These manufacturers must now shift away from their current reliance on overcapacity as a cost-saving mechanism and focus on quality for a sustainable future, concluded three industry veterans in a panel discussion at the recent inaugural Interphex trade show, held in Mumbai, where Outsourcing-Pharma.com was in attendance.
"Overcapacity could create industry sickness or substandard manufacturing," they warned.
Indian manufacturers are well known for their ability to be highly cost competitive - the cost of building a manufacturing plant in India is one third of that in the US and Europe and the country also has a much lower cost of production and labour.
Furthermore, by manufacturing in huge volumes, and thus creating an over capacity, Indian companies have managed to further drive down prices.
For example, the vaccines market has seen a phenomenal drop in prices in this way, according to Dr SV Kapre, executive director of the Serum Institute of India - the country's largest vaccines manufacturer.
"In the US it typically costs $75 (€53) to make a vaccine dose, so that 10m doses costs $750m but in India it costs only $3 to make a 10 dose vial and so 10m doses costs only $3m," he said.
As a result, the country currently dominates the world's active pharmaceutical ingredient (API) manufacturing arena - presently almost one in two APIs are now sourced in India and the market continues to grow.
However, this scenario cannot last forever: "We're focusing too much on cost advantages in this country but this is dangerous because our cost advantage only has a limited shelf life," said Kapre.
"Instead of just relying on capacity expansion to keep costs down, manufacturers must concentrate on developing new technologies to create added value as well implementing lean manufacturing practices," he said.
"This will maintain margins while limiting overcapacity and allow Indian firms to keep up with the game."
This view was largely shared by the other panellists: "To survive, India needs more quality factories than capacity," said Satish Rajkondawar, president of Sanofi Aventis India.
In particular, this is because the US Food and Drug Administration (FDA) is shifting its thinking towards system based and risk based approaches, quality by design and process analytical technologies (PAT) and so the cost of compliance is increasing, he explained.
Also the types of products being developed are changing and becoming more complicated, such as delayed release tablets, and so the degree of control is different, cycle times are longer and costs are higher so our current capabilities are not appropriate.
"Safety, efficiency, quality and cost containment will only be achieved in the future by designing appropriate processes and equipment from the outset."
"Robust technology should be integrated to deliver flexibility, minimise operator error, reduce non value-added activities, improve regulatory compliance, and offer reliability."
Meanwhile, according to SG Belapure, president of manufacturing formulations at Cadila Healthcare, the current state of overcapacity is only set to increase over the next few years, particularly due to tax holidays being offered by the government, that have created $1bn worth of investment in capacity until 2010, along with special economic zones and pharmaceutical parks being created, attracting an additional $0.25bn capacity investment until 2010.
"Indian drug manufacturers are the most aggressive investors of all the Indian industries and these government incentives are driving overcapacity - most companies get their money back within one year of investing it."
"However, they must begin to build up capabilities and technologies so that when their costs eventually become comparable with EU and US they will still be able to compete on a quality level."
