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Status of Small Scale Drug Formulation Units

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Indian pharma industry

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The Indian drug industry can be divided into bulk drugs segment and

formulations. The industry produces about 60,000 finished medicines and roughly 400

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bulk drugs, which are used in the formulations. India is one of the top five producers of

strides over the years. Today the industry is manufacturing practically the entire range of

bulk drugs in the world. The Indian drug and pharmaceutical industry has made rapid
the therapeutic products; it is capable of producing raw materials for the manufacture of
a wide range of bulk drugs from the basic stage and a range of pharma machinery and
equipment. The industry has achieved global recognition as a "low cost producer of
quality bulk drugs and formulations". Leading Indian companies have established

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marketing and manufacturing activities in over 60 countries including USA and Western

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Europe. The phenomenal progress made by the industry over the years is depicted in

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Tables 1.

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Table 1. Temporal progress of the pharma industry

Status

1950s

Formulations

1960s

Formulations

1970s

Formulations

Some imports.

Bulk drugs

Indigenous manufacture by domestic

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Year

Mostly imported MNC dominance

Domestic endeavor on imported bulk drugs

companies

Bulk drugs

Significant indigenous manufacture (based

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Significant exports, minimal imports (< 2%)

Self reliant (exports > imports)

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Bulk drugs

on domestic R&D)

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Formulations

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1990s

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Marginal imports (<5%)

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Formulations

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1980s

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Pharmaceutical industry in India is quite strong in global terms. Total annual sales

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of pharmaceuticals are put at Rs.25, 000 crores as per the date available for the year

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2004-2005. In terms of the volume India accounts for 6-8% of the total products of
pharmaceuticals in the world. In world ranking India stands 4th in terms of volume. In

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value terms India occupies 13th position in the world. Annual growth rate of Indian

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pharmaceutical industry is greater than 15%, the world average being 10-12%. There are

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more than 15000 units in India, engaged in the manufacturing of various pharmaceutical

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formulations. Almost 60% of the production is from the organized sector comprising of

about 40% of the annual production. State wise most of the units are located in the state

300 units. The rest of the unit belongs to small and medium sector and accounts for

of Maharashtra followed by Gujarat, Andhra Pradesh and Tamilnadu.

Though the per capita consumption of drugs is highest in Kerala as compared to
the rest of India, only less than 2% of the states requirement is produced within the state.
The growth of the market is equal or more than the national average of 15% per annum.

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Product range includes all major categories like Antibiotics, Anti-inflammatory Drugs and

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other common remedies. Pharma industry in the SSI sector is still in its infancy in Kerala.

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Majority of the unit depends on Governments requirement for the health services alone.

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There are some units doing contract manufacture also. Manufacturers engaged in ethical

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marketing are very few in numbers.

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Data related to the industry in Kerala is given below:

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Annual growth rate

15%

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Number of active units in SSI sector

50 crores

Liquid orals

25 lakhs liters

External preparations

10,000 kg
lakhs

vials/

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bottles

Employment Potential

1000 directly

Employment Potential

1000 indirectly

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Rs.5 crores

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Export potential

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25 lakhs liters

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Large Volume Parantrels

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Ophthalmic/ Otic/Nasal drops

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Capsules

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100 crores

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Tablets

Combined annual production capacity

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Kerala Pharmaceutical Manufacturers Association (KMPA) is the only association

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representing the manufacturers of Kerala.

Thiruvananthapuram

940 lakhs

Kollam
Alappuzha
Pathanamthitta
Kottayam
Idukki
Ernakulam
Palakkad
Thrissur
Malappuram
Calicut
Wayanad
Kannur
Kasargode

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5
8
18
3
7
65
138
5
192
12
2

160 lakhs

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Employment Export
Potential
Potential/Export
during last three
years
267
Curretly
exporting to
Bahrain, U.K,
West Indies and
Hongkong
63
Nil

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Production
Capacity

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No: of
Units
engaged

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District

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Status on Small Scale Drug Formulation Units in Kerala

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36
93
29 crores
733
251
17.50 crore 498
1264
8 crores
111
520
73
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2.95 crore

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40 lakhs

The SWOT prospective

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Conducive business environment gives top priority to pharmaceuticals,

drugs and bio- tech industries, several fiscal incentives announced.
The products are of high standard in terms of quantity, thanks to
stringent implementation of GMP by State Drugs Control Department.
Developed infrastructure - Transport, power, water availability
comfortable.
Existence of auxiliary industries, such as the packaging units
Institutional support from DICs and SISI are commendable
Weaknesses

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Outsourcing of raw materials, extreme dependency of supplies

With large firms/Group of Companies/MNCs being in majority, do not
require much of assistance, small industries (which are less in number)
are left to fend for themselves. No collective approach/ bargaining to
redress problems.

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Strengths

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are left to fend for themselves. No collective approach/ bargaining to

redress problems.
Absence of common facility testing labs, R&D labs within the state
Weak capital base forbidding small units to invest further fearing poor
viability
Lack of exposure to enter export market

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Opportunities

Ever expanding demand, both domestic and overseas

Scope for expansion and additional units for generic drugs
Proximity with Mumbai for raw materials, export and testing facilities
Globalization
Peaceful Social Climate with communal harmony
Threats

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Product Patent Regime w.e.f 2005

Schedule M involves additional cost, threat perceptions on viability &
commercial feasibility
Cut- throat competition, both domestic and external.
Globalization
Ceiling on product prices
Documentation & procedural hurdles in export marketing
Flow of unchecked spurious drugs

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Problems faced by the industry

Infra structural facilities like industrial parks exclusively for pharmaceutical

production are non-existent in Kerala.

Incentives for pharmaceutical sector are minimal form the state government.
The government has now reduced the price preference to the SSI sector for
government tenders to 10% from 15%.

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Supports from financial institutions are not forthcoming.

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Even though SIDBI has special schemes for modernization and expansion of

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pharmaceutical industry, accessibility for direct financing from the institution is

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poor for units located in semi-urban or rural areas. Banks nationalized or

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otherwise, located in such areas are reluctant to advance loans under refinance

from SIDBI. Recent decision by SIDBI to have more branches in southern India,

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might remedy the situation to a great extent.

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Due to financial constraints and non-availability of the right source, the current
technological advances have not reached the manufacturers.

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The government has revised the schedule M, which deals with the GMP norms, of

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the drugs and cosmetics act to make the quality of the drugs produced comparable

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with international standards. The manufacturers are to invest heavily in plant and

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the manufacturers. But the majority could not utilize these as they had either

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machinery to comply with these stipulations. SIDBI had certain schemes to help

completed their projects before the schemes were declared, or were not able to do
so within the period stipulated by SIDBI

Strict compliance to Schedule M of the Drugs & Cosmetics Act (A statutory

requirement for pharma units)
Adherence to international standards of quality

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Enhancement of investment level so as to be classified as an SSI

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Huge investments for establishing in-house R&D and testing facilities

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Spurious drugs flooding the market

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Lack of waste disposal facilities

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There is an urgent need to make the latest technology available as the industry is

highly competitive and fittest only will survive.

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Adherence to international standards of quality

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Enhancement of investment level so as to be classified as an SSI

Shortage of raw materials

High Labor charges

Delay in obtaining license

Suggestions for the development of the industry
Task Force to Boost Exports.
International Promotional activities.

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Buyback arrangement

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Online pharma marketing

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Incentives for exports

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Tax concessions and investment incentives

Awareness on quality to encourage exports.

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Create awareness on issues like Globalization, WTO, IPR, Patent Laws & GMP,

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Educate small entrepreneurs with cost-cutting techniques such as waste

minimization, cleaner production methods, energy conservation for improved

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productivity & profitability,

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Enhance competitive strengths; explore possibilities of export marketing,

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Develop managerial skills in areas like TQM, QMS including Time & Knowledge

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management, and

modernization.

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Ensure credit flow for technology up gradation, product quality improvement &
Try out formation of consortia for commercial gains.
The interest subsidy scheme declared by the government is yet to be implemented.
SSI sector of the state used to enjoy price preference of 15% for government
tenders until 2004. Since 2005 onwards, however, this has been reduced to 10%.

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Restoring price preference to 15% will definitely be an incentive to the small scale

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formulation units of the state.

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Formation of a Pharma cluster in Kerala: The cluster could have common raw

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material procurement and storage facility, central lab for R&D activities and testing

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of products, and preferably common marketing arrangement.

75% of the governments purchases to be resaved for the SSI manufacturers of the

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state with 15% price preference. Alternatively, Government may supply the raw

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materials for the products required, to the manufacturers and get the products

manufactured under loan license from them. The government will get the products

at the lowest possible rates and the manufacturers will be benefited by the

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conversion charges collected.