East meets west: India becomes a world manufacturing hub
As India leverages European technology to become a world manufacturing hub, the global ambitions of its pharma industry provides lessons for US and European big brands, says Abhishek Bardhan, M+W Products.
With Europe’s acknowledged role as pioneers, longstanding experience and reputation in cleanroom manufacturing, businesses are working together with emerging markets to help create a broader marketplace for pharmaceutical manufacturing.
The opportunities for win/win in best practice and cost control for global players in the pharma industry are substantial especially for one such emerging market - India. It is well documented as an attractive place for businesses looking to invest in due to its recent growth, strong democracy and growing standards as well as its high numbers of skilled staff. What’s more India itself is fast tracking its presence on the global pharmaceutical manufacturing scene, and deploying smart strategies.
According to figures cited by the Indian government last year globally, the Indian pharmaceutical industry is ranked third largest in volume terms and 10th largest in value terms.[i] The sector is highly knowledge-based and its steady growth is positively affecting the Indian economy. In addition to the relatively low cost-base, the organised nature of the Indian pharmaceutical industry is attracting several companies that are finding it viable to increase their operations in the country. In terms of value, exports of Indian pharmaceutical products increased at a CAGR of 26.1% to touch US$ 10.1 billion during FY06-13.
Currently, the Indian pharmaceutical industry is highly fragmented with about 24,000 players (330 in the organised sector). The top ten companies make up for more than a third of the market.
Already major manufacturers based in the sub-continent have flexed their muscles with a flurry of M&A activity, with clearance to enter North America. The US market alone accounted for nearly 30% of India's medicine exports of $15 billion in the fiscal year through March 2014.
Europe’s reputation for quality and precision finished products, and German engineering excellence in particular, is still the order of the day with emerging markets keen to learn from years of experience. In 2012, Europe’s pharmaceutical trade surplus was estimated at €80 billion[ii].
The advantage that India has over other emerging markets is a plethora of highly skilled engineers and technology graduates providing a ready-made low cost labour market. They cover the most sophisticated of manufacturing processes from R&D to world-leading production regimes. This is in sharp contrast with Europe where the skills gap for engineers has placed a premium on such as a precious resource.
Times are changing, however, with emerging markets gaining a foothold. For many BRICS economies, the question is how they manage to compete on a world stage with the developed regions such as Europe. The answer is simple – through partnerships. Indian pharmaceutical manufacturers are leveraging the expertise and brand strength of European engineering organisations to build cleanroom facilities that provide environments for the manufacture of pharmaceuticals that meet stringent regulations across the globe.
The strength of the pharmaceutical market in India is gaining traction and growing with investments continuing to pour in, largely through mergers and acquisitions. With many Indian drug companies investing outside of India as well, confidence in the market is growing from both sides. The benefits for European engineering organisations to partner with Indian pharmaceutical manufacturers lies largely in the cost benefits. Due to availability of skilled labour, India has the ability to deliver cost efficient programmes. Pharmaceutical manufacturing projects can cost between 30 and 40 per cent of manufacturing projects in the U.S, a significant reduction in costs leaving cash left over for investment or future projects. One of the main reasons why India’s pharma market has catapulted to become a significant player is the amount of government support it has received. With the implementation of ‘PharmaVision 2020’ the Indian government is aiming at making India a global leader in end-to-end drug manufacture.
I am general manager at M+W Group’s India office, and have experienced the growth of pharmaceutical manufacturing over the past decade. One of the key challenges is the lack of readily available advance technology products for facilities which are needed in order for India to deliver its pharmaceutical manufacturing at global standards. European engineering and products have strong reputations of engineering excellence and pharmaceutical companies in India are cottoning on to the benefit of partnering with such organisations. There is an incredible amount of research and development already taking place in the Americas and across Europe. Rather than follow the same route yet remain 50 to 100 years behind many organisations, businesses are realising that a combined approach to building up the Indian pharmaceutical manufacturing industry is ideal. Furthermore, these partnerships help Indian Pharmaceutical companies deliver global levels of safety and quality while adhering to the levels of FDA and GMP standards which are essential for their products to be acceptable globally.
M+W Products’ experience in India is demonstrating that European/Indian partnerships are proving beneficial to both sides.
[i] http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/347/1