Pharma Industry in West Bengal: The Road Ahead

Prof. Arup Mukherjee and Debashis Bhattacharya

Pharmaceutical sector is by far one of the most diverse, knowledge driven, technology intensive growth area, where fast track advancements can surely generate significant resources. Despite competitions and regulatory issues looming large, current Indian scenario remains more or less intact. Indian domestic market by 2005 stands at $ 5.3 billion dollar, export in value terms stands at $ 3.7 billion and import about $ 985 million, which is delivered by about 5 million people in direct and 24 million in indirect employment. It is interesting to note that in 1995 when India joined WTO, the pharmaceuticals export was valued at around $600 million. By 2005, the export value stands at $3.7 billion and accounts for more than 61 percent of industry turn over. Indian market for pharmaceuticals was projected an average growth of 15-20% during 2005-20010. Sector wise growth tilt is visible in way of increasing contract manufacturing, outsourcing, and foreign acquisition mostly in generics field, joint ventures and value addition. Scenario in West Bengal has not seen much change and is currently looking for some fast track decisions to take advantages in a complex global growth market. The doors of the neighboring state of Sikkim have opened up recently in both manufacturing activity related tax concession and in market terms with extended competitive possibilities through China for opening up of road routs through Nathula Pass.

The genesis of Indian pharmaceutical industry is always traced to the state of West Bengal. The starting point was in 1901 when the noted teacher and scientist Acharya Prafulla Chandra Ray laid the foundation stones of Bengal Chemical & Pharmaceutical Works Ltd (BCPL). BCPL is still a success story with four factories - two in West Bengal, one in Mumbai and one in Kanpur, with sales outlets in 11 cities, and a wide self distribution network across the country and abroad with about 1500 listed distributors. BCPL business model is unique in that, it has a wide range of related product mix, that include, fine chemicals, active pharmaceutical ingredients (APIs), perfumeries, toiletries, hospital and surgical equipments, sera, vaccine and fire extinguisher. The state capital, Kolkata was considered, at one point of time, for production of cost effective and quality drugs. Pharmaceutical industries of Kolkata shared more than 80 per cent of the national drug production in 1940, which has gradually been reduced to less than eight per cent in 2004.

The Indian pharmaceutical sector in general is highly fragmented, both in terms of the number of manufacturers and in number and variety of products. A vast majority of Indian pharmaceutical firms are small in global terms having annual revenues of less than $5 million. Confederation of Indian Industries (CII) estimates that about 80% of them are engaged in some type of contract manufacturing. West Bengal does extend several bulk drugs and formulation products standing on available technology strength. However, product mix of any pharmaceutical unit should adequately be spread across therapeutic segments for growth and to provide a protection net that needs to concentrate currently on individual concerns in West Bengal. Interesting models can be the surviving original companies like BCPL. Major India centric therapeutic segments include antidiabetics, cardiovascular medicines, anti-infective, anti-cancer and anti-HIV medicines and anti-inflammatory groups. Gradually, quality life drugs like steroid hormone products, anxiolytics and anti-arthritis are also creating impact in India. It is not relevant to further compete in low margin me-too formulation areas. West Bengal is currently in a position to provide a contract manufacturing hub in synthetic as well as formulation areas particularly in specific therapeutic segments like anti-cancer, anxiolytics, cardiovascular, gastrointestinal and anti-infectives. Skilled manpower is the basic input and that is a plenty in West Bengal. Environment controlled location for Pharma- Biotech processing zone can provide a great impetus to this sector growth. CRO agencies are also expected to grow in region particularly in discovery research. Entrepreneur orientation of the region and the existent entrepreneurship knowledge gap and increasing capital input requirements in pharmaceutical manufacturing however remains a bottleneck.

The State Directorate of Drugs Control has extended a helping hand to the pharmaceutical producers in meeting global standards in stages. The West Bengal government is planning to announce a comprehensive Drug Policy for the state. Recent years have seen increased academia-industry initiatives. Academic institutions like the Department of Pharmaceutical Technology of Jadavpur University and Indian Institute of Chemical Biology (IICB) have done commendable job in this direction. A strong motivation within the pharmaceutical industry is now required to regain its lost pride and position.

Trends in pharmaceutical industry in West Bengal can be seen as:

Synthetic specialty drugs as also some biotechnology focus might be seen soon in West Bengal through major players like Dabur and Biocon. Multinationals (MNC's) like Pfizer and Organon initiated their manufacturing activities in West Bengal with a focus on bulk drugs. The effect was negated in government taxation and pricing policies. The driving factors, however, remained as availability of skilled manpower and phytochemical raw materials and access to different global regions through east.

Pharmaceutical industry of West Bengal is trying to achieve and develop expertise on formulation and development for a number of sustained release formulations. Presently some such formulations have gained confidence of medical fraternity and have seen commercial success in the market. Since all surviving industries in West Bengal are GMP compliant, requirements of advanced tools and technology, validated and aseptic processing will no more be a problem centers.

Expertise in synthetic chemistry and pharmaceutical manufacturing in West Bengal remains a traditional strength that will allow the West Bengal pharmaceutical sector to position itself as the provider of quality products at competitive price at least for the generics market in India.

Biotechnology is set to sweep all aspects of life around the world. The Biotech sector is poised to create arguably, the greatest revolution that the business-world has seen. With adequate human resource input, investments in this sector are expecting to grow. India is already set to become the vaccine hub of the world with a silent transformation of institutions going on in India over the last 4-5 years. The government is taking several initiatives to create and facilitate an environment of innovation and research culture in the country. The achievements in the field of biotechnology will not be sustainable for long if participation of private sector enterprises in the field is not encouraged. Emphasis is being laid on participation of internationally acclaimed biotech firms in joint ventures.

Relatively recently, several contract Research Organisations (CRO's) mostly in discovery research have started full functioning from West Bengal. The global CRO market is estimated at $10 billion and growing at an annual rate of 14 to 16 percent. The 2004 market size for CRO was pegged at Rs. 300-400 crore. The trend is to set up bioequivalence, clinical trial and discovery based CROs as service growth sector.

The pharmaceutical industry sector is in fact more intellectually -driven than the IT industry. IT in itself plays a larger role in the development of pharmaceutical sector. Constant IT solution inputs are today required in areas ranging from data management, clinical trial management, statistical analysis, data backup, compliance to regulatory requirements and validation of systems. In this regard bioinformatics is the next big opportunity. Few Indian companies that have a focus on the bioinformatics market like TCS, are active in West Bengal. TCS is offering services for understanding all aspects of the use of bioinformatics in drug discovery, comparative genomics, protein structure, integrated database design. The global biotechnology market is in the range of $30-40 billion, growing at around 25 percent a year. Bioinformatics constitutes about 8-10 percent of the total market size of about $2.5 billion currently and is estimated to rise to about $5-6 billion by the end of this decade.

Contract research and manufacturing services (CRAMS) market in India as well as in West Bengal is growing at a significant rate of about 20 per cent. In 2005 Indian CRAMS market was estimated at $532 million with contract manufacturing accounting for almost 84% of the total. Intellectual Property Rights (IPR) being firmly in place investments in developments and innovations are poised to grow and West Bengal is only to gain significantly from that. Experts maintained that Indian companies have a capacity to gain 35 to 40 % of global CRAMS market. The Associated Chamber of Commerce and Industry of India (Assocham) projected the domestic Indian CRAMS market will reach % 900 million by 2010 and the demand in clinical research will grow to $200 million by end of 2007 and to $ 1 billion by 2010.

India has emerged as an attractive destination for outsourcing, as it provides low cost manufacturing at a world-class quality. Pharmaceutical production costs are almost 50 percent lower in India than in Western nations, and R&D costs are about one-eighth and clinical trial expenses around one-tenth of Western levels. Expectations are for sizable revenue generation because innovator companies are trying to concentrate more on the research side of the value chain than on the sales and marketing.

An increasing number of Indians are also dipping into their own pockets to buy over-the-counter (OTC) drugs. The OTC market is currently worth about $940m and growing at 20% a year - more than double the rate at which the market for prescription products is rising. In market value terms West Bengal constitutes a significant market, both for dense population and population awareness levels. West Bengal is also in access route to very densely populated regions of globe through China, South East Asia and Myanmar. Significant opportunity lies here to take a specialized market leadership.

In view of a significant market access location, a strong knowledge based manpower support, very good transport, communication and manpower supply position added with proactive and favorable government support, West Bengal currently is a springboard for pharmaceutical industry developments. Hence, with its enormous advantages, including a large well-educated, skilled and english speaking workforce, low operational costs, huge domestic market including South East Asia, Kolkata has the potential to become the region's hub for pharmaceutical discovery, research, manufacturing and healthcare services. However, to make this happen, it is imperative that the regulatory environment, West Bengal government's strong commitments towards pro-industry policies should continue to improve.

The pharmaceuticals industry is grappling with the highest level of attrition. There is an acute shortage of manpower at all levels in the industry. It is becoming increasingly difficult to find the right people for the right position. Human resources in the pharma industry is not well developed at all.

As far as emerging trends are concerned, consolidation will take place and is a logical thing to happen. An exemption on excise and other taxes, subsidies in capital investment and interest and reimbursement of insurance premium etc., are the prime reasons for selecting Sikkim for investment against West Bengal. Similar support also needs to be devised along with encouragements to regional enterprise for a faster growth in industrialization in this sector.

(Prof. Arup Mukherjee is Senior Professor and Ex-Head, Department of Chemical Technology, Calcutta University and Debashis Bhattacharya is a Researcher at the Division of Pharmaceuticals and Fine Chemicals Technology, Department of Chemical Technology, Calcutta University)