India’s pharmaceutical industry is renowned for selling medicines to the world at reasonable prices, especially developing countries. This has helped Africa in its fight against HIV/Aids, for instance. Such endeavours have earned India a reputation as the “pharmacy of the world”.
Now, the advantages that have enabled India to play this role are in danger of being eroded. Not only would this be bad news for India’s economy, it could make it harder for developing countries to access the medicines they need – threatening the UN Sustainable Development Goals in the process.
India is the world leader in generic medicines, which contain the same ingredients as the originator version, and go on the market after the original patent has expired. India’s top pharma firms include Cipla, Aurobindo Pharma, Lupin, Dr Reddy’s Laboratories and Sun Pharmaceutical Industries.
One challenge is coming from China, which has increasingly been exporting active pharmaceutical ingredients in recent years. Indian companies have managed to turn this into an opportunity by using these ingredients to supply medicines at reasonable prices while reducing their production costs and R&D spend.
But China is also expanding into drug formulations. By our calculations, China’s global share of formulations exports trebled from 0.4% in 2009 to 1.2% in 2018, while India’s doubled over the same period from 1.5% to 3.6%. Remarkably, 36% of China’s exports are to the EU and North America, where regulations are the most stringent, compared to 19% in 2009. Beijing’s “Made in China 2025” policy has identified pharmaceuticals as one of its strategic industries.
China’s rising share of formulations has been aided by improved standards that appear to be making the world less apprehensive about Chinese medicine quality. Notably, the China Food and Drug Administration issued guidelines in 2013 to make generic medicines bioequivalent to the originals, and in 2016, the government made them mandatory.
Chinese pharma has also placed much emphasis on using AI and genetics for developing new drugs. This enables firms like XtaIPi to identify thousands of molecules which could be used to treat a disease with fewer resources and time.
One silver lining is that China is proposing a new regulation that would give its firms exclusive control over their clinical test data. This sort of rule is favoured by the “innovator” pharma industries that we see in the west, and is opposed by generic pharma industries like India’s. It indicates where Chinese pharma might be headed, and may drive up its production costs for formulations – thus potentially benefiting India.
Another challenge to India is wealthy countries protecting their pharma industries to ensure drug security. In August, President Trump issued an executive order that called for the elimination of drug imports, both as active ingredients and formulations. France and Germany look to be heading in a similar direction.
If the US order is strictly adhered to, it will heavily affect Indian pharma. More than half of India’s pharma sales are from exports, and by our calculations, the US has bought 37% of them over the past three years.
Access to the US market is also critical for leading firms to maintain profit margins. For example, when Dr Reddy’s secured 180-day exclusivity in the US for selling the antidepressant fluoxetine 40mg in 2001-02, it increased the company’s annual sales of generic drugs by 81% and operating profits by 50%.
The COVID dimension
COVID-19 underlines India’s importance to developing countries when it comes to drug access. The Serum Institute of India (SII), the world’s largest vaccines producer, is collaborating with the World Health Organization, the COVAX facility of Global Alliance for Vaccines and Immunisation (GAVI), and the Coalition for Epidemic Preparedness Innovations (CEPI) to produce and supply 100 million doses of a COVID-19 vaccine at a maximum cost of US$3 per dose.
This is the lowest quoted price in the world for a COVID vaccine, and will see them distributed in low and middle-income countries. By comparison, German biotech firm BioNTech’s deal with US involves a price of US$19.50 per dose, while the Moderna/US deal is set at between US$32 and US$37 per dose.
SII separately has a manufacturing agreement with AstraZeneca to produce one billion doses of the Covishield vaccine, which the UK company is developing with the University of Oxford. The drug is in phase III trials in India at the moment.
SII is also partnering with US firm Novavax to develop and distribute the NVX-CoV2373 vaccine in collaboration with CEPI and COVAX. Again, this involves a minimum of one billion doses for India and other low to middle income countries.
Several other COVID vaccine candidates are being developed by Indian pharma firms: Covaxin, being developed jointly by Bharat Biotech and the Indian Council of Medical Research, has just entered phase III; and ZyCoV-D, by Zudus Cadila, is in phase II. These too are likely to be much cheaper than western equivalents.
Besides vaccines, Indian firms are developing drugs for treating COVID conditions. Baladol, developed by PNB Vesper Life Sciences, has become the first new drug for treating COVID to enter phase II clinical trials around the world. Studies so far have shown that it reduces death rates by 80% – whereas WHO-approved medication dexamethasone reduces them by 20%.
Despite India’s contribution to global access to medicines, the government has never tried to use this as an instrument of foreign policy. All decisions on export destinations and pricing have been made by the firms.
Contrast this with China, which is reportedly using its own vaccine projects as a commercial negotiating tool with countries who stand to benefit. This threatens to put pressure on countries whose leverage was limited already. It is another reason why India’s position as pharmacy of the world has a value far beyond its borders.