4-Acetamidophenol CAS 103-90-2 Paracetamol
From not joining the Regional Comprehensive Economic Partnership (RCEP) trade agreement to saying no to the trade pillar of the Indo-Pacific Economic Framework (IPEF), India has deliberately said no to opportunities to be part of major regional economic initiatives. But that’s not to say that Delhi doesn’t have its own vision for growth. In fact, since the outbreak of COVID-19, New Delhi rolled out an economic package for ‘Atmanirbhar Bharat,’ or self-reliant India.
From wariness about trade ties with China to fears about supply chain security, there has been no lack of issues for Prime Minister Narendra Modi’s administration. But it is in the pharmaceutical industry that India has made clear its aspirations for self-reliance.
The primary goal is to cut India’s dependence on Chinese-made Active Pharmaceutical Ingredients [API’s] and decrease imports of finished Chinese pharmaceutical and medical device products. Those objectives in turn would allow India to become the pharmacy to the world, and produce cheap, high-quality drugs at every junction of the global value chain. At the same time, the strategy is expected to realize significant growth in the country, with the aim of increasing market value 30 percent by 2025 and doubling market value by 2030.4
The latent potential of India’s pharmaceutical industry is widely recognized. Yet visions for the industry’s growth diverge, and there is certainly dissonance between the incentives desired by the private sector and those granted by the Indian government.
Drug manufacturing had been a key industry for India long before the pandemic. The Indian domestic pharmaceutical market’s growth outpaced that of the overall economy by two to three percent a year.5 India’s efforts to reduce poverty created a middle class that can afford medical care, and the domestic market has strong growth prospects as India’s “Ayushman Bharat Yojana” continues to enroll citizens in the nation’s affordable care scheme. If nothing else, a growing pharmaceutical industry will drive down drug costs for families as markets become increasingly competitive.
A strong pharmaceutical sector is also an integral part of reducing India’s overdependence on China. The pandemic illustrated the dangers of offshoring production of essential goods; indeed, India’s restriction of acetaminophen exports to the United States illustrates exactly why pharmaceutical independence is essential to inuring India from undue influence by a hostile neighbor. Government reports signal that nearly 70 percent of all APIs and upwards of 90 percent of those APIs essential to produce critical mass-market antibiotics are imported from China, and any export halt or slowdown from China could temporarily upend India’s entire pharmaceutical industry.
In order to reduce dependence on China, India has released three production-linked incentive [PLI] schemes that in the long-term ideally work to greatly reduce India’s pharmaceutical and medical device exports from China. Pharma [1.0, 2.0, Bulk Drug Park] and Medical Device PLI. In the two years since implementation, nearly $2 billion has been distributed to 55 different firms as a result of the pharmaceutical PLI schemes, with those funds in part contributing to the production of 35 of 53 APIs upon which India has substantial import dependence.6
The history of the global dependence on Chinese pharmaceutical is closely linked to the reorganization of the Indian pharmaceutical industry in the 1990s. India’s participation in the WTO forced the pharmaceutical industry to adopt product patent regulation in line with global standards. Lost to China amongst the reshuffling of the Indian pharmaceutical industry as it partnered and competed with multinational corporations [MNCs] in the domestic and global market was an Indian self-reliance on APIs. Even as China has long struggled with pharmaceutical innovation, it has long been in a unique place to capitalize on an international need for pharmaceutical precursors.
A Nikkei report8 concluded that China’s current near monopoly on precursors stems from a massive flight of Western pharmaceutical providers to China in the early 2000’s. Indeed, this report enumerates China capitalized on a Western interest in its domestic pharmaceutical market to trade for the schematics of key generic drugs. With state-owned or state-supported enterprises that were able to produce in massive quantities without concerns over profit, China accessed economies of scale faster and far easier than India. Moreover, with increasing Western partnership in India, pollutant-heavy API refinement processes came under fire. China, with industrial drug parks that offered cheap municipal disposal solutions and higher risk-tolerance for polluting industries, readily took over the dirtier precursor industries as well.
In some ways, it appears that the Indian government will take a page out of Beijing’s playbook. Chief among these shared strategies is India’s support of shared-use industrial drug and medical device parks. There exists the above Bulk Drug Park initiative focusing on infrastructure for APIs and KSMs, which is significant because existing ventures in the Indian state of Telangana represent a replicable, significant development in the Indian pharmaceutical industry. Hyderabad’s Pharma City has been under construction since 2018, with significant private sector interest and deep public support. Alongside Pharma City, the Indian government plans to construct another three bulk drug parks around the subcontinent, with states like Himachal Pradesh amongst the forefront of those considered for these ventures. Bulk drug parks, capable of leveraging scale to offer infrastructure, process waste, and subsequently offer cheaper municipal resources and lower production cost, were essential to China’s growth in the pharmaceutical industry. In the long-term, bulk drug parks with the ability to safely and cheaply produce key precursors decreases India’s reliance on China, but also makes India an attractive prospect to companies because India can offer a more vertically integrated pharmaceutical manufacturing environment, simplifying supply chains and making China’s value proposition far less unique.
There is political support for government-sponsored growth. To be sure, the Indian government makes it clear that it underlies its production schemes with dialogue from the private sector. However, public statements from the Indian pharmaceutical sector convey a high degree of suspicion and doubt regarding the proceeding government incentive plans and the long-term goals regarding API independence. Public statements, such as those by Union Health Minister Mansukh Mandaviya, that speak to sacrificing profits for reputation and international standing seem directly at odds with those made by equity providers and industry leaders, who see the future as one defined by low-volume, high-value APIs and high-value biologics rather than total self-sufficiency and high-volume generic drug production.
Additionally, the value of the PLI incentive programs appears to lie less in their monetary value and far more in the signaling it provides. Public statements10 that suggests that the pharmaceutical industry is dissatisfied with the scope and value of the PLI incentives, that overall monetary benefits hardly impacted growth. Indeed, even after $2 billion broadly injected into the Indian pharmaceutical sector, during and after the pandemic, industry growth year-over-year is still not projected to clear the pre-pandemic high of thirteen to seventeen percent, instead settling at a projected eleven percent. At a market size of nearly $42 billion, that is little more than $4 billion in year-over-year growth, and it is unclear how much of this growth stems from bulk drug incentive programs and how much stems from fledgling joint ventures and growing private investment in the industry.
Still, with nearly 55 companies receiving awards, the buy-in across the industry is notable- the industry is certainly more definitive with its actions than its words. This is particularly important when contextualized against recently leaked research linked incentive [RLI] scheme that would synergize with earlier PLI schemes7 in both supporting growth and drug security lower on the value chain while helping India’s pharmaceutical sector emerge as an R&D powerhouse by contributing government funds to private R&D. This is largely in line with statements made by Indian pharmaceutical leaders, that they would prefer to prioritize R&D over bulk drug production due to the possibility for better returns. By offering reimbursement opportunity across the value spectrum, the Indian government could realize far more gain from the investments it has made in its industry as it allows firms more flexibility to explore the market niches in which they excel.
The end goal of government action is to encourage security in the pharmaceutical industry without sacrificing growth- and there is significant momentum supporting further collaboration between private firms and the Indian government. To realize sustainable growth without overcommitting federal funds, the Indian government should consider incentivizing partnerships with foreign MNCs, as it is a strategy empirically supported in India’s own history.
Three synergistic conditions make foreign investment and collaboration lucrative in the Indian pharmaceutical space. First, the flurry of private investment in the API and broader pharmaceutical sector is staggering, with blockbuster investment deals from global private equity giants like the Carlyle Group and PAG. With clear private interest in revenue growth and government support, and trends toward deregulation, access to favorable and plentiful financing abounds. Investment and M&A activity trebled from 2020 to 2021, on the heels of the PLI schemes. The total investment landscape in the Indian pharma sector alone could total nearly $4 billion by the end of 2022.11 Increasing the value of the pharmaceutical environment correlates to firms having more resources and incentives to expand offerings abroad, helping India approach its sector growth targets.
Three of the largest global pharma players, including Pfizer, Bayer, Merck, AstraZeneca, and GSK have entered joint ventures with some of the largest Indian pharmaceutical companies.
Second, while private financing is abundant, joint ventures with Indian pharmaceutical firms are also increasingly lucrative for foreign firms. Three of the largest global pharma players, including Pfizer, Bayer, Merck, AstraZeneca, and GSK have entered joint ventures with some of the largest Indian pharmaceutical companies. These ventures target domestic market growth, and industry experts highlight India’s unique blend of advanced pharmaceutical infrastructure, its status as an emerging market, and strong growth potential as underlying reasons why there is interest in accessing this market as early as possible.
Third, India sits at a unique East-West regulatory crossroad, boasting an important credential no other country can claim. India has key advantages in global partnerships as its manufacturing sector boasts nearly 100 FDA-approved manufacturing sites, the highest number outside of the United States. This makes it a natural partner for American firms newly interested in inuring their supply chains from overdependency. This has natural synergy with Western political concerns over pharmaceutical overdependence on China as well; after investing significant time in setting up India as a pharmaceutical partner with U.S. regulatory approval, now is the time to take advantage of its high-quality offerings to broaden production options.
Follow the Asia Program on Twitter @AsiaProgram. or join us on Facebook.
The views expressed are the author's alone, and do not represent the views of the U.S. Government or the Wilson Center. Copyright 2020, Asia Program. All rights reserved.
References
1https://gdc.unicef.org/resource/report-india-lifted-271-million-people-out-poverty-decade
2https://www.stimson.org/2022/chinas-evolving-strategic-discourse-on-india/
3https://mediaindia.eu/business/trade-deficit-atmanirbhar-bharat/
4https://www.ibef.org/blogs/indian-pharma-industry-to-touch-us-130-billion-by-2030
5https://www.raconteur.net/healthcare/pharmaceuticals/india-pharmaceutical-industry/
6 https://m.economictimes.com/industry/healthcare/biotech/pharmaceuticals/local-manufacturing-of-35-apis-started-after-pli-scheme-mandaviya/articleshow/90519863.cms
7https://www.news18.com/news/india/coming-soon-research-linked-incentive-scheme-to-rejuvenate-global-image-of-indian-pharma-market-5470369.html
8 https://asia.nikkei.com/static/vdata/infographics/chinavaccine-3/
9https://www.pharmaceutical-technology.com/news/us-pharmacopeia-report-high-reliance-indian-manufacturers-api/
10https://www.business-standard.com/article/companies/expand-pharma-pli-scheme-to-make-it-research-linked-indian-pharma-122022500644_1.html
11 https://www.livemint.com/companies/news/pes-set-to-make-a-3-4-billion-bet-on-intermediate-pharma-companies-11621187918113.html