Why Indian Pharma Dependent on China:

To manufacture finished generic products, India imports about 84% of the API’s (Active Pharmaceutical Ingredients). In 2016, India imported APIs valuing Rs 13,853 crore from China which is a whooping 65.3% of the total Rs 21,217-crore. In 2017, API  imports were 80% out of which 75% was from China. It shows Indian Pharma Industry critical dependency over China for API’s.

China exports only 2% to India out of its total exports. If we talk about Pharmaceuticals, it’s not a priority area for China; it is its 39th largest export item, but for India pharma is of greater importance as its 5th largest export item. This skewed import-export balance  highlights India’s dependency on China for API’s.

What is happening in China due to stringent environmental policies?

Due to stricter environmental policies in China, more than 1.5 lakh factories have been shut down till last fiscal year 2017.  This will directly impact Pharmaceutical industries in China & other countries where these factories used to supply pharma ingredients specially APIs. This will lead to decrease in supply of APIs & the price of APIs will also increase.

Impact on Indian Pharma Sector:

Indian Pharma sector which is highly dependent for the APIs from China, may be affected by  high Inflationary & supply disruption impacts.  There is approximately 120% increase in the cost of raw material from China as per few sources.

Drug price rates

Data source as accessed on 15-June-2018

Since the Cost of the API is increasing, the cost of Finished formulations may also increase as we move ahead. There are various Geo-International-Political factors which are creating a huge pull for low cost Raw material in India.

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Huge demand of Indian Drugs in US & Europe: Due to rising cost of healthcare in developed nations, the demand of Cheaper but high-quality drugs has increased. India is the preferential supplier of the drugs satisfying the criteria of high Quality & Cheaper drugs.

DPCO impact on price control: Drug price control authority is trying to bring down the price of medications to make health care accessible & affordable. But due to high cost of raw material, it will become difficult to make high-quality but cheaper drugs if the conditions remain same in China.

Emerging focus on African countries: For the supply of Finished formulations, the focus on African countries has been increasing continuously. There is huge demand of Indian drugs in African markets but the issue revolves around pricing. They require cheaper drugs at the moment & to make these cheaper drugs low cost APIs are required.

What may be the solution?

Capacity building for Raw material: Indian Pharmaceutical industry need to be self-reliant for APIs. MAKE IN INDIA should be a priority now for APIs. Govt. Policies, PPP & Capacity building by Private players may make this possible.

Policies favouring the API production: As per recent news, a strategy is being worked out by Pharmaceuticals Export Promotion Council of India (Pharmexcil) in association with national research institutes to reduce the dependence on China and Italy for import of Active Pharmaceutical Ingredients (API s) and intermediates. Pharmaxil is also acting as Facilitator between Indian and foreign manufacturers and the respective governments by extending incentives, concessions and providing a platform for Indian exporters to display their products at international exhibitions. Further Import duty & taxation need to be reduced on APIs.

China buying APIs from India: China has started purchasing APIs from India and is concentrating on manufacture of formulation drugs. It can be a good chance to promote APIs export from India.

Technology to reduce cost of Production: Importing technology & digital methods for APIs & finished drugs may lower costs. It will be a one-time investment for long term impact. Also using inventory-based model for drug supply (as done by Amazon like online retailers) by using digital methods may further lower down cost of drugs in India.

 

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