India is moving towards reducing dependency on the import of Active Pharmaceutical Ingredients (APIs) and drug intermediates from China. “There has been a 4 per cent reduction in import of APIs and other raw materials from China in the last one year,” R Uday Bhaskar, Director-General, Pharmaceutical Export Promotion Council (Pharmaexcil), told Business Line.

About 65 per cent of the raw materials for Indian drug makers worth $3.5 billion are being sourced from China

Indigenous production

There are multiple factors that warrant indigenous production of raw materials. “The geopolitical realities, including tension between India and China, as well unexpected challenges such as Covid-19 work in favour of domestic production,” said the MD of a Hyderabad-based listed pharma company.

The import of raw materials from China was halted for over two months due to the global and domestic lockdown and was restored only recently.

The rising cost of APIs being imported is another major concern as it is adversely impacts cost of production as well as the margins of Indian firms. According to a note of the Ministry of Commence, between March and May this year, there has been a 20 per cent increase in prices due to the impact of Covid-19.

The journey towards self reliance started almost a year back in a significant way. Pharmexcil conducted a study with the support of the Ministry of Commerce & Industry on ‘Strategies to Reduce Import Dependence of APIs, KSMs and intermediates’, and submitted a Detailed Project Report (DPR) to the government in January.

Some schemes have also been sanctioned to develop three mega bulk drug parks in partnership with States. The government is giving grants to States with ₹1,000 crore for each bulk drug park.

As part of a Production-Linked Incentive Scheme, financial incentives for the eligible manufacturers of 53 critical bulk drugs (26 fermentation-based and 27 chemical synthesis-based bulk drugs) have been provided on their incremental sales over base year 2019-20 for a period of six years at a cost of ₹6,940 crore.

On their part, drug manufacturers, too, realised the need for local production and have been adopting different strategies. When contacted on the steps being taken, GV Prasad, Co-Chairman and CEO, Dr Reddy’s said: “DrReddy’s is working to increase its backward integration of APIs.” It is learnt that few players have also started sourcing them from domestic players, who are now seeing a business proposition in their production.