Thursday January 1, 02:39 AM

Source: Indian Express Finance

Pharma cos save big on relocating acquired firms' units

By MG Arun
Indian pharma companies that have shifted the manufacturing bases of firms they have acquired in the US and Europe to India, are realising upto 30%-40% savings in manufacturing costs. For instance, Piramal Healthcare, which has relocated the inhalation anaesthetics (IA) production of UK s Rhodia (acquired Rhodia s IA business in 2004) to India, is saving up to 40% in manufacturing costs, said a senior company official. This has now prompted Piramal to contemplate shifting some products of its latest acquisition, Minrad International of the US, also to India. Meanwhile, Dr Reddy s, which acquired Betapharm in early 2006, is also planning to shift the latter s products to India for reasons of cost. This would help ease some pressure off Dr Reddy s Betapharm buy, which has been facing margin pressures in Germany due to intense generic competition. The high cost of product overseas has already seen drug majors like Pfizer, Astra Zeneca and GlaxoSmithKline closing or selling manufacturing units, reducing manpower, and stepping up outsourcing to countries like India and China. The IA business of Rhodia included products like halothane and isoflurane, which Piramal relocated to facilities in India. Piramal already manufactured halothane at its cGMP facility near Chennai, and moved the Rhodia products to a facility in Hyderabad, aimed at process improvement and cost reduction advantages. The company, which recently acquired Minrad, said it plans to shift some of the latter s products to India. Apart from isoflurane, Minrad s product portfolio consists of enflurance and sevoflurance. According to a Merrill Lynch study, the cost of manufacturing in India at USFDA approved facilities is just 35-40% compared to the US. China is still cheaper, at 20-25%. The average hourly wages in India is just $1.8, compared to $16.6 in the UK and $24 in Germany. Meanwhile, Dr Reddy s, which acquired Betapharm, Germany s fourth largest generics company, had said it would manufacture a few of Betapharm s products in India. In fact, the company had said that one of the drivers of the acquisition was that it would benefit from manufacturing the acquired company s products in India. This year, Piramal also bought the polygeline-based blood plasma products manufactured by Plasma Select AG of Germany under the brand name Haemaccel in over 38 countries. Piramal is now shifting the manufacturing site for Haemaccel from Germany to a plant it is setting up in Baddi in Himachel Pradesh. Says Ajay Piramal, the company s chairman, The cost of manufacturing will be significantly lower when done in India. The company also makes tax savings in manufacturing products at a place like Baddi.