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India must fill China gaps to develop into the “pharmacy of the world”

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India has launched into an ambitious plan to chop dependence on China for key raw materials because it seeks to develop into self-sufficient in its quest to be the “pharmacy of the world.”

Varun Singh Bhati | Eyeem | Getty Images

India has launched into an ambitious plan to chop dependence on China for key raw materials because it seeks to develop into self-sufficient in its quest to be the “pharmacy of the world.”

Already the world’s third-largest manufacturer of medicines by volume, India has certainly one of the bottom manufacturing costs globally. About one in three pills consumed within the U.S. and one in 4 within the U.K. are made in India.

Nevertheless, India’s $42 billion pharmaceutical sector is heavily depending on China for key lively pharmaceutical ingredients or API — chemicals which might be liable for the therapeutic effect of medicine. 

In line with a government report, India imports about 68% of its APIs from China because it’s a less expensive option than manufacturing them domestically.

Nevertheless, an estimate by the Trade Promotion Council, a government supported organization, puts the figure of API dependence on China at about 85%. One other independent study carried out in 2021 points out that while India’s API imports from China are at nearly 70%, its dependence on China for “certain life-saving antibiotics” is around 90%. Some drugs which might be highly depending on Chinese APIs include penicillin, cephalosporins and azithromycin, the report said.

That could be starting to alter.

Under a government scheme launched two years ago, 35 APIs began to be produced at 32 plants across India in March. This is predicted to cut back dependence on China by as much as 35% before the tip of the last decade, in accordance with an estimate by rankings firm ICRA Limited, the Indian affiliate of Moody’s.

India emerged as a big supplier of Covid-19 vaccines, supplying to 75 countries, including Indonesia, where a medical officer injects the vaccine AstraZeneca right into a recipient in Bintan island on July 2, 2021.

(Photo credit Yuli Seperi / Sijori images/Future Publishing via Getty Images

A complete of 34 products were approved in the primary phase of the scheme — and distributed amongst 49 players, in accordance with assistant vp at ICRA Limited, Deepak Jotwani. 

“The primary phase will lead to reduction in imports from China by about 25-35% by 2029,” Jotwani estimated. 

India’s role within the pandemic

The federal government hopes to drive the pharmaceutical sector — currently valued at roughly $42 billion — as much as $65 billion by 2024. Its goal is to double that focus on to between $120 billion to $130 billion by 2030.

India has also emerged as a key player in worldwide efforts to combat the pandemic. 

In line with the federal government, India has supplied over 201 million doses to about 100 countries across Southeast Asia, South America, Europe, Africa and the Middle East as of May 9.

India has been exporting vaccines through each government-funded initiatives and under the Covax platform.

The country needed to briefly stop exports in April 2021 when domestic cases surged and it needed more vaccines at home. It resumed exports in October that 12 months.

Significantly, over 80% of the antiretroviral drugs used globally to combat AIDS are also supplied by Indian pharmaceutical firms, in accordance with the federal government.

India was not at all times this depending on China for essential ingredients for its drugs.

Reducing import dependence is essential for reducing disruptions in India’s pharma supply chain.

Amitendu Palit

senior research fellow, Institute of South Asian Studies in NUS

In 1991, India imported only one% of its APIs from China, in accordance with PWC consulting group.

That modified when China ramped up API manufacturing within the Nineteen Nineties across its 7,000 drug parks with infrastructure similar to effluent treatment plants, subsidized power and water. Production costs in China fell sharply and drove Indian firms out of the API market.

Long road to self-sufficiency

It’ll be a “very long time” before local production becomes large enough to satisfy the demand of India’s pharmaceutical producers, senior research fellow on the Institute of South Asian Studies on the National University of Singapore, Amitendu Palit told CNBC.

“Till then, India might want to import APIs substantially from China. Reducing import dependence is essential for reducing disruptions in India’s pharma supply chain,” Palit said.

Founding father of Mumbai-based Somerset Indus Capital Partners, which operates a non-public equity fund in health care, Mayur Sirdesai, said the production-linked incentive scheme’s focus might be narrower. 

“We are going to probably do higher with low volume, by specializing in area of interest APIs than with high volume ones,” he said, adding that plenty of other chemical processes within the manufacturing cycle would also must be moved to India to chop costs in the long term. 

Geopolitical considerations were behind the choice to cut back dependence on China, said Pavan Choudhary, chairman and secretary general of the Medical Technology Association of India, a non-profit organization.

“Blind offshoring is now becoming ‘friendshoring,'” Choudhary said, explaining “friendshoring″ to mean the outsourcing of business operations to countries which have the same political system, and with whom there’s a “history of peace”.

He also India was reflecting recent attempts by numerous countries to diversify supply chains away from China.

Choudhury — an influential voice in shaping policy within the pharmaceutical industry — estimated that other than APIs, India also imports $1.5 billion of medical equipment from China in imaging technology or machines to perform magnetic resonance imaging and other varieties of sophisticated scans.

He said reducing dependence on China for medical equipment would take longer than for APIs.

“APIs are depending on a chemical ecosystem which already exists in India,” he said, adding that there was more “technological complexity” in medical devices. 

“It’ll take a bit longer to chop this dependence,” he said.

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