It's time for Indian pharmaceutical companies to embrace the Chinese market

By Tian Guangqiang Source:Global Times Published: 2018/6/10 22:53:40

Illustration: Xia Qing/GT

Accounting for 10 percent of the global pharmaceutical industry in terms of volume, India has become the "pharmacy of the world." Even in China, there are frequent cases of smuggling and selling Indian-made drugs, and the enormous underground market for Indian medicine is a sign of the huge demand for cost-efficient treatments for cancer and other diseases in China.

With the further opening-up of the Chinese market and improving China-India relations, expanding imports of Indian drugs is expected. The prospect of closer bilateral cooperation in the pharmaceutical industry is promising.

With an estimated $30 billion in revenue in fiscal year 2017, India is playing a leading role in the world pharmaceutical industry, especially in generic drugs. It is the largest generic drug provider globally, taking up 20 percent of generic-drug exports by volume.

The Indian pharmaceutical sector has many advantages. The sector has price advantages due to the low cost of land, labor, utilities and equipment. A production line in India costs 40 percent less than in Western countries, and labor costs 50 percent to 55 percent as much.

Another key factor leading to a prosperous pharmaceutical industry is related to Indian law and policy.

India's 1970 Patent Act granted drugs "process patents," which allow the same product to be patented again as long as there is a tweak in the process, no matter how minor. The immediate result is that Indian pharmaceutical companies can legally copy patented drugs from international specialists, laying the foundation for development later on.

The law was amended in 2005 under lobbying and pressure from Western countries, but the door was still left wide open for generic drugs. The amendments didn't stop "evergreening" patents, which seek to prolong a monopoly with a variant. Meanwhile, government price ceilings and fierce competition have kept drug prices very low.

Also, many Indian pharmaceutical companies have adopted various methods - not limited to merger and acquisition deals - to cooperate with their international counterparts. Some Indian companies have grown into multinational giants themselves. The sector has also attracted a significant amount of foreign direct investment.

Despite the Indian market's size, Indian medicines are rarely seen in the Chinese market and import volumes are limited. In May, China ended tariffs on 28 drugs including those essential for cancer treatment.

Indian drug companies with their competitive prices can greatly benefit from the move. Patients in China will have more options, which will provide incentives for domestic pharmaceutical companies to speed up research and development to cope with approaching competition.

However, the win-win deal has not attracted many Indian companies. Most of the Indian companies take a wait-and-see stance, since they are concerned the field test and approval process will be too long.

The Central Drug Standard Control Organization in India borrowed the regulatory system from Western countries. It is easier for Indian drug producers to obtain approvals from food and drug regulators in the US and UK. In 2017, Indian companies received 304 Abbreviated New Drug Application approvals from the US Food and Drug Administration, according to the Indian Brand Equity Foundation.

China's regulatory system is different from those in India and the US. Drugs are special products that affect human health, so China is moving very deliberately and cautiously. Despite the low cost and high quality of Indian drugs, there are still plenty of fake drugs from India. The field test and approval process indeed takes longer for India than it does for other countries.

To encourage innovation, China initiated significant drug and medical device regulatory reforms in 2017. Changes are already taking place. As the backlog of applications is processed, the approval time will get shorter. wIt is time for Indian pharmaceutical companies to abandon their concerns and embrace the opportunity that exists in China. Joint development in the pharmaceutical industry can be expected as China imports more Indian drugs.

The author is assistant research fellow with the National Institute of International Strategy at Chinese Academy of Social Sciences.


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