Business is so brisk that Sun, with revenue of 41 billion rupees ($880 million) last year, predicts sales will grow 20 percent this year and is expanding its Halol factory.
“This site specializes in making difficult things,” Sampad Bhattacharya, Sun’s vice president in charge of operations, said during a recent factory tour. The blue and gray concrete building, which will be nearly 800,000 square feet after the expansion, would not look out of place in the pharmaceutical manufacturing centers of New Jersey, except for the herds of cattle and buffalo wandering nearby.
India’s drug industry— on track to grow about 13 percent this year, to just over $24 billion— was once notorious for making cheap knockoffs of Western medicines and selling them in developing countries. But India, seasoned in the basics of medicine making, is now starting to take on a more mainstream role in the global drug industry, as a result of recent strengthening of patent law here and cost pressures on name-brand drug makers in the West.
And while the Indian industry has had quality-control problems, it nonetheless benefits from growing wariness about the reliability of ingredients from that other historically low-cost drug provider— China. The United States is India’s top export customer for drugs.
India is becoming a“base for manufacturing for the global market,” said Ajay G. Piramal, the chairman of Piramal Healthcare, a drug maker based in Mumbai. Eventually, in Mr. Piramal’s perhaps overly optimistic forecast, only the very first and very last steps of the business— molecular drug discovery and marketing— will be run by the West’s global drug giants.
Those companies“don’t create much value” in the steps in between, he said.
It is not only Indian executives, though, who are bullish about thepharmaceuticalsindustry here. Analysts, research groups and consultants have been making similar predictions in recent months.
Big pharmaceutical companies have come calling, too. This year, Mr. Piramal sold his generic drug business toAbbott Laboratoriesfor $3.7 billion, the latest in a string of takeovers and joint ventures here.
Daiichi Sankyo of Japan helped kick off the foreign drug push into India in 2008 by buying a stake in Ranbaxy Laboratories, this country’s biggest drug maker. Last year, among other deals,GlaxoSmithKlineformed a partnership withDr. Reddy’s Laboratories;Pfizertied up with Claris Lifesciences;Sanofi-Aventistook control of Shantha Biotechnics, andBristol-Myers Squibbopened a research center in India with Biocon.
“There is a lot of good talent at a much lower price in India,” said Jim Worrell, the chief executive of Pharma Services Network, a Charlotte, N.C.-based consulting firm that is organizing tours of Indian factories for Western pharmaceutical executives who are considering outsourcing some of their business.“What I see happening now is manufacturing and even packaging and even formulation are moving to India,” Mr. Worrell said.
The shift to pharmaceuticals is part of a subtle, broader shift in the Indian economy. Moving beyond less sophisticated, outsourced services like telephone call centers, India has been advancing up the business value chain, particularly in law and medical diagnostics. Now it is showing a flair for manufacturing, particularly in goods demanding high-skill production and superlow prices.
Until recently, pharmaceuticals has been“an incredibly arrogant industry that has never outsourced,” said Sujay Shetty, an associate director with PricewaterhouseCoopers in Mumbai. But over the next several years, he predicts,“everything in the value chain will move to different parts of the world that are cheaper,” with India a major beneficiary.
The next opportunities for India could come at the more sophisticated end of the drug making spectrum, including research and development for the world’s drug giants and even development of proprietary medicines.
“We can crack the problem of patented drug discovery in India at a much lower cost” than in the West, predicted Mr. Piramal, who held onto his research and development operation, Piramal Lifesciences Limited, when he sold the rest of his company to Abbott.
At Piramal’s main laboratory in north Mumbai, about 300 scientists are researching new drugs aimed at inflammation, metabolic disorders and cancer. Mainly because of lower wages, if it costs big pharmaceutical companies“$1 billion to $1.5 billion to discover a new drug, we can do it in a tenth of the cost,” Mr. Piramal predicts.
G. V. Prasad, chief executive of Dr. Reddy’s Laboratories, said that Indian drug makers had the“ability to handle product development on a massive scale at a low cost.” Dr. Reddy’s originaldiabetesdrug has completed Phase 3 clinical trials— the last step before seekingFood and Drug Administrationapproval— the farthest of any of its peers.
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