India 'too reliant' on Chinese drug imports, worries Delhi

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Media captionIndia has the third largest pharmaceutical industry in the world, but relies on drug imports from China

There's loud chatter in Mandarin, Hindi and English - all thrown in a heady mix of business, big numbers, and of course money converted in at least two currencies.

It's speed dating but with a difference - business is the focus here, at this Delhi event.

This is not something you'd expect between Indian and Chinese traders - who traditionally view each other with suspicion.

Many credit dating sessions like these for Indian and Chinese representatives are now dominating the world's pharmaceutical industry.

Yet this is not something that India is very pleased about.

India produces a third of the world's medicines, mostly in the form of generic drugs. But more than 80% of the raw materials for these drugs are imported from China.

That gives its neighbour and rival a virtual monopoly over pricing and supply - so much so that there are no domestic producers left for many essential medicines in India.

The government is now worried that in the event of a dispute with China, India could face a public health crisis. It is a scenario it is determined to avoid.

So just what medicines are these? Many of them are lifesaving, and healthcare in India depends on them.

These drugs include the most commonly used painkillers such as paracetamol and Aspirin, and antibiotics such as amoxicillin.

Rising imports

India has more than doubled the import of antibiotic drugs from China in recent years, and the trade is now worth billions of dollars.

In 2012 it is estimated that Indian drug imports totalled $4.6bn (£2.9bn), a rise of about 58% compared to $2.9bn in 2011.

There are now no domestic producers left for penicillin and its derivative, for example, leading to fears of a public health crisis if China were to ever stop its supply.

Image copyright Reuters
Image caption More than 80% of the raw materials for India's drug makers are now imported from China

Drug companies in India blame the government, saying that low-cost imports have driven many manufacturers to close down.

Some, such as Eskay Pharmaceuticals, have now given up producing the ingredients for other drug manufacturers, to produce more complex formulations themselves, which they then export to developed markets in the US and Europe.

"Bureaucracy and lack of environmental clearances in India have made it uneconomical to produce raw materials anymore," says chief executive Ketan Shah.

But switching back to mass production of raw materials is not difficult, he adds.

"China became so much more competitive artificially. Indian companies had no incentive to continue production - so we are out of it.

"But it is not too late at all. If the government acts quickly things can turn around in less than 10 years."

India's drug import dependency

Image copyright Getty Images

India is dependent on China for imports of ingredients of several essential drugs:

  • Painkillers - Aspirin, paracetamol
  • Anti-diabetics - Metformin
  • Stomach ulcers - Ranitidine
  • Anti-inflammatories - Ibuprofen
  • Antibiotics - Amoxicillin, ciprofloxacin, cefixime, ofloxacin, ampicillin, metronidazole

Promoting investment

Now the Indian government has decided to step in. Ajit Doval, India's National Security Adviser, recently warned that India should take immediate steps to create adequate infrastructure to become self-sufficient in manufacturing essential medicines.

Delhi wants Chinese manufacturers to shift production to India, and to help them, the government is setting up large-scale pharmaceuticals and chemical industry clusters.

One such cluster is the Mangalore Special Economic Zone (SEZ). Here businessman Ravinder Sethi is using it to sell the idea of a large industrial park to the Chinese.

"One of the major constraints so far stopping Chinese pharmaceutical companies from investing here is infrastructure," he says. "Not just macro level ones like roads, ports and airports but micro ones.

"These units are looking for power, steam, water and central effluent treatments plants - because by their very nature, they are very polluting industries."

So in the SEZ he is promoting, they are providing a central effluent treatment plant hoping to attract producers.

And the potential to invest and grow is huge in India.

The country's pharmaceutical sector was worth $6bn in 2005 and $18bn in 2012, and is expected to touch $45bn by 2020, according to a study by McKinsey.

Policymakers do not just want Chinese investment in India, but are also negotiating better access for India's pharmaceutical industry in China.

This will not just secure India's drug supply, but also help compensate for the widening trade deficit between the two neighbours.

Image caption Ravinder Sethi wants Chinese businesses to bring their factories to India

Healthcare security

Indian MP Sanjay Jaiswal - a politician who is also a qualified doctor - says it is a matter of national concern, and that any deterioration in relations with China could potentially result in severe shortages of essential drugs.

"I have asked Chinese officials that when we are buying bulk drugs from their country, why are they not taking our pharmaceuticals? Because we are the cheapest manufacturers of generic and branded drugs.

"Still they prefer to buy European medicines that are three times costlier than Indian products. But they are not allowing [the] Indian pharmaceutical industry to enter China. Relations cannot be one-sided."

China might be happy to take more imports from India, but whether it would be prepared to allow some of its industries to shift production to India is a different matter.

And the answer to that could have profound repercussions for the future of India's healthcare security.

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