Indian drugmakers giving up 'advantage' to move to higher-margin drugs

The "Indian advantage" has been the ability to do clinical trials and manufacture drugs for global export at perhaps a tenth of the cost that drugmakers in the West face. But with actions by the FDA and Western regulators forcing plants from exporting to those markets and a need to move to higher-margin drugs, some Indian drugmakers are giving up that edge in an effort to raise profits.

"We have lost what is called the India advantage," Swati Piramal, vice-chair of Mumbai-based Piramal Enterprises, told Reuters. But she said "the new alternative" is to acquire small groups of people who have the expertise to research and make a particular type of product.

While the FDA has been hard on manufacturing lapses in India, banning plants by Ranbaxy Laboratories, Wockhardt, Sun Pharmaceutical and others, it also holds some advantages over the burdened system in India. India requires that clinical trials be conducted in India for any prescription meds sold there. But its system can take a year to approve a trial, compared to maybe four weeks in the U.S., and its regulations are in flux.

According to Reuters, analysts also blame weak regulatory oversight for the import bans imposed by the FDA on Indian drugmakers in the past year. And analysts say that has led some of them to consider building or buying new plants in the U.S. or Europe as well. India's Glenmark Pharmaceuticals in July said it would build its first U.S. plant in the U.S., a $15 million operation it is putting in Union, NC. Ranbaxy Laboratories was able to get FDA approval to make a generic of Novartis' ($NVS) heart drug Diovan after the agency banned exports from the plants in India that would have manufactured it.

Jefferies India analyst Piyush Nahar earlier this year told clients in a report that Indian drugmakers told him that they have boosted their investments in compliance but some also were looking to invest in U.S. or European facilities "to overcome challenges relating to both regulations and perceptions."

- read the Reuters story