Indian Government To Reduce Import Of Chinese APIs

There is a growing concern in India that the domestic pharma industry has developed an over dependence on China for the manufacture of active pharmaceutical ingredients (APIs). LiveMint reports that the Indian government intends to make locally manufactured APIs more attractive and available for Indian drug makers.

The Economic Times (ET) reports that Indian drug manufacturers import over 90 percent of their raw materials from China. This is based on data from Boston Consulting Group (BCG) and the Confederation of Indian Industry (CII).

According to ET, Indian drug makers depend on foreign imports for the APIs in many antibiotics, painkillers, synthetic penicillin, and semi-synthetic cephalosporins.

Indian experts who spoke to LiveMint explained that this was not always the case.

Sujay Shetty, consultant from PwC India, said, “India is known for complex intermediates and APIs, while China always had an advantage when it comes to base chemicals and intermediates. The concern now is that China has gone up the value chain and is becoming more competitive in APIs and complex intermediates as well.”

Experts cite fragmentation within the industry, high costs of land, power and utilities, as well as a marked lack of incentive for research and development. The Chinese were simply able to offer the ingredients at a more attractive price.

However, this practice raises some concern from analysts who argue such a large dependence upon imports from one country not only damages the Indian economy, but it also puts India’s supply chain at substantial risk.

Bart Janssens, a BCG partner, explained to ET, “Any deterioration in relationship with China could potentially result in severe shortages in the supply of essential drugs to the country. Additionally, China could easily increase prices of some of these drugs where it enjoys virtual monopoly.”

India has already experienced some of this risk when China closed factories prior to the Beijing Olympic Games to cut down on pollution—a move which subsequently raised the price of APIs by 20 percent.

There is also some concern about quality. Many Indian manufacturers have come under fire within the past year for drug quality concerns, which the CDSCO is working to address. Many of the raw ingredients used to manufacture the drugs in question were imported from China.

The Indian government is now looking at ways in which they might incentivize local manufacture of APIs. Such ideas include reduction of input costs, investment in industrial parks for manufacturing, or setting minimum pricing for imports, LiveMint reports.

The need for more locally manufactured raw materials is clear, but experts urge caution. There is a strong possibility that China might retaliate to any extreme measures or aggressive Indian sanctions.

According to LiveMint, the Indian Prime Minister has requested a report from the department of pharmaceuticals and policies outlining a strategy for addressing the issue. The report is expected within the next three months.