The global movement to de-risk from China has presented opportunities for India. Karan Singh, Managing Director of ACG, a multinational pharmaceutical company based in Mumbai, spoke to BT about what will it take to shift the backward integration of pharmaceutical products to India. He also talked about challenges and benefits of PLI scheme of India, and digitalisation of the pharma industry. Edited excerpts.
BT: How do you think India can build a sustainable ecosystem for the pharmaceutical industry?
Karan Singh (KS): For India to bring back the manufacturing of APIs and raw materials in an environmentally responsible manner, a key pre-requisite is building a sustainable ecosystem for the pharmaceutical industry. Along with economic incentives for production, R&D and innovation, the government must provide centralised infrastructure support, reasonably priced power and energy supply and industry cluster level waste management systems for effluents. This will ensure we’re not only capitalising on the present global trend of de-risking from China but building sustainable businesses that can cater to the global and local demand for medicines well into the future.
We need to evolve beyond how we traditionally approach production activities in India and go for a sandbox approach that helps in containing the impact of failures. In my opinion, attaining ‘Atmanirbharta’ lies in developing an ecosystem of ‘smart’ pharma parks which embrace next-generation technologies.
As regard to China, the government strategically supported its core industry when India opened its economy in 1990 allowing free imports of key active pharmaceutical ingredients (APIs) hitherto procured locally, based on economic viability. By early 2000s, China became the largest supplier of key raw materials for manufacturing drugs. Through economic incentives making available cheap factors of production such as negligible land, and financial costs and, cheap electricity, water, and labour, it was able to gain a key position that India had previously enjoyed in the global manufacture and supply of bulk drugs and APIs.
This was not an easy feat for China to accomplish and this is what we will have to keep in mind when we chart the path back to self-sufficiency via backward integration.
BT: How can the PLI scheme be used to build India’s position as a global pharma manufacturing hub?
KS: The Production Linked Incentive (PLI) scheme is an important step in fulfilling India’s domestic healthcare needs in the immediate to medium term by developing a resilient supply chain. The way it is designed, it rewards the enterprise of companies that have the potential to be global champions and are willing to invest in India's long-term future.
In 2020, India’s import dependence to manufacture life-saving drugs was nearly at 90 per cent. Over 70 per cent of our key starting materials (KSM), intermediaries, and APIs come from just one country – China. Coupled with the global healthcare crisis from the pandemic, strengthening India’s pharma sector is now a national security imperative.
The vision of providing a boost to domestic production should be synchronised with the reduction in imports and building capabilities. Companies must invest in the upgradation of technology enabling production of affordable, safe, and effective medicines and build a resilient supply chain that can serve the demand for medicines well into the future. The government must encourage businesses to not only become economically viable but also gain a competitive edge in the long run.
BT: What role can digitisation and industry 4.0 technologies like IoT, AI, digital twin play in improving pharma manufacturing?
KS: Exposing considerable weaknesses in supply chains across the globe, the pandemic has compelled the pharma and healthcare sectors to revisit their strategy and shift away from a ‘just in time’ to a ‘just in case’ approach. In 2022 and beyond, we will see a rise in new delivery models built on a resilient value chain by leveraging the benefits of digitalisation.
Ultimately by leveraging industry 4.0 technologies such as Internet of things (IoT), companies will be able to run at a higher level of efficiency with better working capital management to be competitive on a global scale and also be able to enhance the affordability of quality healthcare.
While building a self-reliant and robust pharma supply chain, our focus must be on creating high-performing and quality driven manufacturing units that can support smart, connected, and intelligent systems.
BT: What are the new areas of investment you would be looking at in 2022? What are the strategies that you will be considering in the next 5 years?
KS: ACG has been serving its global customers by a network of near shore manufacturing operations spread over 3 countries through manufacturing facilities across the continents of South America, Europe, and the Indian sub-continent. The learnings over the past two years are that if anything, we need to double down on and deepen our capabilities to secure and build resilient supply chains that can deliver affordable, safe, and effective medicines to patients globally. Over the next 5 years there will be greater thrust in expanding our portfolio of integrated pharmaceutical solutions to cater to evolving needs in healthcare that support global pharma majors.
BT: What is the pathway for India to become a global pharmaceutical hub by 2025?
KS: India became a leading supplier first with life-saving medicines and later with Made-in-India vaccines during the COVID 19 pandemic, solidifying our position as the ‘Pharmacy of the World’.
To consolidate this momentum as a dependable supplier of safe, affordable and effective life-saving medicines to the world, our industry would need to build on its fundamental strengths while making a quantum leap towards innovation.
The route for India’s success is three-fold: Firstly, after establishing ground in generics space, the industry is ready to build its R&D and innovation capability and adopt advanced manufacturing technologies to remain competitive in the global scenario. Secondly, we must embrace USFDA benchmarks, regarded as the highest standards operating procedures for manufacturing, to improve our current levels of quality and compliance. Thirdly, despite a vast skilled population and deep expertise in healthcare, we lack the infrastructure and foundation such as – hospitals, availability of latest medical technologies, amongst others.
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