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India’s dependence on China for pharmaceutical raw materials is threatening the country’s health-care industry and pushing the government to take action.

India’s imports of active pharmaceutical ingredients (API) or bulk drugs from China reached $2.22 billion in 2015, or 5 percent up from the previous year, according to the latest statistics from the Indian Parliament.

India produces a third of the world’s medicines, mostly in the form of generic drugs, with 300 large companies and more than 10,000 medium and small-scale companies in the sector. However, less than one-fourth of them are producing APIs, while the majority – about 77 percent – make formulations.

“Many of India’s APIs and intermediates manufacturing plants have shut down,” said Ramesh Adige, a pharma expert who was formerly an executive director at Ranbaxy Laboratories Ltd., an Indian multinational pharmaceutical company. “China has emerged as the dominant player in the global API industry due to its large-scale manufacturing capabilities of APIs and intermediates. Chinese imports are cheaper and highly subsidized by the Chinese government.”

A study by the Boston Consulting Group and the Confederation of Indian Industry (CII) said the total imports of APIs and advanced intermediates grew at a compound annual growth rate (CAGR) of 18 percent from $800 million in 2004 to $3.4 billion in 2013. And among all the imports, made-in-China pharmaceutical products accounted for more than 80 percent.

The high dependence is a result of price competitiveness attributed to Chinese bulk drugs. China’s raw materials are relatively cheap; the small profit margin prevents India's local manufacturers from competing.

Although the operation cost of local drugmakers goes down by using cheaper imported raw materials from China, importing from a single country means that India put all the bets on China’s bulk drugs. In other words, if anything endangers the APIs production in China, it will most likely bring drug manufacturing in India to a halt, putting the health of 1.3 billion people at risk.

“A glimpse of just what could go wrong was evident during [the] Beijing Olympics in 2008, when China closed down many of its API plants to cut environmental pollution,” said Adige. “This led to an immediate price rise of around 20 percent in some bulk drugs, which were being sourced solely from China. We had no alternative since China has a near-monopoly in several APIs.”

The disadvantageous position of Indian pharma companies causes outcries among the industry, calling for the government to take immediate action.

“India should match the incentives which China gives to its API manufacturing units with fiscal support, monetary interventions such as low interest regime, subsidy for effluent treatment plants, setting up of large API manufacturing parks and special economic zones,” said Adige. “Public health is paramount, and budgetary support for this initiative should be provided. Profit motive should not be the only driving force.”

Speaking at an annual conference of pharmaceuticals and medical devices in New Delhi last December, India Minister for Chemicals and Fertilizers Ananth Kumar said the government would set up parks for bulk drugs, pharmaceuticals and medical devices, offering affordable and unencumbered land and common facilities to reduce manufacturing costs by almost a third.

The government also constituted a committee headed by former Health Secretary VM Katoch to outline a framework for bulk drug manufacturing.

“The committee has since submitted its recommendations. After examining the recommendations, the government is now looking into the financial viability of supporting the proposal for providing assistance for common minimum facilities for three greenfield bulk drugs and API parks to the extent of INR2 billion [US$30 million] each,” said an official from the Ministry of Chemicals and Fertilizers.

The policy is warmly welcomed by the industry, but the real challenge is the timely implementation.

“The government of India has realized that the situation will have national-security implications. Health security is crucial to any nation,” said Adige. “This subject has been discussed by the government at the highest level over the last four years. We now need to roll out a policy quickly.

“India’s public sector units in the area of API manufacturing should also be encouraged and funded for making advanced intermediates such as erythromycin thiocyanate, 7-ACA (7-aminocephalosporanic acid), penicillin used in manufacturing antibiotics, OTBN (2-Cyano-4’-methylbiphenyl) used in manufacturing anti-hypertensives.”

The country’s pharmaceutical sector was worth $6 billion in 2005 and $18 billion in 2012, and is expected to touch $45 billion by 2020, according to a study by McKinsey.

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