Self-sufficiency in bulk drugs is a must

Paran Balakrishnan | Updated on June 24, 2020 Published on June 24, 2020

India cannot afford to continue depending on China for crucial pharma ingredients

The government declared 2015 the Year of the API. That may not sound hugely exciting but the health of the nation depends on them. APIs — or active pharmaceutical ingredients — play a crucial role in our lives as the raw materials that go into making antibiotics, painkillers, and other medicines that people pop every day. The 2015 announcement was followed a year later by the government fixing a 2020 deadline for when, as Union Minister Ananth Kumar declared, “India is going to become self-reliant (from China in bulk drugs),” calling it a matter of national “health security.” Now, guess what? We imported 68 per cent of our APIs or ₹249-billion worth from the Middle Kingdom in 2019, up from ₹193 billion the previous year.

The issue came to the fore in January with the Covid-19 outbreak in Hubei province, China’s pharmaceutical heartland, that hit API shipments to India. In February, highlighting India’s vulnerability, the Indian Pharmaceutical Alliance, which represents domestic drug producers, described the API inventory situation as “grim.”

While supply lines from China have opened up again, the problem of India’s dependence on its neighbour has become even more glaring for the country’s flagship industry post the deadly hand-to-hand Ladakh border fights. Three decades ago, India was completely self-reliant in APIs. Then, the Chinese built up their own sector with state support and our pharma industry moved up the value-chain to making finished drugs and used low-cost raw materials from China. “We need to examine alternative sources (for APIs) even if they’re costlier,” says Sudharshan Jain, IPA Director-General.

The government now says it’s serious about breathing life into its promise to make India API self-sufficient. But when it comes to making many things here, India suffers from cost disadvantages, mainly because of expensive power and poor logistics. The government has dusted off 2016 plans to create pharmaceutical clusters where common costs can be shared and also offer fiscal incentives to would-be producers, roughly the same approach it has taken to attract the global electronics giants to India. Incentives are even more important in the case of bulk-drug production because the industry is highly capital intensive and also needs huge tracts of land — of 1,000 to 2,000 acres.

Fund allocation

The government has announced it’s allocating ₹69.4 billion to push indigenous manufacturing of 53 key APIs such as those required for antibiotics, medicines for heart ailments, diabetes, blood pressure and TB. The government has also approved ₹30 billion to set up three drug parks in the country in tandem with State governments that will feature shared facilities like pollution treatment plants to lower costs for companies.

Just to bring it home, let’s look at how dependent we are on Chinese API imports? Well, for blood pressure drugs like losartan and heart drug digoxin, reliance is 100 per cent. For antibiotics like penicillin it’s 98.5 per cent and for ciprofloxacin 99 per cent. The numbers are similar for diabetes drugs metformin and glimepiride, according to a KPMG report. The government is also reportedly planning to start sourcing APIs from countries in Europe to diversify.

There’s an added disadvantage, though, when it comes to producing bulk drugs: the environmental factor. All pharmaceutical plants are polluting and API production is even more so. The National Green Tribunal (NGT) has insisted that pharmaceutical plants install zero-effluent treatment plants to prevent heavy pollution. This further pushes up the cost of manufacturing APIs.

One report in 2016 had the dramatic headline: ‘Hyderabad: A city drowning in pharmaceutical pollution’. (The NGT passed strong strictures against the Telangana Pollution Control Board last November.) Hyderabad could be called the first home of the Indian pharmaceuticals industry. API manufacturer Divi, which is headquartered in Hyderabad, is one of the biggest makers in the world of APIs.

The city also has public sector companies like the Indian Drugs and Pharmaceuticals (IDPL) being based there. IDPL and several other companies were large-scale producers of bulk drugs till around the 1990s when the Chinese began to expand their industry. The Chinese systematically looked at what they needed to create — a world-beating industry — and the government offered cheap land, power and finance to would-be producers. Says Jain: “Slowly, they created large plants. The cost of manufacturing was so economical they became the dominant power.” He adds: “We set up a number of committees but nothing has moved.”

Which States could be set to become big API-manufacturers? There are only a handful which stand out with existing companies that are already in the game — Gujarat, Maharashtra, Telangana, Andhra Pradesh and Uttarakhand. Of these, Gujarat is reckoned to be the frontrunner — partly because many top decision-makers in the Government are from the State. Andhra Pradesh is the laggard even though it has created small pharmaceutical clusters around Visakhapatnam. Telangana also has put in hard work to be able to offer the incentives to put up a bulk drugs plant.

How long will the government take to decide on which States should put up bulk drug plants? The optimistic estimate is six months. And it will obviously take much more time before any production begins. Says Jain: “If we start now, it will take two-three years.” And even that could be the best-case scenario.

Speed up process

Nobody’s suggesting for a moment that we should cut all economic ties with China — even if that was remotely possible. But our top diplomats all concur that, unless peace moves are made very quickly from both sides, this could be a watershed moment. In trade and business terms, what can we do in the short run? It looks like we will have to take Huawei out of the running for major telecom infrastructure deals. And we need to move as quickly as is possible to cut our dependence on China for APIs.

We aren’t the only country that’s hit the panic button in recent months after realising how heavily dependent we are on the Chinese for APIs. One pharma giant, which has decided that it wants to reduce the pharmaceutical industry’s heavy reliance on Chinese APIs, is Paris-based drugmaker Sanofi. It’s setting up what it calls a “new industry champion (that) would rank number two globally, with approximately €1 billion in expected sales by 2022.” Sanofi aims for the new API company “to help in balancing the industry’s heavy reliance on API sourced from the Asian region.

India needs to make sure that this time it lives up to its promise to cut its reliance on Chinese bulk drugs.

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Published on June 24, 2020
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