Pharmacy of the Post-Pandemic World
India’s pharma export volumes soar
For years, India has been calling itself the “pharmacy of the world.” As a powerful manufacturing engine supplying more generic medicines by volume to the global population than any other country, the title carried an air of legitimacy. Yet, implicit in the nation’s role was a clear limitation – India was a reproducer, skilled at churning out preexisting formulations at lower costs, but not an innovator in its own right. In this way, it would remain forever a step behind its counterparts in the West, whose scientists advance the industry with their extraordinary research programs backed up by even more extraordinary R&D budgets.
Keenly aware of this, Prime Minister Modi has sought to elevate India beyond its pure-play generics status and included the sector within his vision of an ‘Aatmanirbhar Bharat,’ or a self-reliant India. His Make in India initiative, focused on spurring manufacturing development across sectors through the introduction of new processes and new infrastructure, is felt most in the life sciences through the Production Linked Incentive (PLI) schemes, the first of which was announced in March 2020 by the Government of India to include a US$1.83 billion investment into the industry, focusing primarily on APIs and key starting materials, followed by an announcement in March 2021 of an additional US$2 billion investment.
“Rather than working within different regional specifications like a US pharmacopeia or a British pharmacopeia, we should focus more on an emotional pharmacopeia. We should always make products that we would be willing to take ourselves.”
Rahul Maheshwari, Director, Derren Healthcare
“The Indian government is proactively looking to provide industrial park facilities to grow the API, pharmaceutical, and nutraceutical industries in India to expand on the country’s prominent role as the pharmacy of the world.” Arun Joshi, Managing Director, Surya Life Sciences
As the pandemic left countries grappling with an unprecedented level of unmet medical needs, India assumed, characteristically, its role as the “pharmacy of the world.” The world’s largest vaccine supplier – India produces roughly 60% of all vaccines – has exported Covid-19 vaccines to over 150 countries in need since the outbreak of the virus. The growth of the country’s PPE sector from modest production capacity pre-Covid to 200,000 kits manufactured daily helped India's pharma export volumes soar, becoming the second-largest producer after China. This was heralded as a triumph of Aatmanirbhar Bharat.
According to Lakshmi Chundu, director of regulatory affairs at the country’s pharmaceuticals export promotion council, Pharmexcil, Indian pharmaceutical exports recorded 18% growth from FY 2019-2020 to FY 2020-2021, marking the highest growth rate recorded for the industry. From 2020 to 2021, the total pharmaceutical export value jumped by nearly US$4 billion.
Rather than resting solely on the shoulders of MNCs and Indian mega corporations, this growth was the product of an industry-wide push. “India has the biggest menu card available in the world with 60,000 formulations made by 3,000 registered manufacturers and 10,000 manufacturing units,” commented Daara Patel, secretary general of the Indian Drug Manufacturers Association (IDMA).
Over the past few years, the country’s pharmaceutical sector has done far more than prove itself in terms of manufacturing volumes, however. It has emerged as a life sciences leader within the post-pandemic order through diligent investments into innovation and by seizing on macroeconomic winds that catch the sails of the world’s largest economies.
India’s life sciences to gain from macroeconomic instability
In mid-October 2022, The Indian Express reported that the IMF’s latest world economic outlook presented cause for concern for the nation, bracing its readers that ‘the worst is yet to come.’ The largest economies continue to stall, it warned, as increasing price pressures undermine macroeconomic stability. Within the context of pharma, the rumblings of stagflation beg the question: Will the contraction of major economies like the US lead to fewer exports of Indian vaccines and medicines, or are the life sciences spared?
According to Peter DeYoung, CEO of Piramal Pharma Limited, India’s pharma sector actually stands to benefit from mounting fiscal pressures. Just as India embarked on its Make in India campaign, other major economies around the world have adopted their own slew of government and corporate-led initiatives to reduce reliance on other nations for several steps along their goods supply chains in response to challenges they faced during the pandemic. DeYoung has watches as governments continue to run enormous stimuli over long periods of time, and he believes there will come a day when they must balance their budgets and face the reality that they will not be able to pay for more public services. This, in turn, will contrast with their reshoring efforts. “Right now, we still see more of a willingness to deal with this later, but the Inflation Reduction Act in the US is an example of where there will be pricing impacts on pharmaceuticals,” explained DeYoung. “Governments will have to grapple with the question: Is it better to be made domestically or to have the lower price?”
“We are seeing increased interest from foreign companies, particularly as global manufacturers are paying more attention to the China-plus-one strategy. In chemicals, with advanced intermediates we have seen more inquiries from MNCs because of macroeconomic instability.”
Jay Bhatt, Director of Strategic Business Development, Vital Chemtech Limited
The strength of the Indian pharmaceutical export market is that, as countries face the uncomfortable tension between wanting to increase their resilience while simultaneously wanting to reduce costs, India can help with both. Having identified gaps in product quality and manufacturing capabilities between advanced and developing markets, Mumbai-based pharmaceutical manufacturer Chempro Pharma found a way to center its business model around this conflict of interest. “Countries around the world are focused on becoming more self-sufficient, especially in critical industries like the life sciences,” said Arun Sehgal, the company’s managing director. “This is no different in places like Indonesia, Thailand, Vietnam, and throughout Africa, where governments are working to create ecosystems conducive for importing technology and setting up domestic production facilities.”
With this in mind, Chempro espied Vietnam’s US$60 billion pharmaceutical sector as an opportunity. According to Sehgal, the country’s pharma market relies 80% on imports. As the Vietnamese government works to drop this to 50%, his company is liaising with public authorities and several manufacturing companies on tech transfers as well as assisting companies looking to establish factories with their design, machinery and technology. In short, Vietnam works to boost its domestic manufacturing capabilities, and India plays the supporting role – for a fee.
Furthermore, coined back in 2013 but garnering evermore attention in the business community is the notion of China-plus-one; the strategy to diversify business with other countries rather than investing solely in China. As the geopolitical wedge widens between China and the West, American and European companies are finding all the more incentive to bolster their supply chains and investment portfolios beyond Chinese-based enterprises. From its vantage point below the Himalayas, India watches its northern neighbor navigate this unfolding relationship and it waits with open arms to catch the business opportunities as they fall.
Image courtesy of Christina Victoria Craft from Unplash