Dependency of Indian Pharmaceutical Industry on China for APIs
Globally, India supplied generic medicines and other drugs at a low cost. But around seventy percent of Active pharmaceutical ingredients are imported from China. API is the primary factor to manufacture medicines, drugs as well as vaccines. By volume, China is the global leading manufacturer and exporter of APIs. The increasing dependency of APIs on China is a concern of health security. China produces APIs at a low cost and this is a barrier that must be removed by the Government of India. In this article, we mentioned the reasons behind the increasing price of APIs. The role of China, as well as India in the pharmaceutical industry, is noticeable. In the longer term, the Indian government needs to be independent for manufacturing APIs. Indian pharma is one of the largest pharmaceutical Industries ranked third among the globe. By creating a monopoly in the pharmaceutical market China has the upper hand, which will help them to generate more profit and increase in exports.
A. Introduction:
The Indian pharma industry has been leading the globe in generics both globally and domestic markets contributing significantly to the world demand for generics in terms of volume. Made-in-India drugs supplied to developed economies like the US, EU, and Japan are known for their safety and quality.
Indian pharmaceutical industry is leading the generic sector in both global as well as domestic markets. Indian drugs (i.e. made in India) supplied to developed economies are known for their quality as well as safety. According to research, the Pharmaceutical industry in India is expected to grow to US $100 billion by 2025 along with the medical device market growth $25 billion. Indian pharmaceutical exports were the US $19.14 billion in FY 19 and the US $13.69 in FY 20 (up to January 2020).
Indian pharmaceutical sector is expected to grow to US$ 100 billion and the medical device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals exports from India stood at US$ 19.14 billion in FY19 and US$ 13.69 billion in FY20 (up to January 2020). Pharmaceutical exports include bulk drugs, intermediates, biologicals, Ayush & herbal products. India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03 billion) in 2019, growing 9.8 percent year-on-year (in Rs) from Rs 129,015 crore (US$ 18.12 billion) in 2018.
But in recent years, India has seen increasing competition from China, which it’s been able to leverage thanks to its inherent cost advantage, manufacturing intermediates and APIs at a price much under those in India which has resulted during a gradual increase in API imports from China to India and this, in turn, has led to the killing of domestic manufacturing capacity sure as shooting key APIs and their advanced intermediates.
The imports from China are mainly because of economic considerations. This essentially implies that Chinese imports are much more cost-effective for Indian pharma manufacturers. The assembly cost of API in China is about 20–30% less than that in India. India’s large import dependence on China (nearly 70% by value) has become a significant threat to India’s healthcare manufacturing and global supply chain.
The Indian government has begun to materialize a policy to extend the production of raw materials within the country itself. Boosting the assembly of medicinal raw materials and medicines could counter China’s dominance within the global market. Hence, the approaching challenge to India’s pharma production may additionally bear opportunities for India in terms of emerging as a self-reliant API exporting nation. As a consequence, it is important to give an overview of different solutions that could be implemented to reduce India’s dependency on China and analyze the challenges in implementing these solutions.
B. Findings
Global impact of Indian pharmaceutical Industry
India is one of the largest globally leading industries for pharmaceuticals. Drugs manufactured in India are acknowledged because of their good quality and safety procedures as well as provided to developed marketplaces like the United States, Europe, and Japan. China is a competitor of India with the advantage of large scale manufacturing in APIs at a low cost. As a result, India is also a consumer of the Chinese pharmaceutical market for APIs. Indian Government exports more than seventy percent of APIs from China. It commenced the slaughter of domestic manufacturing capacity indisputable as expelling key APIs, and their advanced intermediate. India is having nearly twice the potential of Western European countries, significantly outpacing even the USA, Korea, and Germany. India is considered as the best pharma business destination with the Third ranking. Indian pharmaceutical firms provide over eighty percent of the antiretroviral drugs used to combat AIDS (Acquired Immune Deficiency Syndrome) to the global market. Sixty-five percent of WHO demands Diphtheria, pertussis, and tetanus (DPT), and Bacillus Calmette Guerin (BCG), and 90% of the Measles vaccine is manufactured by Indian Pharmaceuticals. According to UNICEF, India is the leading global authorization of affordable medicines and generic drugs.
API and its manufacturing process
The Active Pharmaceutical Ingredient (API) is a part of any drug that produces the intended effects. A small amount of the active ingredient effects, so only a tiny part of the active ingredient is contained in the medicine. Some drugs, like combination therapies, have multiple active ingredients to treat different symptoms or act in several ways. In medicine, API produces the intended effects to cure the disease. As an example, Paracetamol is the API for Crocin and it’s the API paracetamol that provides relief from body ache and fever. Every medicine is formed from two main ingredients. The chemically active APIs and chemically inactive, excipients, which could be a substance that delivers the effect of APIs to one’s system.
API isn’t made by just one reaction from the raw materials but rather it becomes an API via several chemical compounds. Raw materials are chemical compounds that are used as a base to make an API. The chemical compound which is in the process of becoming an API from raw material is called an intermediate, Raw material passes through over ten forms of intermediates during a process when it changes from being material into an API. The long manufacturing process is sustained until it’s purified and reaches a high degree of purity. An API manufacturer first develops the matter during a laboratory. Later, the assembly department manufactures high quantities of APIs using large reactors. it’s then checked for purity before selling it to drug-makers. If an API isn’t ultra-pure, medicine cannot meet the strict quality criteria. therefore, the quality of an API plays a really important role.
Production of APIs has traditionally been done by the pharmaceutical companies. But in recent years many corporations have opted to send manufacturing overseas to chop costs. This has caused significant changes to how these drugs are regulated, with more rigorous guidelines and inspections put into place.
Essential Raw material/APIs imported from China
NLEM listed some drugs as well as 376 medicines, and India currently dependent on imports from China, and it approximated up to 70%. Those lists of drugs include Losartan for cardiovascular diseases and Metformin for diabetes. The list further includes basic antibiotics like Penicillin and Cephalosporins not only this but critical drugs like antibiotics Norfloxacin and Azithromycin India completely depend on China. The Indian government considered a list of 38 drug raw materials presented by the Central Drug Standards Control Organization (CDSCO) that are required to produce locally for reducing dependency on China. Paracetamol, ranitidine, ampicillin, amoxicillin, ciprofloxacin, metformin, ofloxacin, metronidazole, ascorbic acid, and acetylsalicylic acid are some of the essential drugs manufactured by APIs imported.
Reasons behind hike in the price of APIs
An increase in the price of Key starting material (KSM) is one of the most significant reasons for the increasing price of APIs. KSM is a fundamental component of API.
This is often driven by supply uncertainties emerging out of China, where plenty of KSM manufacturing bases are located. Even in India, there have been instances of units being impacted by pollution concerns, resulting in supply issues and thus impacting the value of products — clearly to a lesser extent than China.
As KSM manufacturers began to relocate to line up their base outside China, manufacturers hiked their prices as per their economies, which impacted the KSM pricing and thus API pricing further.
Also, the prices of APIs and basic chemicals used to manufacture COVID19 drugs have skyrocketed between 3 to 10 times since March 20, due to opportunistic marketing, short supply, and weakening of the rupee.[12]
Two factors influence the solvents market; Crude oil price, and the Depreciation of the rupee. Those are significant during value composition it includes Manufacturing of API
Pharmaceutical Industry of China
One of the largest and leading pharmaceutical industries is China by standing second globally. Innovation is the primary focus of the Chinese government. China plays a significant role in changing the market, distribution, and trends. There is great demand, advancement in manufacturing technology, and with the continuous manufacturing process regulated toward promoting the developing trend of small volume with high-value manufacturing. The Chinese government is more focused on supporting its two-thousand-year-old medicine market that is known as Traditional Chinese Medicine, with strategic development plans.
It is an enormous economic factor that China manufactures API on a large scale and export globally. Because of the affordable price their share in the market rapidly increased. China estimates for approximately 90.0% of world water-soluble vitamin output, 70.0% of acid output, and 90.0% of penicillin output. The Pharmaceutical Industry of China massively relies on exports and gain revenue of 36.9% form the global market. China has over seven thousand manufacturers for manufacturing over two thousand APIs. China is changing its identity from imitator to innovator.
Reasons behind India importing APIs from China
The Department of Pharmaceuticals (DoP) within the Ministry of Chemicals and Fertilizers of India, implied that imports from China are more beneficial for Indian pharma manufacturers in terms of profit. Infrastructure facilities, wage costs, and tax advantages are some factors responsible for dependence on imports from China. Due to an uncertain future, Private companies in pharmaceutical production didn’t present concern in research and development. China has achieved more leading market shares with the inherent power and upper hand in infrastructure with larger capabilities, advanced technologies, and chemistry. Because of cost competitiveness, China’s API market gained leading levels.
Figure 2 shows overtime India’s import from China for pharmaceutical materials. From 1991 India started importing Pharmaceutical material from china. And dependency started increasing from 2010. According to the United Nations COMTRADE database regarding international trade, China Exports to India of Pharmaceutical products was US$342.55 Million during 2018,
The risk from the Indian pharmaceutical Industry’s linkage
Importing nearly seventy percent of APIs from China affects the global pharmaceutical market of India also affects healthcare manufacturing. India Is Importing Most of the required raw material from the global market. Around 1.8 billion USD is imported in the year 2019. India would want to continue the supply of generic medicines to the planet using its inventory of APIs although it would not be ready to match the rising global demand within the near future. Because of APIs shortage, India is unable to fulfill the global demand for generic medicines. It will also affect its influence, and power together of the leading suppliers of generic medicines as well as countries that depend upon India may refuse to cooperate with it or engage with its medical diplomacy. These countries will look to secure their supply chain elsewhere or maybe invest within the production of generic medicines on their soil if possible. In step with some, the Indian government has begun to materialize a policy to extend the production of raw materials within the country itself. This might eventually also enable India to become an alternative to China within the world market. Pharma leaders believe that the Indian government should provide credit and support to one section of the industry, for example, people who manufacture one sort of medicine, then replicate it with firms that produce other medicines. Boosting the assembly of medicinal raw materials and medicines could counter China’s dominance within the global market. Hence, the approaching challenge to India’s pharma production may additionally bear opportunities for India in terms of emerging as a self-reliant API exporting nation.
