Obviously targeted to play to US President Trump’s call to action, To Make America Great Again, the biannual “Indian Roots, American Soil” survey showed that 100 companies with origins in India are responsible for creating more than 100,000 jobs and $17.9 billion in investments across the US. The average investment received from Indian companies per state/ territory is $187 million. President Trump will be pleased to know that 85 per cent of these companies plan to make more investments in the US while 87 per cent plan to hire more employees locally in the next five years.
How do we interpret investment flow to the US at a time when the first anniversary of demonetisation saw fiery TV debates blaming the government for continuing jobless growth? In fact, four Indian pharma companies with sizeable investments in the US (Dr Reddy’s Laboratories, Glenmark Pharma, Sun Pharma and Emcure Pharma), are reportedly among the 18 companies accused by a consortia of US states of colluding to fix prices of generic medicines.
Secondly, most of India’s pharma majors investing in the US continue to be in the cross hairs of the US FDA for not following mandated cGMP norms at their manufacturing plants. Most recently, in a Warning Letter 320-18-06 dated November 6, the US FDA warned Lupin that ”repeated failures at multiple sites demonstrate that your company’s oversight and control over the manufacture of drugs is inadequate”. The WL stated that the US FDA had reviewed Lupin’s response to concerns highlighted during previous inspections at the company’s Goa and Indore plants but deemed the response inadequate and not addressing all the issues raised in sufficient detail. Over analyst calls, Lupin officials expressed surprise over the US FDA’s stance, not expecting the regulator to reject their response and pick holes in the remedial actions outlined in its response. Clearly, the US regulator is not letting companies off the hook until it is satisfied that the root causes have been sufficiently addressed.
Just a couple of days later, on November 13, Sun Pharma’s Baska plant reportedly had a surprise visit from US FDA inspectors. Given that the plant is close to its Halol facility, which still has ongoing unresolved issues as there has been a delay in re-inspection, this news is particularly significant. Thus, are continued investments in the US market justified, given that the opportunities seem to be drying up? Of course, these companies cannot ignore the largest pharma market in the world, but maybe it is time for moderation and re-thinking strategy. The good news is that the domestic market is showing signs of revival from the effects of GST. AIOCD PharmaTrac data for October shows that four months after the roll out of GST, growth during October was 6.5 per cent, compared to just 2.4 per cent in August. Pharma pundits are assuming that this upward trend will continue and the industry will achieve double digit growth again, in the next few months.
In contrast, pharma exports dropped in October. In fact, the country’s overall exports contracted for the first time in 13 months in October. As per a CARE Ratings report, pharma/ drugs is one of the top five industries, dominating India’s exports basket, which together contribute a little over 60 per cent of total exports. Of these five sectors, two i.e. gems and jewellery (14.5 per cent share of the total exports pie) and pharma (5.7 per cent share) showed a decline which contributed to the overall fall in exports in October. As per data from the Ministry of Commerce, pharma/drugs share of the total exports pie was $9.8 billion in 2016, which registered a negative growth of -2.1 per cent in 2017. Though the slip is small, it is a cause for concern. One hopes that this is an aberration and the graph turns upward again over the next few months.
In the final 18 months of his term, Prime Minister Modi finds himself with so much to do, and so little time. Of course, there have been gains, like the country moving up 30 places in the World Bank’s Ease of Doing Business Index. More recently, Moody’s Investors Service upgraded the Government of India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. Let us hope that as the country moves into election mode, health and associated policies once again become a key part of the political debate.
It is against this backdrop that we bring to you our annual CPhI India and P-mec India special issue. Do read the in-depth coverage of our first Pharma CXO Summit, focussed on leveraging serialisation and traceability for business growth. All experts at the Pharma CXO Summit agreed that investment in such technologies is crucial to future global growth of the sector and CXOs will have to strategise to achieve long term sustainability rather than quarter to quarter P&L goals. Hopefully, the interactions at CPhI India and P-mec India 2017 will inject new vigour into India Pharma Inc’s growth trajectory.