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Panacea for Indian SME Pharma Segment

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Though pharmaceutical industry is a billion-dollar business in India, contrary to common belief SMEs play a major role in the in the sector. Already, the products of the SMEs have made their presence felt both in domestic and overseas market. The low cost and the high quality have enabled them to conquer the market.

They have achieved low price and high quality – the two critical factors for the success of any industry – by complying with Good Manufacturing Practices (GMP). This has been approved by leading global regulatory agencies such as World Health Organisation (WHO) and United States Food and Drug Administration (USFDA).

Indian SMEs have mastered in the art of drug making through rearrangement of molecule strategy, which was permitted before the enactment of patent law in the country. Coupled with this cheap, but highly efficient labour, around one seventh of the costs in the developed countries had made Indian pharmaceutical companies a formidable player in the world market.

Now corporate players in the field including the multinational pharmaceutical companies whose costs are prohibitively high are looking to SME pharmaceutical firms in India to outsource their production and research programmes.

This has opened up a big opportunity to Indian pharmaceutical SMEs, but they face one major obstacle in grabbing the opportunity. Their research facilities do not match with the Western standards. Though their manufacturing capabilities are superb, Indian SMEs are finding it difficult to keep up with the pace of research and development in technologically advanced countries.

The prime reason for the Indian SME pharmas lagging behind companies in developed counties in research facilities is the severe shortage of fund they are facing. A modern research lab entails state-of-the art technology like specialized automation system and several
sophisticated and costly equipment. Hence setting up of   research
facility is a very costly affair and only big players in the sector can afford the system in the present situation.

The paradox is that without quality and genuine drugs, pharmaceutical companies cannot exist in the environment changed by the enactment of the patent law by almost all the countries in the world. However, there is a silver line on the cloud for the Indian SME pharmas.

To overcome the limitations resulting from the lack of capital investments, the Indian SMEs can adopt the Contract Research and Manufacturing (CRAM) practice. This time- tested business practice elsewhere in the world can provide a highly effective financial boost to SME pharmas in India. Some firms have already adopted this line and emerged ideal partner for the global pharmaceutical players looking for a partner that can offer manufacturing and research service at competitive price.

Many market analysts aver that the CRAM is very effective business model as far as the Indian SME pharmas are concerned.

''This equips the Indian SMEs pharmas to offer the quality research and manufacturing facilities at a competitive price to pharmaceuticals companies elsewhere in the world, who are looking for outsourcing their business, '' says Sunil Metha, a pharmaceutical business analyst.

In fact, already, several SME pharmas in the company have availed themselves of the facility and Indian firms have become one of the major beneficiaries of the facility. Market experts predict that within three years, Indian will emerge as the hub of the Contract Research and Manufacturing business. Then Indian pharmaceutical SMEs can provide a wide range of low-cost services in research and manufacturing.

Low cost production and amendments made in India’s patent law have generated immense CRAM opportunities for Indian SMEs. The CRMA market is expected to grow at 13 per cent to touch $ 78 billion by 2011.

It is expected that the patent for drugs worth around $ 75-80 billion will expire by 2011. Then all companies are free for manufacturing these drugs. This will generate massive manufacturing opportunities to Indian SME pharmas. The market analysts estimate that Indian SMEs will get 40 per cent of manufacturing of these drugs through outsourcing contract.

Since it is certain that all major companies will tap this opportunity and wide their product band, there will be a mad scramble in the market to grab the largest chunk of the market share. In such a crowded market condition, companies can even make their presence felt only by offering the products at low prices. And it offers a good opportunity to Indian SME pharmas.

Industry sources say that global companies are looking for Indian partners to outsource the manufacturing of these drugs. Some firms have already inked deal with Indian partners.

This apart, says experts, the Indian SME pharmas can offer service of the clinical trials of the newly formulated drugs.  Considering the sizeable costs associated with these operations, SMEs in India can offer to conduct the contracted job at lower costs with financial aid from sponsors.

The other area where the SME phrarms can joint hands with the major players is in the process of developing new drugs. The formulation of a new drugs consisting of different stages such as subject, synthesis, classification, screening and assessments of the therapeutic efficiency. To complete each stage need huge fund and the big pharmaceutical companies can cut cost of each of these stages by making use of Indian SMEs through the CRAM. Experts are of the view that Indian SME pharmas need to grab this opportunity, which promises consistent business prospects for the Indian pharma sector.

The market analysts point out that the Indian SME pharmas has much-needed well-trained and efficient manpower and world-class manufacturing facilities. If these are effectively utilized with the backing of the CRAM system, the Indian SME pharmas can emerge a global player in the pharmaceutical sector.

 

Last Updated ( Monday, 05 July 2010 17:26 )  

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