India's dependence on China for “certain life-saving antibiotics” like penicillin and azithromycin is about 80 to 90 per cent. - ILLUSTRATION: UNSPLASH
NEW DELHI (The Straits TImes/Asia News Network): India has been taking measures to wean off dependence on China for ingredients that go into making a variety of drugs, including antibiotics.
But three years after the Covid-19 pandemic disrupted supply chains from China, India is still a long way off from reducing imports of active pharmaceutical ingredients (APIs) – chemicals responsible for the therapeutic effect of drugs, noted industry experts.
Instead, India imported APIs and drugs worth 352.49 billion rupees (S$5.7 billion) in 2021-22, up from 285.29 billion rupees the previous year, according to government figures.
In the northern state of Himachal Pradesh, construction has started on a pharmaceutical park spread over 362 ha, while in the western state of Gujarat, work has started on a similar park spread over 809ha.
Land for a third park is being acquired in the southern state of Andhra Pradesh.
The parks, which are expected to be ready in two years’ time, are in addition to the government giving Production Linked Incentives (PLIs) worth US$2 billion (S$2.6 billion) for manufacturing 53 APIs such as levofloxacin, an antibiotic used to treat pneumonia, for which India is heavily dependent on China.
Manufacturing has already started for about three dozen APIs like para-aminophenol, a raw material for paracetamol, but volumes have yet to reach a point where imports can be cut, noted industry experts.
“The realisation of the benefit of the (PLI) scheme will take time as the incubation time is high,” said Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance.
Under the PLI scheme, different incentives are given for different products over a period of time. For instance, products that require fermentation, a process to create microorganisms for antibiotics and others, will get 20 per cent of the total cost to push up manufacturing between FY24-27.
On the pharmaceutical parks, Jain said: “India aims to create clusters for developing an ecosystem for bulk drug manufacturers. These clusters will be of great help as they facilitate faster clearance, efficiency and product development initiatives.”
India is the biggest supplier of generic drugs in the world, meeting more than half of global demand for many vaccines. Still, the US$42 billion sector is heavily dependent on China for APIs.
According to a government report, India imports about 68 per cent of its APIs from China as it is a cheaper option than manufacturing them domestically.
And the dependence on China for certain life-saving antibiotics such as penicillin and azithromycin, used to treat bacterial infections such as bronchitis, is about 80 per cent to 90 per cent, according to industry data.
Deepak Jotwani, assistant vice-president and sector head of corporate ratings at ICRA, an India-based credit rating agency, assessed that dependence will go down only over a four- to five-year period.
He noted that for some drugs like “the entire requirement of certain fermentation-based APIs like penicillin and erythromycin” are being sourced from China.
And then there are some APIs that are made only in China like Penicillin G and 7-aminocephalosporanic acid, the key raw materials required for manufacturing cephalosporins, used for making certain antibiotics.
For real impact on reducing imports from China, industry experts said the requirement was to get middle-level pharma firms to increase manufacturing and push innovation.
A majority of firms that have applied for incentives under the PLI scheme are major companies like Sun Pharmaceutical Industries and Dr. Reddy’s Laboratories.
“The volume drivers from the middle-tier players are still not very well engaged,” said Mr Naveen Kulkarni, chief executive of biotransformation company Quantumzyme, on the PLI scheme.
“One of the primary reasons could be that the high-value products requiring fermentation capabilities are received sceptically by mid-level players, who are not willing to move out of their comfort zone,” he said.
He noted that the government’s incentive scheme, which runs for six years, could also be a deterrent and perceived as risky by the mid-level players, “who are enjoying a better bottom line with extremely low risk”.
Import dependence is expected to remain high in the interim because domestic demand is expected to increase, even as India is set to overtake China as the nation with the world’s largest population at 1.4 billion people
“It will, however, take time for these local manufacturing capacities to develop large-scale outputs. In the meantime, rising domestic demand for drug intermediates is likely to preserve the import dependence on China,” said Dr Amitendu Palit, a senior research fellow and research lead (trade and economics) at the Institute of South Asian Studies in Singapore.
Firms that have started increasing capacity include biopharmaceutical company Biocon.
“Our immunosuppressant facility in Visakhapatnam and peptides facility in Bengaluru... are expected to go live in FY24, with more projects in the pipeline,” said Siddharth Mittal, managing director and chief executive of Biocon.
Without going into details, a spokesman for pharmaceutical firm Glenmark, said: “As a beneficiary, we have enhanced our development efforts on complex products as well as towards increasing our manufacturing capacity under the (PLI) scheme.”
