Indian pharmaceutical companies may have units abroad as part of “distributed manufacturing” across various locations, according to industry veterans.
This may come about over the next five to 10 years.
There will be more interdependence between research and development (R&D) and manufacturing facilities, but they may not be in close proximity.
Speaking at the Indian Pharmaceutical Alliance (IPA) Global Pharmaceutical Quality Summit, Umang Vohra, managing director and global chief executive officer (CEO), Cipla, said manufacturing traditionally used to be concentrated in locations that were economic.
At this point in time, countries are trying to be self-sufficient in pharma and companies and countries are trying to be balanced from a tariff perspective.
“So, technology-transfer functions will begin to change because historically we have been used to operating perhaps in one culture and one predominant language.
"And now we are going to see more distributed manufacturing,” he said.
It would become important in manufacturing to have a set of people who can work out of multiple geographies, the CEOs felt.
There may be pilot facilities from R&D to manufacturing situated in different countries, depending on availability of talent.
“We may begin to see the setting up of some facilities in the US — modular sort of things,” Vohra said.
His comments are significant because the United States (US) is looking to impose reciprocal tariffs of 25 per cent on imports of pharmaceutical products.
While no formal announcement has come in this regard, there is widespread anticipation of a potential tariff on India’s pharma exports to the US.
Vohra, however, said the industry’s strategic decisions should not be driven solely by current tariff structures.
“Current tariff structures can change. A long-term perspective is necessary because by the time a manufacturing facility is established in the US, the existing tariffs may no longer be in effect.
"Furthermore, the financial impact of these tariffs is not very significant,” Vohra said.
A senior industry executive who is the promoter of a leading pharmaceutical company said: “We don’t have clarity on what kind of tariffs, if any at all, will be imposed on exports from India.
"Now India does not have high duties on pharma imports from the US.
"Almost 60 per cent of products do not have any duty, and for some products there is duty in the range 5-10 per cent,” he said on the sidelines of the IPA conference.
Local companies have not decided whether they would pass on the increased duty to the US buyer, but that seems to be the most likely outcome of a potential tariff imposition.
Differing slightly with Vohra, Dilip Shanghvi, chairman and managing director (MD), Sun Pharmaceutical Industries, said for manufacturing to work well, one needed to have some “minimum volume and consistent production”, adding, most of India-made products were in the range of $1-5 and might not justify relocation.
There are tens of thousands of drugs consumed by patients across the world, and Pankaj Patel, chairman, Zydus Lifesciences, said: “Almost two-thirds of the world cannot afford these emerging technologies.
"Therefore, India has a great opportunity to play an important role here.”
Nilesh Gupta, MD, Lupin, too said India had to focus on developing complex generics, and otherwise even the larger generics market would not grow.
He added that automation and higher efficiencies in running manufacturing plants would also go a long way. “We have to chase efficiency and quality.”
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