Currently the pharmaceutical trade between Indian and china majorly focuses on Active Pharmaceutical Ingredients (APIs) import by Indian companies. With majority of Indian pharma companies depending on China for their APIs, there is a growing concern in the Indian industry that over-dependence on China in the long run will have adverse impact. More over India’s exports to China in this segment have not picked up as expected.
Realizing this, during the past one or two years, the domestic players have slowly cut down their API dependence on China and are exploring alternative destinations for procuring APIs within the country. Keeping this in view more companies have even started API manufacturing units in the country.
"During the past one year it has been viewed that there is a slow decline in the imports of APIs from China. As per our view, Indian pharmaceutical imports form China has declined from 62 per cent to 57 per cent during the past one year,” says Dr. P.V. Appaji, Director General, Dr. P.V. Appaji, Director General, Pharmaceutical Export Promotion Council of India (Pharmexcil).
The Indian government along with leading industrial organizations like Ficci, CII and Pharmexcil are continuously pushing forward with the Chinese government to achieve export targets. “We are persuading the matter with the Chinese authorities and hopefully in the near future we will definitely reach our expected mark,” opined Appaji.
As a step forward in this direction , recently India and China have signed a memorandum of understanding (MoU) in May 2013. Among many other trade agreements signed between the two countries, the visiting Chinese premier Li Keqiang has also signed the trade co-operation agreement for the pharmaceutical sector.
With the operationalisation of the MoU on co-operation agreement between CCCMHPIE (chamber of Commerce for import & Export of Medicines & health products and the Pharmexcil , the Indian generic drugs are expected to get a fare market access into China.
The Indian government along with Pharmexcil are continuously persuading and exploring all the ways and means to enter the Chinese market to boost Indian’s generic exports.
According to Dr Appaji, though India has allowed innumerable number of Chinese exporters to access Indian markets for their APIs, the same reciprocity is not shown by the Chinese authorities, because of which there is an imbalance of trade equation among the two neighbouring nations.
Though India and china are the two biggest nations in Asia, their administrative set ups are entirely different. While India has a democratic set up, the Chinese administration is authoritative and aggressive with respect to implementation of regulatory standards. This has obviously led to an imbalance in the trade between the two nations. Moreover as china is a vast country with unlimited resources having a huge population, it has access to human resources as well as natural resources at lower costs. These factors have definitely given China an upper hand over India. But if the Indian government utilizes its resources and pushes forward with the reforms, India has the potential even to beat China and can become self- reliant by producing its own APIs, opined industry experts.
India’s export growth
The Indian pharmaceutical industry is continuing to exhibit strong growth as structural growth drivers continue to remain impervious. The industry is expected to revert a growth of 10-12 per cent in 2013-14, according to a study by ICRA. It is also expected that inorganic investments will gain momentum in the medium-term as companies plan to create stronger presence in emerging markets and build expertise in select therapy areas.
Among the top 10 companies, Cipla with total sales of Rs 302 crore (US$ 49.13 million), Sun Rs 297 crore (US$ 48.32 million), Alkem Rs 222 crore (US$ 36.12 million) and Sanofi Rs 186 crore (US$ 30.26 million) were the fastest growing corporations for the month of May 2013.
Pharmaceutical exports from the country during 2012-13 stood at US$14.6 billion, up from US$13.2 billion the previous year according to Appaji.
If we give a closer glance at the last five years export data of pharma products from India, the country has shown a gradual increase of exports. In the year 2008-09, India’s pharmaceutical exports were at $ 8802 million and this has increased to $8976.07 million in the year 2009-10 which showed an increase of about $174.07 million in just one year period.
The exports in the subsequent year of 2010-11 has further increased to $10725.18 million which is almost a jump of $ 750 million which is followed by another leap of $ 2542.67 million with a total export value of 13267.85 for the year 2011-12.
According to latest statistics provided by Pharmexcil, the export value of pharmaceuticals including herbals and other Ayurvedic products have touched $ 14590 million for the year 2012-13. With a CAGR 13 per cent growth annually, the Indian pharma sector is continuing its might as the best quality generic and herbal exporter in the world.
Global growth of API industry
According a forecast by TechNavio's analysts the global pharmaceutical ingredient market is expected to grow at a CAGR of 7.9 per cent over the period 2011-2015. One of the key factors contributing to this market growth is the entry of novel formulation technologies.
The global API market has also been witnessing the trend of increasing outsourcing of API manufacturing to China and India. However, the stringent regulatory environment poses a challenge to the growth of this market.
From the Indian perspective, the US and European countries stand as the leading importing counties which have been sourcing the Indian generics for a long time.
The Ministry of Commerce has targeted pharma sector exports at US$ 25 billion by 2016. The Government has also planned a ‘Pharma India’ brand promotion action plan spanning over a three-year period to give an impetus to generic exports.
In order to boost the export capability, Export-Import Bank of India (Exim Bank), has decided to expand the scope of its finance to pharmaceutical companies for extended repayment periods. Eligible export-oriented companies can avail finance from Exim Bank for a maximum repayment period of 10 years with a moratorium of up to 36 months.
“Of the export markets, Indian pharma will focus on the US market which presents significant opportunities for the next two years for generics, due to patent cliffs and recent changes in healthcare policies,” said the India Ratings report on outlook for Indian pharmaceuticals for 2013.
Challenges
The recent rupee fall, stringent environmental regulations and stiff competition in the international markets are the major challenges faced by the pharmaceutical industry in India today. As a matter of fact many API units in Andhra Pradesh and Gujarat have been shut-down due to the imposition of stringent environmental regulations. Experts are of the view that near extinct of penicillin production in the country was another major factor that boosted the Chinese imports. Penicillin and its derivatives are the based products for a broad basket of anti-infective drugs.
According to Venkat Jasti, CEO Suven Life Sciences, the major reason for Indian companies to depend on China is the cost factor. Indian firms importing raw material from China saves 5-10 per cent on API cost for the Indian drug maker, which is a significant difference in their profitability.
For India to become self -reliant and come out of its dependence on China, the state and central governments should provide all the support to the industry so that the nation can overcome the Chinese challenge and become the numero uno pharma hub in the world, opined experts.