Officials from the Union Ministry of Health recently noted that India has started making 29 out of 43 ‘critical’ Active Pharmaceutical Ingredients (APIs) that were imported earlier. This will go a long way in reducing dependence on China. This is the outcome of the Product-Linked Incentive (PLI) scheme for pharmaceutical goods launched by the Department of Pharmaceuticals in 2021. Achieving self-sufficiency in domestic manufacturing of APIs will help India become the global hub of pharmaceutical industry.
The Active Pharmaceutical Ingredient (API) is the biologically active component of a drug product (tablet, capsule, cream, or injectable) that produces the intended health effects. An example of an API is the acetaminophen contained in a pain relief tablet. The active ingredient in a biological drug is called a Bulk Process Intermediate (BPI). An example of a BPI is the insulin in medicine to treat diabetes. Combination therapies have more than one active ingredient, each of which may act differently or treat different symptoms. APIs find application in high-quality drugs that are used to treat different diseases.
The global pharmaceutical market is ~ US$ 1.2 trillion with API market of ~US$ 182.2 billion and is estimated to reach US$ 245.2 billion by 2024. The pharmaceutical industry in India is 3 rd largest in the world (in terms of volume) and 14 th largest in terms of value. The Indian industry has a strong network of 3,000 drug companies and about 10,500 manufacturing units.
The India active pharmaceutical ingredients market is estimated to be valued at US$ 19.9 billion in 2021 and is expected to exhibit a growth rate of 8.3% between 2021-2028. At present, API contributes ~25% to the Indian pharmaceutical market and the rest is contributed by formulations. The API industry in India is highly fragmented with about 1,500 units.
The Indian pharmaceutical industry is having distinct advantage due to the following factors:
Many of the fermentation-based APls have ceased manufacturing in India due to large installed capacities and economy of scale available in China and high domestic infrastructure and utilities cost. Strain improvement and other process improvements are required for manufacturing APls, which have not taken place in India. As each APIs have specific strain and process requirements, readymade technologies are not available in India for many of the APls. However, the technological and scientific base to develop the strains and processes is available in India. In case of chemical APls, technologies are available for some and the rest could be developed in India with some R&D.
The cost and availability of finance in India is extremely high. This is compounded by restrictive banking practices, such as insistence on collateral to extent of 100% of the borrowed funds. Government support is not enough. The Government grant of funds is also extremely slow and long, making the project non-viable. Government funding is focused on ‘innovative products and ideas’, whereas much of the API and intermediates business is generic in nature, which is not supported by the government funding schemes. According to a study conducted by the Indian Pharmaceutical Alliance, the cost of finance in China is about 5% – 7% compared to 11% -14% in India.
Profits margins are higher for Finished Formulations (FPPs) compared to APIs. Hence, pharma companies focus more on FPPs.
The relative advantages of Chinese pharmaceutical companies, in comparison to other countries including India are:
The imports from China works out to be cheaper and cost effective for the pharmaceutical companies.
The Draft Pharmaceutical Policy 2017 prepared by the Department of Pharmaceuticals aims to provide a comprehensive policy to ‘guide and nurture pharmaceutical industry of India to enable it to maintain and enhance its global competitive edge in quality and prices‘. The Policy envisages making essential medicines affordable to common people, making the industry self-reliant by promoting indigenous production of drugs, encourage research and development and ensure quality of medicines which are exported as well as consumed domestically. Strategies for realising these goals consist of a variety of mechanisms such as pricing mechanism, compulsory license and FDI.
The Department had launched an umbrella scheme namely ‘Scheme for Development of Pharmaceutical Industry’ during 2017-18, with an objective to increase the efficiency and competitiveness of domestic pharmaceutical industry; so as to enable them to play a lead role in the global market and to ensure accessibility, availability and affordability of quality pharmaceuticals for mass consumption.
This scheme is a Central Sector Scheme (CS) with a total financial outlay of INR 480 crore for a 3-year period till 2019-20 and comprises of five sub-schemes namely:
The Government, in March 2020, approved a scheme on Promotion of Bulk Drug Parks for financing Common Infrastructure Facilities in 3 mega Bulk Drug Parks, in partnership with States. The scheme has financial implication of INR 3,000 crore for next five years. The Government of India is providing Grants-in-Aid to the States with a maximum limit of INR 1000 crore per bulk drug park. Parks will have common facilities such as solvent recovery plant, distillation plant, power & steam units, common effluent treatment plant etc. The scheme is expected to reduce manufacturing cost of bulk drugs in the country and dependency on other countries for bulk drugs.
It was approved in March 2020. It aims for promotion of domestic manufacturing of critical KSMs, Drug Intermediates and APls in the country with financial implications of INR 6940 crore for next 8 years. The scheme aims to boost domestic manufacturing of APls by attracting large investments in the sector to ensure their sustainable domestic supply. It will lead to incremental sales to the tune of INR 46,400 crore and also significant additional employment generation over next 8 years.
In 2021, the Department of Pharmaceuticals had launched a product-linked incentive (PLI) scheme for pharmaceutical goods and in-vitro diagnostic medical The financial outlay under this scheme is INR 15,000 crore over a period of 6 years.
In May 2020, the Government, identified Pharmaceuticals as ‘Champion Sector’ along with leather, gems and jewellery, renewable energy, textiles etc. to provide hand-holding for investors with a focus on improving India’s manufacturing capabilities.
A high-level committee of experts has been formed by the Government in May 2020, to recommend reforms in India’s drug regulatory system so that approval processes can be fast-tracked. The committee would study the current drug regulatory system and submit recommendations for reforms to bring the system in line with global standards and make it more efficient.
