Economy

The World Is Looking For Affordable Drugs – and India Needs to Keep Delivering

The export of generic pharmaceuticals is one of India’s strengths. But both the government and manufacturers need to do more if they want to continue to stay ahead of China.

India's global export of pharmaceuticals is double that of China. Credit: Pixabay

India’s global export of pharmaceuticals is double that of China. Credit: Pixabay

In 2016, India exported $651 million worth of pharmaceutical products to Latin America, as compared to China’s $404 million-worth pharma exports. In fact, India has consistently beaten China in the last five years in pharma exports to Latin America. What makes this even more interesting is that India imports the bulk of its raw materials from China, converts them into finished products and exports them.

Making a name in Latin America

India exports affordable generic drugs to the region, in contrast to the costly, patented products supplied by MNCs. This has led Latin American governments and people to have a positive view of India as an important contributor to their objective to reduce the cost of healthcare. In fact, Brazil and Chile encouraged the entry of Indian pharma companies into their countries to put pressure on MNCs and local drug-makers to increase the availability of generics and reduce the cost of medicines.

India is also a major supplier of bulk drugs (pharmaceutical raw materials known as API) to Latin American manufacturers of pharma products. The export of bulk drugs are worth over $300 million. This helps Latin American manufacturers reduce their cost of production, thanks to the low-cost inputs from India. Indian pharmaceuticals are not considered a threat to the Latin American industry, which has been hurt badly by the large-scale entry of Chinese manufactured products in many sectors.

Some Indian pharma companies have even set up manufacturing plants in Brazil, Mexico and Argentina. Besides supplying to the local markets, these units also export to the US and other countries outside the region. The Glenmark plant in Buenos Aires has become the company’s global hub for the manufacture and export of oncological products to over 20 countries, including the US.

The success and positive perception of Indian pharmaceuticals have helped in enhancing the image of other Indian companies, as well as India as a whole, in Latin America. Latin American trust in Indian medicines has helped in increasing their confidence in the quality of other Indian products as well.

But India’s pharma lead over China is not just limited to Latin America. In fact, India’s global export of pharmaceuticals is double that of China. In 2016, India’s pharma exports were worth $13 billion, as against Chinese exports worth $7 billion. India is the tenth largest pharma exporter in the world, while China ranks at 16.

Other importers

India is the fourth largest supplier of pharma to the US, with exports worth $5.1 billion, while Chinese exports to US were just $1.1 billion in 2016. Indian companies account for 30% of the US’s generic drug imports. It is also creditable that India has the largest number (over 200) of US FDA-approved pharma units outside the US. Some Indian firms such as Sun Pharmaceuticals, Lupin, Reddy Labs and Cipla have also established manufacturing units in the US.

India leads China in exports to the EU as well. In 2016, India’s exports were worth $1.56 billion as against China’s $1.36 billion. Even in Africa, where the Chinese have spoiled the market with massive credit and some non-transparent practices, India’s pharma exports were worth $2.8 billion as against China’s $618 million in 2016.

The UK is the second largest market for Indian pharma exports, which stood at $464 million in 2016. India also exported to other developed markets in 2016, including Australia ($220 million), Germany ($161 million), France ($145 million), Netherlands ($143 million), Canada ($143 million) and Belgium ($125 million).

India exports half of its total production of pharmaceuticals. Exports to the US and other rigorously-regulated western markets account for over 50% of India’s global exports. This has given a stamp of quality to Indian pharmaceuticals, adding to the confidence in Indian medicines in Latin American and the rest of the developing world.

India is the largest exporter of generics (by volume) in the world, accounting for 20% of global export volume. The low cost of production and the large and strong base of scientific and technical human resources have given Indian exporters of generic medicines a competitive advantage. The world has recognised India’s role as the main contributor to the lowering of healthcare costs in developed countries like the US and the UK. Western NGOs was well as foundations such as the Bill and Melinda Gates Foundation, Doctors Without Borders and the Clinton Foundation buy Indian generics for use in their healthcare work in Africa.

The way forward

There are, of course, many challenges that Indian pharma exports face. Some Indian companies, including Ranbaxy, have been caught and fined or their products banned by the US FDA and its EU counterpart for violations of quality standards and authenticity of data. There is a shortage of qualified pharmaceutical scientists for research and development work. While the exports are dominated by a few large players, there are many small and medium companies that need technological and infrastructural support. There is a need to strengthen the Indian regulatory system and train people for the industry in collaboration with educational institutions. Indian companies have profited from mass producing those products whose patents have expired. But they need to move beyond this business model and become innovative, with more investment in research. The government of India should also keep up its solid stand against pressures from the US to change Indian patent laws.

Pharmaceuticals are not a focus area for China; it is its 39th largest export item. But China has started catching up fast. For India, pharma is of greater importance, as its fifth-largest export item. Given this significance and the competitive advantage that India has, it is time for the government to specially focus on pharma exports, just as it has successfully done for IT. The government and the Indian pharmaceutical industry should work out a comprehensive strategic policy to increase exports in the future. According to a June 2016 study by Assocham, India’s pharma exports could reach $20 billion by 2020.

While the large exports of IT products and services, and diamonds are facing a downturn due to unfavourable global trends, the exports of generic medicines offers a brighter future in both the short and long term. The developed and developing world are concerned about the high costs of patented medicines and what this means for healthcare. Countries are keen to use more generics to cut down the cost of healthcare. This is an unmissable opportunity for India.

The success of pharma exports should be an inspiration for Indian exporters of other manufactured products who complain about and suffer from Chinese competition.

Ambassador (retired) R. Viswanathan is a Latin America expert.