In the new age of globalization, size does not matter. Small and medium-sized enterprises (SMEs) are often hailed as drivers of economic growth. Cross-border business networking allows SMEs to expand their markets and distribution channels, realize economies of scale and scope in products and processes, and provide opportunities for sale and licensing of technology-based assets.

In the Indian pharmaceutical sector, the small and medium sized companies that are reinventing themselves. The pharmaceuticals industry prospects are attracting foreign players who are eager to take part in the development of the bulk drug industry. There are about 250 large units and about 9000 small scale units, which form the core of the pharmaceutical industry in India (including five centrally-owned public sector units). SMEs have strengths in manufacturing, supply chain and field operations.

SMEs in the pharmaceutical sector have been undertaking low-end contract manufacturing jobs. This is because they are left with no choice, as the bigger players have taken up high-end jobs already. This is an opportunity for them and they are trying to leverage on it.

SMEs in the pharmaceutical industry have of late been earning quick and huge revenues from Contract Research and Manufacturing Services (CRAMS). This growing area has tremendous potential not only in the domestic market but also in global avenues. Most of the SMEs will not only survive but also thrive as the Indian crams market is estimated to touch the $900 million-mark by 2010.

CRAMS is quick revenue for SMEs because they have to exist first and then grow. So when they set up a plant, it has to start working and the capacity has to be utilized to pay back the bank loan taken for the same. However, SMEs need to understand that it is only the first step towards their growth and not the ultimate step. Therefore, while they sustain themselves, they should also have certain growth plans.

SMEs in the Indian pharma industry at an early stage need the support and funding from big players in the industry to become agents of research and innovation. Several market pressures present both challenges and opportunities for SMEs. Coping with these challenges and turning them into opportunities require speed, innovation, responsiveness and adaptability. While maintaining these attributes becomes even more difficult as a company grows and expands into new regions or lines of business and opens new plants - the right IT infrastructure can make all the difference.

SMEs' problems can be classified into following categories:

Internal - With regard to internal problems, they are associated with management issues. SMEs need to channelize and manage their resources in a much better manner. This will happen if they focus on a few things instead of trying to do many. They could also do better by improving their finance management skills and their marketing management skills, both of which are crucial for the survival of the company.

Finance - The SME sector faces difficulty because of lack of finances to tackle change in any regulations. Only those SME's, which have enough funds for expansion and are involved in research and invention of new drugs are expected to survive in the long term.

External - More support is required from the government. There are innumerable initiatives undertaken by the government already. But in reality, when you come to the brass-tacks, there is hardly anything concrete that is happening. Money is being allocated to SMEs, but it is not trickling down. As a result, the government comes to believe that the corpus is being under-utilized. For instance, there are reports that the Deputy Chairman of Planning Commission, indicated that the Rs 600-crore allocation made under the CLCSS scheme has not been utilized, and hence, they are seriously thinking of discontinuing the scheme.

The Finance Ministry has earmarked Rs 500 crore for technology upgradation of pharmaceutical units under the Pharmaceutical Technology Upgradation Fund Scheme (PTUFS) to assist the small scale pharma units in the country to upgrade their units to meet Schedule M standards. The National Productivity Council, entrusted with the task of preparing the modalities of implementing the Pharmaceutical Technology Upgradation Fund (PTUF), will take a tour to some of the key small scale clusters like Indore, Thane, Kolkota and Ankleshwar.

The SME Pharma Industries Confederation (SPIC) called for extending the scheme to all existing manufacturers in both formulation and bulk drugs.

Human resources: Human resources is a big problem. Big pharma companies attract talent from SMEs by offering incentives like allocation of shares and other perks. SME players cannot afford to pay big salaries to their employees and are hence losing them to big players. Secondly, the IT and ITES industry has also impacted the remunerations in the pharma sector in general and SMEs in particular. Its impact is more pronounced in the SME segment whose affordability is much lesser than the larger players.

SMEs are increasingly depending on an effective business solution to streamline operations, improve efficiency and bring in innovation. Automation enables them to redirect resources away from administrative tasks to focus on activities that can differentiate their products or services in the marketplace.

In order to reduce the risk in new drug development, Indian companies out-license their molecules under development to such large MNCs that can support their research activities and huge marketing and sales organizations. Small companies do not have the required budget to undertake new drug development, which is one of the major thrusts for the pharma companies to innovate themselves.

Through the out-licensing strategy smaller Indian pharma players can focus on this area by partnering with global players which have a thrust on R&D and come out with innovative molecules and also have the required market access to emerging pharma growth markets. Small and mid-cap companies can benefit more from this in a major way as it answers the gap in the product pipeline and product portfolio planning, which is the basis for growth.

Recently the small scale pharmaceutical units in the country have sought Prime Minister Manmohan Singh's intervention to remove the anomalies in the excise duty exemption limit for the SSIs arising out of the reduction in the abatement rate from 42.5 percent to 35.5 percent by the central government in the last budget. The government had raised the SSI exemption limit from Rs 1 crore to Rs 5 crore in the Union budget 2007 when MRP based excise was in operation with abatement of 42.5 percent, the reduction in abatement in the budget 2008 by 7.0 percent has taken away the sheen of the excise exemption to the SSIs.

Today if each SME can focus on at the most five countries and meet their requirements by supplying good quality and affordable medicines. There will be a tremendous multiplier effect in play and if channelised appropriately, they will surely become the growth driver of the industry.