A call to action for made-in-India APIs

In April 2020, the Indian pharmaceuticals industry began to feel its wings were clipped due to an excessive dependence on China for raw materials or active pharmaceutical ingredients (API). A year later, as the country marks 75 years of Independence, the pharmaceutical industry is looking to spread its wings again, as they pursue indigenous manufacturing of specialised and novel APIs, beyond just commodities.

As the COVID-19 pandemic struck and India rushed to ensure its medical supplies, Chinese supply disruptions dented not just operations but also finances of companies with API prices almost doubling in no time.

India had been displaced from its once dominant position in APIs by Chinese companies, aggressively developing their API manufacturing. By 2000, much of this production shifted out of India. So in 2020, when COVID-19 struck, pharma players had sleepless nights securing their bulk drug to make even vitamin-C tablets, as its demand went up with people popping the pill to ward-off the virus.

A PwC report on reviving India’s APIs noted, the percentage share of API imports from China had shot up from 1 percent (1991) to about 70 percent (2019). The pandemic pushed global pharma companies also to consider alternative sources. For India, it accentuated the need to localise API sourcing.

The lesson learnt, domestic industry is now strengthening domestic API capacities. For instance, Emcure Pharmaceuticals (once producing APIs for captive consumption) is now scaling up production to supply other domestic buyers. “In order to achieve the targeted double-digit growth, as a promoter, one of the verticals that excites me is the API for third party sales. We have created capacities for that,” says Satish Mehta, Emcure founder and Chief Executive Officer (CEO). The company sells ₹150-crore worth of API to third-parties. Mehta is quick to clarify, that shutting out China completely, “isn’t going to happen. We are trying to see how to reduce the dependence on China and make an alternate.”

Pharma major Dr Reddy’s Laboratories Co-chairman and MD, GV Prasad had earlier expressed their intent on increasing backward integration for API manufacturing. More recently, Glenmark Life Sciences is tapping the API potential, as it launched its initial public offering.

Dr Yasir Rawjee, GLS Managing Director pointed out, the global pharmaceutical market is estimated at $1.1 trillion and APIs are pegged at about $ 190 billion (2021), which is projected to reach $260 billion by 2026. GLS looks to produce high-value, non-commoditised APIs.

Mahesh Doshi, National President, Indian Drug Manufacturers’Association says, several large companies are bringing value-addition to their API businesses through specialised API. "Not that commodity API isn’t an opportunity anymore. Companies with capabilities will continue to produce that but those large players with better infrastructure and R&D facilities they are adding as a vlaue-addition this novel API,” Doshi said, adding that more will join the API — specialised or commodity – bandwagon.

Research and Information System for Developing Countries (RIS) in its report, released just days ago, noted that, of the 5000 APIs invented thus far, about 3000 of them are being used for treatment, mitigation and cure. India discovered only 16 novel APIs, of which only six are presently available in the market.

“In order to remain globally competitive and dominant, India has to steer and to foster newer approaches,” the RIS report by Prasanta Kumar Ghosh said.

“To become an important global player in the discovery of novel APIs during the coming years, India would need to spell out and spend on innovative multidisciplinary avenues with adequate provisions for enabling the inventors to adequately reap the benefits of their discovery in terms of societal recognition and amassing individual wealth," it added.

Chinese producers benefit from the economies of scale and government incentives for finance, infrastructure and other favourable regulatory policies.

The Indian government too has intervened to encourage self-sufficiency with its Product Linked Incentive scheme. (see box*). Industry players are encouraged, but say, not many can participate. While they wait for the second tranche, an industry-voice points out, APIs are a business opportunity that more will tap. “After all one has to be atmanirbhar. How long can you continue on government subsidies?”

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