After 30 years, India will start manufacturing Penicillin G, says Union Health Minister Mansukh Mandaviya, pointing to the success of the Centre’s Production Linked Incentive (PLI) scheme for pharmaceuticals and medical devices.

Penicillin G, an antibiotic used to treat infections including pneumonia and syphilis, was manufactured in India till the late 1980s. Imports killed the Penicillin G story, leading to closure of the local plants making the drug. And for that reason, the plans for rebooting Penicillin G’s manufacturing augurs well for the industry.

But the PLI scheme is not without rough edges, say pharmaceutical and medical device industry-insiders, calling for simplification of approval and licencing regimes, even as benefits of the scheme become tangible.

A participant in the PLI scheme, Arushi Jain, Director with Akums Drugs and Pharmaceuticals, says the scheme’s symbiotic approach integrates India into the global supply chain, nurturing sustained economic growth.

“Participating in the PLI scheme offers numerous benefits in the overall economic expansion,” she said, adding that it also promotes a more sustainable development, with direct investments towards labour-intensive sectors.

“PLI incentivises incremental sales, encourages domestic manufacturing and reduces reliance on imports, thereby narrowing trade deficit,” she says. It also attracts foreign companies to set up manufacturing units which positions India as an attractive destination for international businesses says Jain.

Entry barriers

Medical device makers point to areas that need some ironing out. “Entry barriers in the med-tech PLI persist, especially for small and medium players and that is something that is being discussed on various levels,” said an industry association representative, requesting anonymity.

For a small or medium firm to partake in the med-tech/ device PLI scheme, it has to establish a new plant, machinery and equipment in addition to new research and development, an industry-voice said. “The fact that the scheme is only relevant to greenfield investments is a barrier to their ability to participate in it,” the industry representative added. Concerns persist on the scheme’s impact on the cost of medical equipment. The impetus to increase production could result in a surplus of gadgets and a subsequent drop in costs — a typical demand-supply mismatch, they say.

The Centre announced two PLI schemes — for pharma (with an outlay of ₹6,940 crore and covering 41 bulk drugs) and for med-tech devices (outlay of ₹3,420 crore) and covering segments including cancer and radio-therapy, nuclear imaging and radiology, cardio-respiratory devices, implants. Government officials claim that over ₹6,000 crore has been invested across both segments.

Recently, Health Minister Mandaviya inaugurated 40 projects under the PLI scheme — 27 for bulk drugs and 13 for medical devices. The bulk drugs to be produced included levofloxacin, ofloxacin, telmisartan, vitamin B6 and diclofenac sodium. And the medical devices included CT scans and MRIs, cath lab and ultrasonography, as well as oxygen concentrators, ventilators, dialysis machines and stents, among others.

Expand Scope

A section of the PLI beneficiaries and trade bodies call for expanding the scope of these schemes, to give a greater push for API (Active Pharmaceutical Ingredient) manufacturing. A PLI beneficiary said, there has been significant decrease in API imports following implementation of the PLI scheme. For instance, paracetamol imports have halved compared to pre-pandemic levels.

“But, the decline notwithstanding, a substantial portion of APIs, particularly for antibiotics, are still imported. So, one needs to further develop API manufacturing here,” one of the players said.

An outlay of ₹6,940 crore over seven years under PLI 1.0 for pharma is seen as less that 15 per cent of the combined turnover of the beneficiary companies, which seems a bit low, points out another industry participant.

Besides this, delays in setting up units, bringing facilities onstream, and reaching optimal production levels (a two-to-three year phase) raise concerns about inflation eroding the scheme’s benefits (including incentives paid to beneficiaries).

To boost domestic production, the PLI scheme offers tiered financial support for fermentation-derived drugs: 20 per cent (first four years), followed by 15 per cent and 5 per cent in the fifth and sixth years, respectively. This applies to antibiotics, enzymes and hormones like insulin. Drugs that involve fermentation in their production process are more challenging to manufacture. So the production of fermentation-based drugs needs to be incentivised further, adds another industry hand.

While Covid-19 may have exposed the shortcomings in many a country’s manufacturing armour, the next few years will reveal if PLI has helped India plug the chinks in its armour.