Adani To Foray Into Healthcare Business

Priyanka Tanwer
Priyanka Tanwer May 19 2022 - 8 min read
Adani To Foray Into Healthcare Business
AEL will set up diagnostic facilities, health aids, health-tech based facilities and research centres with initial authorised and paid-up share capital of INR one lakh.

Adani Enterprises (AEL) is all set to enter into the healthcare business by setting up a wholly-owned subsidiary, Adani Health Ventures (AHVL) that would start operations soon.

According to regulatory update, AEL will set up diagnostic facilities, health aids, health-tech based facilities and research centres with initial authorised and paid-up share capital of INR one lakh.

The firm has also expressed interests in other allied and incidental activities.

This comes in the backdrop of the company’s recent foray into the cement business, with the acquisition of Switzerland-based Holcim Group’s Indian subsidiaries.

The company,headed by the India’s richest business tycoon Gautam Adani, signed definitive agreements on May 8, 2022 to acquire Holcim’s entire stake in Ambuja Cements and Associated Cement Companies (ACC) for about USD 10.5 billion (around INR 78,750 crore).

On May 13, Asian Media Group (AMG) Media Networks, an AEL entity, entered into an agreement to pick up a 49 per cent stake in RaghavBahl-curated digital business news platform Quintillion Business Media (QBM) for an undisclosed sum. This followed a share purchase agreement AEL had entered in March, under which it acquired an unspecified minority stake in QBML.

In September 2021, Adani Group had hired veteran journalist Sanjay Pugalia to lead its media company, Adani Media Ventures.

As per estimates by the National Skill Development Corporation, healthcare can generate 27 Lakh additional jobs in India during 2017-22 adding more than five lakh new jobs every year.

Adani Group has been on an acquisition spree and bought as many as 32 acquisitions in the past year valued at about USD17 billion (INR 132.3 lakh crore), according to data compiled by Bloomberg News.

Adani Enterprises Limited, the flagship company of the Adani Group’s diversified portfolio is broadly split into energy and utilities, transport and logistics and emerging businesses.

Since listing of the company in 1994, it has maximised value for stakeholders, while contributing to the nation building. Adani Enterprises Limited is presently focused on businesses related to airports, roads, water management, data centres, solar energy, defence and aerospace, edible oils and foods, mining, integrated resource solutions and integrated agro products.

In Last Five Decades

Evolution of the Indian pharma industry began in 1970 when the Indian government introduced the ‘Patents Act 1970 which allowed domestic pharmaceuticals to produce drug without paying royalty to the original patent holders. This Act resulted in emergence of domestic manufacturers.

Prior to the Act, the Indian pharma market was dominated by the foreign players.

After this, during the period of 1990 and 2000, many Indian pharmaceuticals joined the export market on the back of knowledge acquired by manufacturing generic drugs—that helped increase their capabilities and establish a global reach—and economic liberalisation policies; this exposed the economy to privatisation and globalisation and further, accelerated pharma exports.

Big Role Of Pharmaceuticals

Pharmaceuticals industry of the company plays a vital role in the global market. It ranks third for production by volume and 14th by value worldwide. The country is the largest generic medicine provider globally contributing 20 per cent share in global market supply while it supplies 62 per cent vaccines produced globally.

The country has 3,000 pharmaceutical companies and 10,500 manufacturing units. Moreover, its economic growth and public health outcomes have been significantly supported by the pharma industry.

Indian pharma manufacturers have a significant presence in the global supply chain which helps in development of country’s pharma industry. Sun Pharmaceutical Industries, Cipla, Lupin, Dr. Reddy’s Laboratories, Aurobindo Pharma, ZydusCadila, Piramal Enterprises, Glenmark Pharmaceuticals and Torrent Pharmaceuticals are some key domestic players in the country. Some of the manufacturers have partnered with global players to develop new drugs.

The revenue from the industry was recorded USD 41 billion (around INR 3.7 lakh crore)  in 2021 in the backdrop of strong formulation capabilities and foothold in international markets.

The country became in international manufacturing hub due to large base of raw materials and availability of trained workforce.

New Heights Of USFDA Approved Facilities

Moreover, India is the only country which has the largest number of the US Food and Drug Administration (USFDA) approved pharma factories including active pharmaceutical ingredients (APIs), as it produces drugs for a third of the price in the United States and half the price in Europe.

The Economic Survey 2020-2021 has predicted that the pharma industry of India will expand to USD 65 billion (INR 4.8 lakh crore) by 2024.

India has been through many challenges and opportunities during past two years of COVID-19 pandemic which has helped it become a global pharmacy hub. India’s pharmaceutical exports totalled USD 24.4 billion (around INR 18.92 lakh crore) in Financial Year 21, up 18.0 per cent from Financial Year 20.

According to the USFDA, in the last nine months, Indian pharmaceutical companies have received nearly half of all new Abbreviated New Drug Application (ANDA) approvals; this is likely to help boost exports in the future years.

Government Initiatives

In order to boost the production of high-value products and improve exports from FY 2020-2021 to 2028-2029, the government has introduced the ‘production-Linked Incentive’ (PLI).

Through the PLI scheme, the government intends to make India’s pharmaceutical sector more competitive by lowering import costs.

This scheme has divided the pharmaceuticals sector into three categories. Biopharmaceuticals, complex generic drugs, patented drugs or drugs nearing patent expiry, cell-based or gene therapy products, orphan drugs, special empty capsules and complex excipients comes under first category, active pharma ingredients (APIs), key starting materials (KSMs) and drug intermediaries (DIs) have been put under second category while the third category includes repurposed, auto-immune, anti-cancer, anti-diabetic, anti-infective, cardiovascular, psychotropic and anti-retroviral drugs, in-vitro diagnostic devices (IVDs) and phytopharmaceuticals.

Accordingly, for Category 1 and Category 2 products, the incentive rate will be 10 per cent (of the incremental sales value) for the first four years, 8 per cent for the fifth year and 6 per cent for the sixth year of production.

The incentive rate for Category 3 products will be 5 per cent (of the incremental sales value) for the first four years, 4 per cent for the fifth year and 3 per cent for the sixth year of production.

According to government’s estimates post implementation of PLI scheme, pharma exports are expected to be worth US$ 35 billion (INR 200,000 crore) by 2026.

Bulk Drug And Medical Device Parks

The Indian government intends to develop three bulk drug parks and four medical device by providing grants to the states by 2026. In 2020, government approved a scheme under which it will provide aid to states with a maximum limit of USD 134.65 million (INR 1,000 crore) per bulk drug park and USD 13.46 million (INR 100 crore) per medical device park to encourage domestic production of critical APIs and Key Starting Materials (KSMs) and medical devices.

The Future Ahead

The Indian pharmaceutical sector has built an international reputation of high-quality and cost-effective drug supplier via innovative methods and formulations and gained a significant portion of the market in developed economies such as the US and the UK by making critical pharmaceuticals inexpensive and accessible.

The industry can reach more heights if opportunities like supporting state-sponsored health-care programmes and emphasising chronic-care medicine might lead to universal drug access, investing in emerging product categories such as biosimilars, gene therapy, and speciality medicines, and explore underpenetrated international markets to increase exports are taken advantage of.

The industry’s current success is primarily due to its capacity to produce high-quality, low-priced generic medicines, which are underpinned by structural cost benefits owing to new manufacturing techniques.

However, generic price erosion, rising market rivalry, greater regulatory scrutiny, new tax systems, domestic pricing controls on raw materials from foreign countries are some current challenges faced by the industry.

Latest About Aurobindo Pharma

The United States S Food and Drug Association (USFDA) in its inspection of company production units found that Aurobindo Pharma’s Unit-7 was not following written procedures for production or process controls.

It has issued six observations during the course of inspection.

Unit-VII is Aurobindo Pharma's oral manufacturing facility situated at Jedcherla, Hyderabad. It is ultra-modern unit based on the suite manufacturing concept delivering huge capacity, and manufactures non penicillin, non cephalosporin and antiretrovirals (ARVs).

According to USFDA observations, Its batch production and control records do not include complete information and written stability testing programme is not followed at the facility.

Appropriate controls are not exercised over computers or related systems, while the equipments used are not of appropriate design.

The investigations of unexplained discrepancy and a failure of a batch did not extend to other batches, according to USFDA observations.

Shares of Aurobindo Pharma traded two per cent lower at INR 539.75 apiece on the BSE on Wednesday.

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