The Indian bulk drug industry is ranked the third-largest in the world and has grown at a compound annual growth rate (CAGR) of 5.6 per cent over 2011–16. It is expected to grow at a CAGR of 7.3 per cent during 2017–22, signifying its future potential and evolving global importance. The industry continuously innovated to supply high-quality, cost-competitive intermediates and Active Pharmaceutical Ingredients (APIs) to both the domestic and international markets. However, over the last decade, India has witnessed increased dependence on imports of many basic intermediates and APIs from emerging countries, especially China. As per the CII – KPMG in India report titled ‘Indian bulk drugs industry – Regaining the lost glory’ that was released today, India imported nearly 272 million kgs of bulk drugs and intermediates valued at nearly USD2.8 billion in 2016. China alone contributes about 70 per cent of all such imports by value. The report presents the current state of the bulk drug industry in India, assesses gaps and explores recommendations to mitigate the challenges associated with API import dependency, thereby establishing self-sufficiency of APIs.
The dependency of API imports, specifically from China, has been a cause of major concern for the industry. China is a single supplier for many of the critical intermediaries and APIs. Some of the critical APIs for high-burden disease categories such as cardiovascular diseases (for example, Digoxin and Losartan), diabetes (Metformin and Glimepiride) and tuberculosis (Isoniazid and Streptomycin) are also listed in the National List of Essential Medicines (NLEM). In fact, the current market is largely dependent on China for many antibiotic APIs manufactured by the fermentation route such as penicillin, cephalosporins and macrolides.
Ravind Mithe, Partner, Strategy & Operations (S&O), Management Consulting, KPMG in India, said, “Such high dependency means that any disruption in the supply of APIs can potentially result in significant shortages of essential drugs in India. Given the strategic nature of this dependence, urgent interventions from the government as well as industry are desired. While the government has taken many positive steps for the pharmaceutical industry, the current scenario also demands a need to build a conducive ecosystem and increase competitiveness for local API manufacturers to match costs with other countries. Measures such as building API clusters, providing low cost utilities, financial incentives, facilitating single-window clearance and promoting innovation would build self-sufficiency in API manufacturing, and also secure its pharma supply chain. ”
The increased dependency of low-cost API is mainly attributed to China’s extensive efforts towards developing economies of scale, easing regulations for bulk drug manufacturers, availability of low-cost utilities, building process efficiencies and supporting manufacturers in the form of subsidy, low taxes and fiscal incentives. Based on pharmaceutical industry interviews, the report brings to light that around 80 per cent of the respondents depends upon Chinese APIs; 10-25 per cent API import growth seen by respondents in last five years from China; 25-30 per cent lower price for Chinese APIs as compared to Indian APIs; Hundred per cent of respondents feel that two key factors – government facilitation and economies of scale – are major advantages for Chinese manufacturers.
Key challenges faced by the bulk drug industry have been identified on the basis of discussion with industry leaders and KPMG in India research:
A structured approach to be followed to help prioritise the recommendations made in order to help achieve self-sufficiency:
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