As China hikes prices of pharma KSMs, India's atmanirbhar drive faces its first real test

The recent hike in KSM prices will weigh heavily on the pockets of India's pharma players.  |  Photo Credit: PTI

Despite opting to leave the prices of its basic raw materials, also referred to as active pharmaceutical ingredients, unchanged, China has increased the prices of its key starting materials (KSMs), required for making medicines, by between 10 and 20 per cent, in a move that is likely to weigh heavily on the pockets of India's pharmaceutical players. India relies extensively on KSM and API imports, specifically in the production of life-saving antibiotics and steroids among other medication. 

Given the rising tensions between India and China sparked by the violent conflict that ensued at Galwan Valley, the latest move by China is being viewed by some analysts as a ploy to derail the Indian pharmaceutical industry's push to align itself with the vision of PM Modi's atmanirbhar India. 

According to data from the Trade Promotion Council of India (TPCI), India currently imports 53 APIs and KSMs from China. Over 70 per cent of its API import requirement is satisfied by our northern neighbour, mostly for antibiotics and vitamins. 

In 2018-19, India's pharma outfits imported Chinese-made bulk drugs and intermediates to the tune of a staggering $2.4 billion, highlighting the industry's large dependence on China, and in particular, the manufacturing hub of Hubei. The COVID-19 pandemic has brought this over-reliance on China to the foreground. 

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The massive supply chain disruptions caused by several areas in China going into complete lockdown during the early months of the year prompted deep fears among India's pharmaceutical players over whether production in India would be hindered. 

The fear saw policymakers scramble to institute a number of new measures geared towards improving drug security in the country, beginning with the formation of a committee under the chairmanship of Eshwara Reddy, Joint Drugs Controller, Central Drugs Standard Control Organisation (CDSCO) in March. 

In truth, Indian pharma's drug reliance on China is not an issue that has gone unnoticed by policymakers. National Security Advisor Ajit Doval had warned as far back as 2011 that India's API dependence could morph into a national security threat if it went unaddressed. In 2013, the UPA government set up a committee headed by VM Katoch, which submitted a report in 2015 outlining a number of measures to curb this dependency including the establishment of exclusive drug parks. However, until March this year, no approval was granted. 

On March 21, the government sanctioned the development of three mega bulk drug parks in India in partnership with states under a new scheme worth $394 million. The funds will be used to finance the construction of these three parks focused on API manufacturing over the next five years. Additionally, the government also announced its intention to introduce a production-linked incentive (PLI) scheme aimed to boost indigenous manufacturing of KSMs and APIs. By some accounts, the PLI could set the Centre back by $911.5 million over the next eight years.