India: Multinational Pharmaceutical Companies Benefiting From Increasingly Sophisticated Indian Services

With the introduction of India’s new patent regime in January 2005, multinational pharmaceutical companies are increasing their presence in the Indian drug industry. The number of global pharmaceutical companies looking to benefit from partnerships with Indian companies has been increasing steadily. Indian companies have been working to attract foreign investment by increasing their range of services and also by meeting international standards of production. This environment has resulted in rapidly growing numbers of alliances, mergers and acquisitions between global companies and Indian companies.

Global pharmaceutical companies can benefit from the low-cost services that Indian facilities provide. Many multinational firms are looking to India as a low-cost and safe market for contract research and contract manufacturing. In order to meet the demand for these services, Indian pharmaceutical companies are becoming increasingly US FDA compliant. There are currently more than 60 FDA approved pharmaceutical plants in India. GMP compliant manufacturing plants number more than 200. These numbers are increasing as Indian companies strive to attract more outsourcing contracts.

For instance, the agrochemical producer, Hikal (Mumbai, India), decided to enter the drug industry 2001 by purchasing a pharmaceutical ingredient plant. Hikal renovated the facility in order to meet GMP standards and received US FDA approval in 2004.

The global market for outsourced pharmaceutical research is worth close to $60 billion. Indian companies contribute less than $200 million to this total. With Indian companies becoming compliant with international standards and multinational companies increasing their outsourcing to India, this market share will likely experience rapid growth.

As a large number of patents expire in the coming years, the growth in Indian companies’ ability to provide generic contract manufacturing services will become increasingly important to multinational firms. Approximately $45 billion worth of drugs are expected to go off-patent over the next four years. India’s experience in the generic market, combined with increasing use of generic drugs in the west, will make partnerships with Indian drug companies an invaluable resource for global companies in the coming years.

The growth in the number and quality of services that Indian companies can provide has been helped by favorable government policies toward the pharmaceutical industry. Currently, the Indian government grants a tax exemption of 100% on the profits of companies that carry out in-house R&D. Indian pharmaceutical companies are taking advantage of their current situation and they are becoming increasingly sophisticated. They will only become more and more important to the global pharmaceutical industry.