Bulk drug parks: Still waiting for financial backing

To counter India's over-dependence on Chinese APIs, Katoch committee suggested creation of mega bulk drug parks in February 2015. However, two years later the scheme has failed to take off due to lack of financial assistance

Written by Deepak Patel | New Delhi | Published:June 7, 2017 2:35 am

In November 2014, National Security Adviser Ajit Doval had warned that the country runs the risk of a severe shortage of medicines because of its over-dependence on China for active pharmaceutical ingredients (APIs), which are used as raw material ingredients to prepare finished medicines. In February 2015, a government committee — headed by former health research secretary V M Katoch — suggested setting up of mega parks for API manufacturing with facilities like assured power supply and effluent treatment plants. Over two years have passed since, and the Central government is still looking to obtain “financial sanctions for the scheme” to establish these parks.

This latest admission was made on Tuesday by the Department of Pharmaceuticals (DoP) in an affidavit filed to counter a petition in the Madras High Court. The Central government has not yet made the contents of Katoch committee public. The DoP told the court that after deliberating the committee’s recommendations, it has decided that financial assistance of Rs 200 crore can be given for providing a common facility at “bulk drug” park, on the condition that “state governments set up a bulk drug park and requisition for this fund”. APIs are also known as bulk drugs.

However, the DoP admitted in its affidavit: “Financial sanctions for the scheme are, however, yet to be obtained. It is dependent on the availability of financial resources of the department and decision on such resources is dependent on the overall financial structuring of the government.” Currently, Indian pharmaceutical industry imports around 85 per cent of APIs from China. The petition pertains to a Chennai-based pharmaceutical start-up Vinkem Labs that requested the Madras High Court to order a preferential allotment or necessary quota for finished medicines, which are manufactured from made-in-India APIs, in all public procurements. Moreover, the company petitioned the court to order the implementation of Katoch committee recommendations within a fixed timeframe.

On Tuesday, in its counter affidavit, the DoP rejected all the arguments placed by Vinkem Labs before the court. It said that the implementation of Katoch committee recommendations in a fixed timeframe is not tenable. “The government is looking into the issue of duty structure, assistance to bulk drug parks and interest rate for support to the industry and trying to obtain necessary approvals for providing funds. As per decision taken in the higher level of the government, an umbrella scheme is being prepared under which assistance to bulk drug industry for common facilitation centre is a sub scheme,” the DOP stated. Once again mentioning the issue of financial crunch, the department added: “Once the necessary approvals were obtained and requisite funds are made available, assistance to common facilities in three bulk drug parks may be provided”.

The Central government wants to establish these three bulk drug parks at Andhra Pradesh, Gujarat and Himachal Pradesh through public private partnership (PPP) mode. According to the Directorate General of Commercial Intelligence and Statistics (DGCIS), Kolkata, during the year 2015-16, India imported bulk drugs and drug intermediates worth Rs 21,114 crore. Moreover, DGCIS data stated that the value of India’s exports of bulk drugs and drug intermediates was Rs 23,382 crore in 2015-16. The DoP mentioned these figures in its affidavit and said that it is taking various measures to

counter such heavy imports. One of the main reasons for huge API imports from China is its low-cost large-scale manufacturing and heavy subsidies provided to their local industry. Opposing the company’s argument of preferential allotment for medicines manufactured from made-in-India APIs, the DoP told the court that “procurements for medicines depends upon various factors, such as requirement of the concerned agency, availability etc, thus it all depends upon facts and circumstances of the procuring agency. Therefore, a general direction cannot be sought by the petitioner.”

In 2015, Union chemicals and fertilisers minister Ananth Kumar told Parliament that India was largely dependent on China for API imports of 12 essential finished medicines that are in the National List of Essential Medicines. The DoP comes under the Ministry of Chemicals & Fertilisers. Since 2014, the Central government has been talking about this near-absolute reliance of Indian pharma sector on China for bulk drugs. It has tried various measures to boost local API manufacturing. It even planned to bring out a bulk drug policy. However, in August last year, Kumar dropped the plans to bring out bulk drug policy.

In its petition, the Vinkem Labs told the Madras High Court that the governments — state as well as centre — are the “mega and near monopolistic procurer” of cancer medicines in India as they are not sold in pharmacies and the size of private hospital market is only around five per cent. “The private market is only around 5 per cent, that too, in the hands of hospitals who procure the drugs directly with multinational companies tie-ups who could spend a ransom for marketing with big brands,” Vinkem Labs stated, adding that this is why it is requesting for preferential allotment in public procurement of cancer medicines manufactured from made-in-India APIs.

On this issue too, the DoP stated in its counter affidavit: “For issuing tenders, the concerned state agencies evolve various terms and conditions taking into account the guidelines issued by the respective departments, chief vigilance commission (CVC) etc. The petitioners demand for waiver of modification of conditions is not tenable.” The Katoch committee was formed by the Central government on October 8, 2013. The mandate of this committee was to carefully study the whole issue of APIs of critical importance, work out a package of concessions that are required to build domestic production capabilities and examine the cost implications. This committee submitted its recommendations in February, 2015.

The Katoch committee recommended establishment of mega parks for APIs with common facilities such as common effluent treatment plants (ETPs), testing facilities and captive power plants or assured power supply by state governments. The committee stated that such parks should have common utilities and services such as storage, testing laboratories, IPR (intellectual property rights) management, designing, etc, maintained by a separate Special Purpose Vehicles (SPV).

This committee also recommended a scheme for extending financial assistance to states for acquiring land, setting up common facilities, revival of public sector units to restart manufacturing of selected and very essential critical drugs (eg: penicillins, paracetamol, etc). It said that there should be financial investment from the government for development of clusters which may be in the form of a “professionally managed dedicated equity fund for the promotion of manufacture of APIs and extending fiscal benefits to creation of the entire community cluster infrastructure and individual unit infrastructure”.

It also wanted an extension of fiscal and financial benefits to promote the bulk drugs sector and promotion of stronger industry-academia interaction, synergising research and development promotion efforts by various government agencies, incentivising scientists and duty exemptions for capital goods imports.

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