Pharma Sector – Drug Pricing, NPPA, FDC, Generics, etc.

Decoupling pharmaceutical industry from China should be strategic


From UPSC perspective, the following things are important :

Prelims level : APIs

Mains level : Paper 3- Indian pharmaceutical industry

Abrupt ban on import from China would harm the India pharmaceutical industry and disrupt the supply of several essential medicines. Any attempt at reducing the dependence on China for APIs should be strategies, argues the author.

Dependence of Indian pharma industry on China

  •  India is the third-largest producer of finished drugs in the world.
  • However, India relies significantly on China for supplies of active pharmaceutical ingredients APIs.
  • An estimated 70 per cent of API requirements of India’s pharmaceutical industry are sourced from China.
  • For some drugs, such as paracetamol and ibuprofen, this dependence is almost 100 per cent.
  • This import reliance has been fuelled by environmental controls in India and competition with China, which has higher volumes of production and lower costs.

Implications of banning import from China

  • Restricting or banning the import of APIs would cause significant disruption to the Indian pharmaceutical industry
  • The pharmaceutical industry had $40 billion in revenues in 2018-19, according to Pharmexcil.
  • Such a prospect is especially of concern to potential patients.
  •  Indian pharmaceutical industry annually exports $20 billion worth of medicine.
  • An ad hoc or reactive decoupling could disrupt the production of a wide range of medicines in India and globally.
  • Such disruption could affect the availability of Dexamethasone and painkillers, such as paracetamol and ibuprofen, as well as antibiotics, such as penicillin.
  • The impacts would be especially high in low and middle-income countries.
  • In many African countries, in fact, India supplies almost 50 per cent of the medicines in value terms.

Lessons from the past: Policy initiative matters

  • Market share of foreign-owned multinationals in India was 80-90 per cent in 1970 in the pharmaceutical industry.
  • It fell to 50 per cent by the early 1980s, and down to 23 per cent today.
  • The prices of medicines in India fell from being amongst the highest in the world to amongst the lowest.
  • But this did not happen through sudden decoupling from foreign multinationals or a complete boycott or ban on imports.
  •  The 1970 Indian Patent Act removed product patent protection in pharmaceuticals.
  • So, the 1970 Patent Act is widely lauded for facilitating the growth of India’s industry.
  • India also benefited from the 1973 Foreign Exchange Regulation Act (FERA) and the subsequent New Drug Policy (1978).
  • Thus, a series of policy initiatives succeeded in tilting the balance in favour of Indian-owned firms.

But does it mean we have to depend on China forever?

  • No, but reducing dependence on China will not be easy to achieve.
  • In India, any decoupling from China must be strategic, with significant policy support.
  • It will take time for a paced indigenisation.

Government moves to reduce dependence for API

  • In March, the government announced Rs 3,000 crore to develop three bulk drug parks.
  • The government also announced Rs 6,940 crore to manufacturers of 53 bulk drugs over the next eight years.
  • Planning ahead towards greater domestic production of APIs, as well as reduced dependence on China, is an understandable and sensible policy objective.
  • Despite a decline in recent decades, India has a stronger starting point than most countries given the continued presence of some API production capabilities.
  • Indian firms have capacities, for instance, to produce COVID-19 treatments, including Remdesivir.

Consider the question “What are the APIs? Why India depends on other countries for it and what are implications of it? Suggest ways to reduce this dependence.”


In the short run, boycotts or bans would be counter-productive for the Indian industry, while also affecting access to much-needed medicines to India’s citizens and beyond. In the long run, however, reducing dependence on China would be strategically prudent.

Back2Basics: What are APIs?

  • Active pharmaceutical ingredient (API), is the term used to refer to the biologically active component of a drug product (e.g. tablet, capsule).
  • Drug products are usually composed of several components.
  • The API is the primary ingredient.
  • Other ingredients are commonly known as “excipients” and these substances are always required to be biologically safe, often making up a variable fraction of the drug product.
  • The procedure for optimizing and compositing this mixture of components used in the drug is known as “formulation.”

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