The decreasing number of small and medium pharmaceutical enterprises may lead to a disproportionate price increase in drugs, warns a small scale pharma industry association in India.
The pharmaceutical industry in India is expected to grow at a steady pace and attract more foreign companies. However, small pharmaceutical contract producers tend to be elbowed out by the market’s overcapacity and face threat of closure. The number of small pharma units has fallen sharply in recent years, especially as larger companies have begun to expand their manufacturing capabilities. These expansions have cut down on the need to contract manufacturing work to smaller firms, Business Standard says. T S Jaishankar, chairman of the Confederation of Indian Pharmaceutical Industry (CIPI), said, “For instance, we had around 300 licensed manufacturers as active members in Tamil Nadu five to seven years back. Now it has come down to 124.”
Across the country, the CIPI reported around 3,000 members five years back. Now the number has come down to 1,000 units. Furthermore, another 50 percent are feared to be at risk of closure due to cutthroat competition in the market.
Overcapacity in the country driven by regulatory barriers in target nations and out-sourcing has forced the shutdown of many companies. Chairman Jaishankar said, “Initially, the large companies came into India without wanting to set up facilities, and only focusing on marketing. SMEs saw this as an opportunity and built up facilities. In fact, they had already gone halfway in setting up the plants when the reality hit them, during 2009-2013… Probably this could be the start of consolidation in the sector. We have to accept that. We are sensitizing the remaining players to think differently and bring in value addition and focus on certain segments in the future.”
According to Jaishankar, SMEs need to refine their offerings in order to stay afloat. “The only way for small-scale units to grow is to focus and specialize in particular sectors, for instance, by selecting 10 or 20 products,” he said.
Adding value such as acquiring expertise in novel drug delivery systems (NDDS) could also help pharma SMEs stay afloat, says CIPI. Chairman Jaishankar said. The Indian government has also announced tax incentives in locations such as Baddi in Himachal Pradesh to help boost growth prospects of pharma units.