By the end of January 2020, the world slowly began to accept that COVID-19 is a reality that each country would have to learn to live with. With the alarming speed with which it consumed the lives of its patients, COVID-19 engulfed one country after another without providing any opportunities for production of a vaccine or medicine to treat it. Most countries were then limited to adopting a lockdown of their economies and societies, to counter the spread of the novel coronavirus.
Moreover, every country is now in a race to find a durable cure for COVID-19 (in the run-up to a vaccine) that would permit them to restart economic activity. Economies like India, which are driven by the service sector, are particularly hit because the preventive measure of physical distancing runs contrary to the demands of this sector. Such countries would want to revive and restore the economic cycle as well as livelihoods of its citizens at the earliest.
Besides, every country developing medicines would want to be in a position to introduce solutions into the world market, as there would be no dearth of buyers for methods to combat COVID-19. They will be in a position to benefit not only monetarily with its export, but also emerge as a key determinant towards the future of global governance in face of health crises.
The scale of India’s pharma space
Even before the COVID–19 outbreak, India was the largest producer of vaccines in the world. India’s global export of essential medicines took a leap when Cipla — a noted Indian pharmaceutical firm — sold HIV medicines in sub-Saharan Africa at one–twenty–fifth the cost of medicines sold by other manufacturers.
Building on this precedent, the Indian government had begun “Pharma Vision 2020” with the goal of systematising processes, so that India could become the world leader in end-to-end production of pharmaceutical products. Its gains have manifested itself in the current pandemic, with countries such as the United States requesting India to export the anti-malarial medicine — Hydroxychloroquine — which is believed to have some success in combatting COVID-19. This had made many countries recognise the power and relevance of India as a leading medicines producer in the world.
India’s stature as the “pharmacy of the world” primarily stems from the range and volume of medicines it is able to produce as well as the low prices it is able to offer. Indian pharmaceutical firms are the largest among Asian countries in their capacity to produce generic medicines.
India, however, lags a bit in developing new medicines. Also, Indian pharma companies face stiff competition from firms in China, Japan and Israel, and experience hostile behaviour and intense negative lobbying from ‘Big Pharma’ groups which routinely accuse Indian companies of violating patent laws.
API dependence on China
Active Pharmaceutical Ingredients (APIs), or bulk drugs, are raw materials used in the manufacture of medicines or formulations. China was one of the leading countries to produce and sell APIs to the rest of the world until recently. However, with the outbreak of COVID-19 and its origin traced to China, the production of APIs took a hit. This may affect the price and sale of medicines in countries to which Beijing exports the important ingredients.
Moreover, the impact is set to be grave, as most of those materials are largely manufactured in the Hubei province. Its capital, Wuhan has been reported as the initial epicentre of the COVID-19 outbreak, and neighbouring areas of Zhejiang and Jiangsu are the other two major Chinese centres of medicinal raw material production.
While the decrease in exports of APIs by China exposed the world’s reliance on it, India’s dependence has particularly been brought to light as it uses Chinese ingredients to produce one-fifth of the world’s supply of medicines. Indian antibiotic manufacturers rely heavily — close to about 90% — on Chinese imports of raw materials. A number of Indian pharmaceutical companies are dependent on Chinese APIs for manufacturing medicines. Granules India and Aurobindo Pharma has among the highest exposure to imports of APIs from China, with the latter mainly for antiretroviral and antibiotic drugs.
The global pharmaceutical industry is inter-twined in a complex manner and will gradually unravel, but shortages in production of APIs in China — happening already and likely to increase — would fast affect the production of formulations across the world.
Already, inventory levels of APIs in India are decreasing. This along with reduced production of APIs in China will mean that prices of medicines in India could dramatically increase.
India’s medical diplomacy at risk
The outbreak of the COVID-19 pandemic has renewed a branch of diplomacy that is gaining recognition. ‘Medical diplomacy’, wherein a state’s international relations encompasses the trade of much-needed medicines and dispatch of medical personnel to affected countries, has begun to gain prominence in the last few months.
India’s medical diplomacy has, so far, entailed giving quick clearances for export of Hydroxychloroquine to countries that requested it, and sending Indian military doctors to neighbouring countries such as Bhutan and Nepal to help local administrations there to tackle the spread of COVID-19.
India would want to continue supply of generic medicines to the world using its inventory of APIs even though it may not be able to match the rising global demand in the near future. If India is unable to fulfil the global demand for generic medicines due to the APIs shortage, its influence and power as one of the leading suppliers of generic medicines could be affected.
Going further, countries that depend on India may refuse to co-operate with it or engage with its medical diplomacy. These countries will look to secure their supply chain elsewhere or even invest in the production of generic medicines on their own soil if possible.
Hence, many industry experts are now asking India to use this situation of a possible shortage in Chinese medicinal raw materials to its advantage. According to some, the Indian government has begun to materialise a policy to increase production of raw materials in the country itself. This could eventually also enable India to become an alternative to China in the world market. The plans include identifying important ingredients used in medicines, giving incentives to local producers, and helping neglected state-run producers to regain lost ground in the industry.
Pharma leaders believe that the Indian government should provide credit and support to one section of the industry, for instance those who manufacture one type of medicine, then replicate it with firms that produce other medicines. Boosting the production of medicinal raw materials and medicines could counter China’s dominance in the global market.
Hence, the coming challenge to India’s pharma production might also bear opportunities for India in terms of emerging as a self-reliant API exporting nation.
The author is a Research Intern at ORF Mumbai. Views expressed are personal.