For years, low-priced raw material from China helped build India's generic drug industry into a global powerhouse. Now, that advantage is turning out to be the biggest weakness - if not a full-scale threat - for the country's bulk drug manufacturers.
With Indian generic companies guzzling over 90% of the bulk drugs and intermediates funnelled from thousands of Chinese producers, its dependence has come a full circle, leaving it virtually under the control of its neighbour. The once-thriving Indian bulk drug industry looks helpless and is gasping.
The debilitating impact has not been sudden. From a respectable position a decade ago, local bulk drug and intermediate companies wilted under the precipitous Chinese aggression, pushed by gargantuan factories that built on scale and crashed prices. Unbridled dumping that followed added to the colossal tide.
Pushed to a deep chasm, local units are getting sicker and pleading for sops. Industry groups are knocking at the doors of policy makers seeking safeguards and help in drawing up a revival plan. However, prospects of an upswing in the foreseeable future appear bleak.
The list of companies that are financially stretched is long. Arch Pharmalabs, Orchid Chemicals, Ind Swift Labs, Surya Pharma, Parabolic Drugs and Wanbury are among those in various stages of corporate debt restructuring plans, while others are exploring options to exit the businesses and sell out at distressed valuations, if they can find buyers.
Ajit Kamath, Chairman of Arch Pharmalabs, characterises the seriousness of the situation, saying it is a matter of time before the API (active pharmaceutical ingredients) industry is decimated in India. "What the industry needs is parity or a like-for-like treatment that China metes out to Indian exporters," suggested the first-generation entrepreneur who supplies drugs to large generic companies.
The government has done little beyond naming the year as that of the bulk drug industry. A policy framework has been in the works for some time. Industry-wide discussions have reached a peak and the Prime Minister's Office is said to have taken cognisance of the situation and promised to hasten support to local companies.
Over the past decade, the generics industry, to which bulk drug manufacturers sell ingredients, have benefited from Chinese supplies and have consolidated and grown in regulated markets such as the US. However, in the rush to seize commercial opportunities, the drug makers neglected the vital link in the manufacturing chain - of keeping its raw material sources intact.
Such is the extent of the oft-termed "Chinese invasion" that generic drug makers are losing the ability to bargain or order desired quantities. If prices are not favourably negotiated and supplies are restricted, India's competitiveness as a generics hub may be in serious jeopardy. "China can at its whim press the button and lead to our downfall," said a retired industry expert, asking not to be identified.
For mass-use products such as the antibiotic amoxycillin, the Chinese have swamped the market, leaving no room to compete. The same dominance is more or less visible in multivitamins. Folic acid, which cost Rs 4,500 a kg at the start of the year, has now increased 11-fold to Rs 50,000 per kg. Prices of some other ingredients and intermediates used in anti-infective drugs have doubled.
"Our companies are fascinated by formulations as those products fetch higher margins. Bulk drugs, in contrast, are less appealing. Why bother when the Chinese have filled the gap?" quipped one mid-level executive at a large Hyderabad-based producer of bulk drugs and generics
Earlier in December, the executive attended CPHI India in Mumbai, an annual buyerseller meeting. "Chinese companies showed up in big numbers, may be higher than at CPHI worldwide (held annually at Europe), proving the bounty they see in supplying to Indian generic companies," he noted. Over the past 10 to 15 years, the balance has tilted steadily in favour of the Chinese as their government facilitated the setting up of large factories and in the process paled the Indian challenge.
From roughly 40 to 50 suppliers, experts estimate China now houses as many as 4,000 bulk drug units. In contrast, Indian API makers, who formed about 15% of the Rs 35,000 crore industry, have shrunk to less than 8% of the industry that's nudging the Rs 100,000 crore mark.
Last year, National Security Advisor Ajit Doval described the increasing dependence on Chinese pharmaceutical suppliers as a "national threat" and called on the government to take concrete steps to help the local bulk drug industry. Cipla Chairman and industry doyen Yusuf Hamied has on multiple occasions warned of China posing a major challenge to the Indian industry.
Beaten at the game on costs, Indian formulation companies (those that make medicines) sought price revisions for several drugs, mainly blaming high raw material costs. India controls prices of hundreds of drugs that form part of the National List of Essential Medicines. If the prices aren't increased, the option left for these companies is to curtail or stop production of those products. The story has played out over the years as firms exit loss-making products.
It's gridlocked and local units - both API and medicine units - are stuck without an escape route. "Even if companies start making intermediates, the Chinese will still undercut rates. We need to look at revival of the sick companies. Even at the best, Chinese prices are about 20% cheaper than what is available in India," said Yogin Majmudar, who runs Bakul Pharma, an API and intermediates maker.
Majmudar, an industry veteran, noted that the Chinese have got their strategy right. They have moved on to working on newer molecules that fetch better returns. "Our industry is still discussing old products. We have to be agile and react with the same speed and quality," he suggested.
"Although Indian companies have moved to a higher level and launched branded and complex drugs, it may not take much for Chinese firms to start regulatory filings for medicines in advanced markets like the US and pose a challenge to Indian companies. India may therefore suffer a double whammy - lose trusted suppliers on one end and see the most lucrative markets slipping away," an analyst at a leading consulting firm added.
India's loose regulations on allowing Chinese products isn't helping much. Critics question the policy and say Chinese companies have found the easiest access point in the Indian market. Although concerns of quality of products from China have been raised by regulators including the US Food and Drugs Administration, the Indian authorities have not reacted in terms of effecting tighter control.
To further widen that gap, Indian companies take at least three years to register a product in China and the charge by Chinese authorities is multiple times more than the Indian rates.
Read more at:
Bulk drugs from China floods Indian market, leaves indigenous products in dire straits - The Economic Times
With Indian generic companies guzzling over 90% of the bulk drugs and intermediates funnelled from thousands of Chinese producers, its dependence has come a full circle, leaving it virtually under the control of its neighbour. The once-thriving Indian bulk drug industry looks helpless and is gasping.
The debilitating impact has not been sudden. From a respectable position a decade ago, local bulk drug and intermediate companies wilted under the precipitous Chinese aggression, pushed by gargantuan factories that built on scale and crashed prices. Unbridled dumping that followed added to the colossal tide.
Pushed to a deep chasm, local units are getting sicker and pleading for sops. Industry groups are knocking at the doors of policy makers seeking safeguards and help in drawing up a revival plan. However, prospects of an upswing in the foreseeable future appear bleak.
The list of companies that are financially stretched is long. Arch Pharmalabs, Orchid Chemicals, Ind Swift Labs, Surya Pharma, Parabolic Drugs and Wanbury are among those in various stages of corporate debt restructuring plans, while others are exploring options to exit the businesses and sell out at distressed valuations, if they can find buyers.
Ajit Kamath, Chairman of Arch Pharmalabs, characterises the seriousness of the situation, saying it is a matter of time before the API (active pharmaceutical ingredients) industry is decimated in India. "What the industry needs is parity or a like-for-like treatment that China metes out to Indian exporters," suggested the first-generation entrepreneur who supplies drugs to large generic companies.
The government has done little beyond naming the year as that of the bulk drug industry. A policy framework has been in the works for some time. Industry-wide discussions have reached a peak and the Prime Minister's Office is said to have taken cognisance of the situation and promised to hasten support to local companies.
Over the past decade, the generics industry, to which bulk drug manufacturers sell ingredients, have benefited from Chinese supplies and have consolidated and grown in regulated markets such as the US. However, in the rush to seize commercial opportunities, the drug makers neglected the vital link in the manufacturing chain - of keeping its raw material sources intact.
Such is the extent of the oft-termed "Chinese invasion" that generic drug makers are losing the ability to bargain or order desired quantities. If prices are not favourably negotiated and supplies are restricted, India's competitiveness as a generics hub may be in serious jeopardy. "China can at its whim press the button and lead to our downfall," said a retired industry expert, asking not to be identified.
For mass-use products such as the antibiotic amoxycillin, the Chinese have swamped the market, leaving no room to compete. The same dominance is more or less visible in multivitamins. Folic acid, which cost Rs 4,500 a kg at the start of the year, has now increased 11-fold to Rs 50,000 per kg. Prices of some other ingredients and intermediates used in anti-infective drugs have doubled.
"Our companies are fascinated by formulations as those products fetch higher margins. Bulk drugs, in contrast, are less appealing. Why bother when the Chinese have filled the gap?" quipped one mid-level executive at a large Hyderabad-based producer of bulk drugs and generics
Earlier in December, the executive attended CPHI India in Mumbai, an annual buyerseller meeting. "Chinese companies showed up in big numbers, may be higher than at CPHI worldwide (held annually at Europe), proving the bounty they see in supplying to Indian generic companies," he noted. Over the past 10 to 15 years, the balance has tilted steadily in favour of the Chinese as their government facilitated the setting up of large factories and in the process paled the Indian challenge.
From roughly 40 to 50 suppliers, experts estimate China now houses as many as 4,000 bulk drug units. In contrast, Indian API makers, who formed about 15% of the Rs 35,000 crore industry, have shrunk to less than 8% of the industry that's nudging the Rs 100,000 crore mark.
Last year, National Security Advisor Ajit Doval described the increasing dependence on Chinese pharmaceutical suppliers as a "national threat" and called on the government to take concrete steps to help the local bulk drug industry. Cipla Chairman and industry doyen Yusuf Hamied has on multiple occasions warned of China posing a major challenge to the Indian industry.
Beaten at the game on costs, Indian formulation companies (those that make medicines) sought price revisions for several drugs, mainly blaming high raw material costs. India controls prices of hundreds of drugs that form part of the National List of Essential Medicines. If the prices aren't increased, the option left for these companies is to curtail or stop production of those products. The story has played out over the years as firms exit loss-making products.
It's gridlocked and local units - both API and medicine units - are stuck without an escape route. "Even if companies start making intermediates, the Chinese will still undercut rates. We need to look at revival of the sick companies. Even at the best, Chinese prices are about 20% cheaper than what is available in India," said Yogin Majmudar, who runs Bakul Pharma, an API and intermediates maker.
Majmudar, an industry veteran, noted that the Chinese have got their strategy right. They have moved on to working on newer molecules that fetch better returns. "Our industry is still discussing old products. We have to be agile and react with the same speed and quality," he suggested.
"Although Indian companies have moved to a higher level and launched branded and complex drugs, it may not take much for Chinese firms to start regulatory filings for medicines in advanced markets like the US and pose a challenge to Indian companies. India may therefore suffer a double whammy - lose trusted suppliers on one end and see the most lucrative markets slipping away," an analyst at a leading consulting firm added.
India's loose regulations on allowing Chinese products isn't helping much. Critics question the policy and say Chinese companies have found the easiest access point in the Indian market. Although concerns of quality of products from China have been raised by regulators including the US Food and Drugs Administration, the Indian authorities have not reacted in terms of effecting tighter control.
To further widen that gap, Indian companies take at least three years to register a product in China and the charge by Chinese authorities is multiple times more than the Indian rates.
Read more at:
Bulk drugs from China floods Indian market, leaves indigenous products in dire straits - The Economic Times
