer companies.
With 600 to 700 US Food and Drug Administration (USFDA) approved pharmaceutical manufacturing facilities, accounting to close to 40 per cent of the total facilities, India has the highest number of such facilities outside the US. USFDA given drug approvals to Indian companies have almost doubled to 201 in 2016 from the previous year’s 109. India has an important role in the production and supply of drugs at international level, as, currently over 80 per cent of the USFDAapproved antiretroviral drugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied by Indian pharmaceutical firms.
The most important factors that are likely to keep contract manufacturing in the Indian Drug & Pharmaceuticals Industry in good stead in the global market include: 1. Fast approaching patent expiries; 2. Availability of adequate compliant facilities in the country to meet high magnitude of demand; 3. Rise in
production approvals or licenses and supply contracts with overseas companies; 4. Changing preferences in regulated markets for generic compositions to keep the rising health care costs under check.
The draft pharmaceutical policy 2017, floated by the ministry of chemicals and fertilizers for stakeholder opinion last year, had pointed out Indian industry’s increasing dependence on imported raw materials - active pharmaceutical ingredients and key starting materials - to manufacture finished dosage formulations. The policy proposed to phase out loan licensing which is a variant of contract manufacturing that accounts for 40 per cent of total drugs production in the country, to improve drugs quality. Many pharma companies rely on loan licensing for
manufacturing and focus on sales and marketing. Thus, phasing out of loan licensing will force pharma majors to develop in-house production capacities.
Through ‘Pharma vision 2020’, the Government of India is aiming at making India a global leader in end-to-end drug manufacture. Under this campaign, the approval time for new facilities has been reduced to encourage and boost investments. Plans by the Government to incentivise bulk drug manufacturers, including both state-run and private companies as a part of its ‘Make in India’ programme is intended to reduce dependence on imports of API, of which nearly 75-85 per cent is currently imported from China.
However, the recent ban on 328 combination drugs by the government has raised few concerns on the business of pharma contract manufacturers. The final impact of this development is yet to be seen. As of now, India has already gained a foothold in the global arena of export due to its high proficiency in manufacturing fantastic quality of drug products. Moreover due to the high number of Contract Manufacturers available in India there is a wide spread growth of Indian pharmaceutical industry making them a Building block of Indian pharmaceutical industry.