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Monday, August 10, 2020

In dwindling imports from China, a big atmanirbhar push for desi pharma firms

The central government, meanwhile, has launched new schemes to promote the production of pharmaceutical compounds and the establishment of bulk drug parks in the country.

Written by Gagandeep Singh Dhillon | Shimla | Updated: July 9, 2020 11:39:56 am
In dwindling imports from China, a big atmanirbhar push for desi pharma firms The pharma hub in Baddi used to import a huge quantity of raw materials from China. File

Disruption of import of pharmaceutical chemicals from China May very well have been the push that the domestic manufacturers needed to scale up their production to fill the demand-supply gap.

Sample this: Carbanio, an Indian business-to-business digital marketplace of chemicals, has claimed to have witnessed a 500 per cent growth in terms of volume since February, the first time imports were affected when China shut down its factories to contain the coronavirus spread.

Supply chains resumed subsequently but have been disrupted once again due to the ongoing tension between the two nations following a violent clash between the troops of the two countries in Ladhak’s Galwan valley.

The central government, meanwhile, has launched new schemes to promote the production of pharmaceutical compounds and the establishment of bulk drug parks in the country.

According to Dr Rafi S, the founder and chief scientific officer of Carbanio, around 6.5 lakh businesses in India are engaged in the manufacture and supply of chemicals, 97 per cent of which are MSMEs.

“These small plants do possess the technology, technical know-how and the capacity to meet the industry’s needs, but their operations have suffered due to factors such as lack of demand, delay in payments and absence of a forum connecting them with buyers. But this year has been different. Supply chain disruptions and lockdown restrictions have forced buyers to look towards local manufacturers who, in turn, have ramped up their output,” he said.

Primarily due to lower costs, the Indian pharmaceutical industry has been importing most of its bulk chemicals or key starting materials (KSMs), drug intermediates and APIs (active pharmaceutical ingredients) from China.

KSMs and intermediates are used to make APIs, also called bulk drugs, which are then used to formulate the finished pharmaceutical products.

Carbanio, which currently facilitates the trade of 72 lakh chemicals including intermediates and APIs across 25 states, is connected with around 20,000 businesses in the country, Rafi said.

He added that India was largely self-reliant in pharmaceutical chemicals during the 1990s, before China entered the World Trade Organisation (WTO). “Our neighbouring country then repeatedly cut down its prices in the competitive market, forcing the Indian buyers to import cheaper raw materials and APIs from there,” he said.

M Kesava Reddy, director of Solapur-based Vamsi Labs, which has been making APIs and intermediates for 25 years, said that uncertainty in the market is causing drug makers to stock up raw materials and APIs.

“So there has been a little increase in the demand for our products. We, too, relied on imported raw materials for some of our products but have stopped it now, and are enhancing our capacity with backward integration,” he said.

He said that factors such as cheaper power and interest rates, a disciplined work culture, and other government incentives helped the industry in China.

“The Indian API industry is not very robust right now, but it can be developed by encouraging entrepreneurship and building industrial parks which offer cheap power and common infrastructure. Banks, too, need to help the entrepreneurs,” he said.

In fact, Reddy added, there are already certain APIs such as SMX (sulfamethoxazole) in which the Indian product is preferred by the market.

Hyderabad, Mumbai, Ankleshwar, Visakhapatnam and Bengaluru are currently some of the important centres where API and intermediate-producing laboratories and plants are concentrated.

But the API industry is linked with causing high levels of pollution, and numerous plants in China have reportedly been shut down in recent years due to environmental concerns.

Neel Dalal, an Ahmedabad-based API trader, said that India, too, had a larger number of pharmaceutical chemical manufacturers in the 1990s many of whom shut shop as environmental laws got stricter.

Assistance to create common facilities such as central effluent treatment plants in the proposed API parks will be provided under a new scheme notified by the Ministry of Chemicals and Fertilisers last month.

Under the scheme, the ministry will provide grants-in-aid to three API parks in India with a maximum limit of Rs 1,000 crore per park or 70 per cent of the project cost of common infrastructural facilities, whichever is less.

In case of northeastern and hill states, this limit would be 90 per cent of the project cost. Common infrastructure will also include facilities such as solvent recovery and distillation plant, captive power plants and incubation facilities.

Several states including Andhra Pradesh, Himachal Pradesh, Gujarat, Haryana, Punjab, Tamil Nadu and Telangana have expressed interest in the scheme.

Himachal Chief Minister Jai Ram Thakur recently wrote to Union Minister of Commerce and Industry Piyush Goyal urging him to relax land requirements under the scheme keeping in view the state’s geography.

Such schemes have been announced in the past, too, but without much success. In 2018, the ministry had launched a similar sub-scheme but it’s total outlay was a mere Rs 200 crore as compared to the Rs 3,000 crore outlay proposed this time.

“India already has one of the world’s largest specialty chemical industries. The time has come to view ourselves not only as global generic suppliers but also as API suppliers,” stated Suhayl Abidi, a research advisor at Gujarat-based GOG-AMA Centre of International Trade, in an article in Express Pharma.

The chemical trail

The making of a drug is broadly done in two stages – API manufacturing and formulation. API is the essence of the drug – the part of the medicine which actually helps the patient.

For example, paracetamol is an API which helps relieve pain, and it’s mixed with starch paste or other binding agents to prepare a pill.

To prepare an API, raw materials such as chemicals and solvents are made to undergo multiple reactions. The primary chemicals needed for the job are called key starting materials (KSM). As the name suggests, intermediates are the chemical compounds formed during the reactions before the API is prepared.

In the formulation stage, the API powder is mixed with solvents such as water and ethanol, binding agents and other non-medicinal ingredients which help in the administration and absorption of the finished dosage formulation. These ingredients, generally inorganic, are called excipients.

Depending upon the drug, Indian drug makers usually import the APIs or the intermediates, using them to prepare the finished pharmaceutical products.

Paracetamol, for instance, can be prepared from benzene (key starting material) which is first converted to PNCB (para nitro chloro benzene).

At the second stage, PNCB is converted into PAP (para amino phenol). The intermediate PAP is widely imported from China by Indian formulation units because of a wide price margin. It is then used to make the paracetamol API and finally the tablet.

Last month, the Centre, besides an API park scheme, also notified a production linked incentive scheme for promoting the domestic manufacturing of 53 critical KSMs, intermediates and APIs in India.

Some of these include azithromycin, dexamethasone, vitamins B1 and B6, paracetamol, ritonavir and lopinavir.

Indian Pharma

According to the department of pharmaceuticals, the Indian pharmaceutical industry is the third largest in the world in terms of volume, and the thirteenth largest in terms of value.

It contributes around 3.5 per cent of total drugs and medicines exported globally, but is significantly dependent on import of raw materials.

Largely due to economic considerations, bulk drugs accounted for 63 percent of the total pharmaceutical imports in the country during 2018-19.

According to an analysis of UN COMTRADE data by consulting firm CPC Analytics, 39 per cent of India’s health-related imports came from China in 2017.

But the total health-related imports to India that year only constituted about 3.4 per cent of India’s total health expenditure.

Also, India had an export surplus in health-related goods of over US$ 12 billion, which was more than double that of China.

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