India’s Pharma Hub

“The government recently proposed two industrial parks in Gujarat: one medical devices park in Rajkot, and one bulk drug (API) park in Ankleshwar, where the API industry is very vibrant.” Dr. H.G. Koshia, Commissioner,
FDCA Gujarat

Amidst Narendra Modi’s ascent to the Prime Minister’s office in 2014, everyone from World Bank economists to Indian street food vendors was enthralled with the concept of the “Gujarat Model.” Onlookers saw a cleanly run, efficient and competent state administration that was richer, enjoyed faster GDP growth and a greater intensity of jobs and industry than India as a whole and wanted to see if those results could be replicated on a national level. In essence, a vote for Modi was a vote for India to be run as Gujarat was throughout his nearly 13 year tenure as the state’s Chief Minister. Sound political leadership only explains half of the story. Climate and geography have long pushed Gujarat towards commerce. Poor rainfall made it hard to scratch out a living by farming, so that other industries were developed to pay the bills. With its long coastline of 1,600 kilometers and a border with Pakistan, the region was a natural hub for international trade. As a result of lucrative trading relationships, the state has long been one of India’s most prosperous. Today, Gujarat is an industrialized hub with its main commercial city, Ahmedabad, nicknamed “Manchester of India” on account of its huge textile industry. Gujarat has also been the flag bearer of India’s pharmaceutical industry since the establishment of the country’s second oldest drug company, the Alembic Chemical Works Company, in Vadodara in 1907. According to Dr. H.G. Koshia, commissioner of FDCA Gujarat, the state regulatory body for pharmaceutical drug approvals, the Gujarat model has allowed pharma companies to thrive. “The roads through and around Ahmedabad are excellent. The state has moved from a deficit in electricity generation in 2002, to a surplus, despite the energy demands of a booming economy. Its 18,000 rural villages are connected to the grid. Water supply is abundant. This emphasis on basic infrastructure - a hallmark of the Gujarat model - extends to making land easily available for commercial development,” he said. Sudhir Vaid, chairman and managing director of Concord Biotech, also acknowledged the importance of vibrant, well functioning cities in attracting and retaining top talent: “Scientists and their families enjoy a good quality of life in modern cities like Ahmedabad and Vadodara, which are also great education hubs.” The state’s legacy is maintained by Gujarati workers, who are renowned for their dynamism and spirit of entrepreneurship. Vinit Shah, chairman and managing director of Saga Lifesciences Limited, asserted: “Gujarati entrepreneurs are born businessman. They are risk-takers and possess high standards of business ethics.”

“Gujarati entrepreneurs are born businessman. They are risk-takers and possess high standards of business ethics.” Vinit Shah,
Chairman and Managing Director, Saga Lifesciences Limited

Relocating to Gujarat

A 2020 report from consulting firm Mckinsey and Company outlined the progress made in India’s pharmaceutical industry over the last decade. The report argued that the common question pharma executives asked ten years ago, “is it worth our while to make a serious play in India?” is no longer the central question. Instead, industry is now deliberating over “How can the Indian market scale up to an even higher growth trajectory, and achieve its full potential?” Furthermore, “What are the most attractive opportunities in the Indian market?” The health of the pharmaceutical industry in Gujarat is already on a strong footing and that makes opportunities for growth even more alluring for companies. Despite only covering about 6% of the country’s area, Gujarat represents a third of all Indian pharmaceutical production. Additionally, almost all medical devices, half of India’s intraocular lens (IOL), and 35% of the country’s diagnostics kits are made in the state, according to FDCA figures. Furthermore, Gujarat remains proud of its legacy as the world’s first producer of contraceptive pills and the fact that it now is home to 40% of all CRAMS (Contract Research and Manufacturing Services).

Building on their industry’s fruitful past and favorable policies from the state, Gujarat remains one of the premiere industrial hubs for businesses looking to invest in India. With the advent of the Goods and Service Tax (GST), coupled with the upcoming expiry of tax holidays granted by some northern states of India, the playing field was leveled in favor of Gujarat. The price and cost difference between tax havens and non-exempted states like Gujarat has narrowed substantially. Local legislation also reduced the number of regulations industry had to comply with in Gujarat and, as a result, the pharmaceutical industry is witnessing a jurisdictional shift, with some of the largest pharmaceutical companies looking to relocate or establish their manufacturing plants in Gujarat. Adding to the enthusiasm surrounding industry development has been the build out of pharmaceutical clusters dedicated to fostering enduring competitive advantages for businesses operating in Gujarat. Dr. H.G. Koshia pointed out: “The government recently proposed two industrial parks in Gujarat: one medical devices park and one bulk drug (API) park, which have already received their most important approvals. The areas have already been earmarked; one in Ankleshwar, where the API industry is currently very vibrant, and another one in Rajkot for the medical devices.”

“In these parks,” he added, “the government will fund the construction of common facilities, from warehouses to testing labs, which will help manufacturers reduce costs and increase their competitiveness in the global markets. These new parks will help the industry shine further.” In addition to these new parks and favorable FDI policy (government now permits investment in manufacturing of medical devices and greenfield pharmaceuticals up to 100%, according to AdvaMed reporting), there has been the implementation of “Pharma Vision 2020,” since 2014, which is a Union Government initiative aimed at making India a global leader in end-to-end drug manufacturing. This has augmented investor trust in the Indian pharmaceutical ecosystem by focusing on increasing the ease of doing business within India, backed by providing modern and state-of-the-art industrial infrastructure such as smart cities, industrial corridors and upgrading the existing industrial clusters. The Gujarat FDCA is making further efforts towards increasing the ease of doing business in the pharmaceutical industry within Gujarat. The Gujarat FDCA was the first state regulator to introduce drug manufacturing license application software in the country, which enables the regulator to efficiently process the approval and renewal applications received in a transparent and timely manner. The Gujarat In 2017, FDCA reduced the stipulated timelines for the granting and renewal of manufacturing licenses to 60 days from the earlier prescribed timelines of 120 and 180 days respectively. Since when, over 300 new pharmaceutical manufacturing facilities have been established or proposed to be set up in Gujarat. Given the advantageous regulatory and policy framework, the overall growth boosted by increasing consumer spending, demand for quality healthcare and the Indian Government’s efforts in raising availability and access to healthcare insurance, the pharma and healthcare sectors market size is expected to grow to US$100 billion by 2025, according to the India Business Council. This, along with other commercial and geopolitical factors, has resulted in a steady flow of M&A and investments linked to the pharma and healthcare sector in Gujarat, all of which are encouraging signs that the future will be a prosperous one for Gujarat’s pharma industry.

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