The Hindu Business Line : `Price may not be trump card for domestic drug cos for long'

Mumbai June 3 Competitive pricing may not be a trump card for too long and Indian drug companies will have to start looking over their shoulders, as competition hots up from East Europe and other regions in Asia.

Price is what brought Mr Tim Berry, Eli Lilly's Associate Sourcing Consultant for Global Procurement to India. But as a "sourcing person", he looked for economies of scale and Europe seems to be responding and becoming more competitive, he told representatives from the pharmaceutical industry.

Cautioning the local industry from falling into a sense of complacency, he said, regions in Europe had built excess capacities in anticipation of more deals and they have been able to come close to Indian levels of pricing. Pricing pressures, environment, health and safety issues and the weakening dollar further skew the equation against sourcing from India, he observed.

Quality & Speed

And though India has started honouring product patents, there still seems to be intellectual property-related concerns, said Dr Michael Kolb, Vice-President, Chemical Development with Wyeth Research. Though India increasingly features on the radar of multinational companies, in some cases, the clincher for the Indian company was, rather paradoxically, its presence overseas.

Wyeth, for instance, was talking to companies, including Shasun for outsourcing opportunities.

But, a drug development project, if it came through, would be outsourced to Shasun's Rhodia plant in the UK, he indicated. Chennai-based Shasun had acquired Rhodia last year. Earlier, cost was the only concern, he said. But now quality and speed are becoming important factors, as well, he points out.

Currently, India boasts of the largest number of US Food and Drug Administration-approved manufacturing facilities (more than 70) outside the US. But the Rabo Bank's Executive Director, Mr Anand Dikshit, points out that contract manufacturing was easy business, as the money came in and the margins were good. But as China, Mexico, Turkey and Eastern Europe shore up their capacities, "margins will shrink and the balance sheet parameters will not look so robust", he pointed out. Lenders of financial resources will then start to ask for their pound of flesh, he said.

Strengths

Boehringer Ingelheim's Corporate Senior Vice-President and Head of Global Licensing, Dr Klaus Wilgenbus, observed that the local market has strengths in pharmaceutical development and chemistry, especially in process chemistry but also to a lesser extent in medicinal chemistry. And on a general scale, area-specific pharmacology may not yet be fully competitive, compared to the US and European standards, he said.

As countries like Korea and Taiwan become more advanced, India will have to look at more research-driven deals, like Merck's research deal with Advinus or the GlaxoSmithKline-Ranbaxy deal, he pointed out.

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