How likely is the localization of Indian and American APIs?

Since the 1990s, India has been one of the important export markets for my country's APIs. Statistics of import and export goods released by the General Administration of Customs of China show that my country exported 5,446,100 tons of APIs to Asia last year. Asia has become my country's largest export market for APIs, and India is the largest export destination of China's APIs in Asia.

China and India have become a pharmaceutical co-prosperity

It is reported that 70% of the raw materials needed by the Indian preparation industry come from China. In particular, paracetamol, Aspirin, ibuprofen and other Antipyretic Analgesics that are consumed in huge quantities in the Indian market, hormone drugs such as dexamethasone, and commonly used varieties such as vitamin C, vitamin E, and vitamin D are basically exported from China. In addition, many commonly used antibiotic raw materials, such as gentamicin, tetracycline hydrochloride, streptomycin, penicillin salts, cephalosporins, macrolides and carbapenems, and antihypertensive drugs, are also used in India. Most are purchased from China and shipped back to China to be processed into preparations. It can be said that the Indian pharmaceutical industry is inseparable from China's APIs.

In the past few years, the European Union has gradually raised the "threshold" for APIs to enter the European market. The same is true for the United States. Therefore, the number of my country's export of APIs to Europe and the United States has not grown fast. According to statistics from the General Administration of Customs, last year, my country exported only 787,900 tons of raw materials to the United States and 2.0763 million tons of raw materials to Europe, both of which are lower than my country’s total exports of raw materials to the Asian market.

According to the analysis of foreign media, the pharmaceutical industry in India and China has formed a de facto "co-prosperity." On the surface, India and China have a trade deficit in medicine, but in fact, India does not "suffer." There are more than 18,000 pharmaceutical factories in India, of which more than 90% are preparation factories. Indian preparation factories purchase Chinese APIs and process them into various preparations, which are exported to Bangladesh, Sri Lanka, Maldives and other South Asian countries and many countries in Africa. Withdraw precious foreign exchange.

According to the latest reports from the Indian medical media, the total output value of the Indian pharmaceutical industry last year reached 40 billion U.S. dollars, and the export value of medicines reached 22 billion U.S. dollars, more than half of the total value of the national pharmaceutical industry. It is worth noting that more than half of the APIs used in India's exports of drugs use China's export APIs. In view of this, senior Indian officials worry that if a dispute arises between India and China, the Chinese side will cut off the supply of raw materials to India, and the Indian pharmaceutical industry will be paralyzed due to lack of rice to cook.

Of course, in China’s view, these concerns are completely unnecessary. Although India and China have conflicts due to undecided borders, they will not affect the export of Chinese APIs to India. Because China's pharmaceutical industry has experienced rapid development for more than 70 years and already has a huge production capacity of APIs, China's domestic market cannot digest these APIs and can only export them to overseas markets.　

　


The production of raw materials does not happen overnight

According to the latest reports from the Western media, the Indian government has begun to implement the "Indian API Localization Process Plan", which is the first step in the country to increase its own production of APIs. According to the Hindustan Times, the Indian government announced at the end of June that it would allocate 30 billion rupees for the construction of 3 API industrial parks, and allocate 694 billion rupees to support the production of 53 kinds of API products that are in short supply in India. . This can be regarded as one of the specific measures that India intends to get rid of its dependence on Chinese APIs.

According to foreign media, India plans to gradually reduce the number and varieties of imported Chinese APIs in the next five years. First, increase the self-sufficiency rate of nearly a hundred important APIs, and then expand the self-sufficiency rate of other APIs, and finally achieve the goal of reducing imports of Chinese APIs.

However, the National Association of Pharmaceutical Manufacturers of India does not agree with the official measures. Senior officials in the Indian pharmaceutical industry believe that senior Indian government officials lack a deep understanding of the intricate interdependence of the global pharmaceutical industry. The international pharmaceutical industry has long been one of the industries with a clear division of labor. In the past few decades, India’s emphasis on preparations production was due to the high profitability of preparations, while the profitability of APIs was low and there were many market risks. There were certain historical reasons for relying on imported APIs. At present, the Indian government is trying to quickly get rid of its dependence on China's supply of raw materials. On the surface, there are good reasons, but in fact, it may be "hasty is not enough."

At present, there are thousands of commonly used API products in the international market. It is undoubtedly a fantasy for Indian pharmaceutical companies to thoroughly master the production process of these products in a very short time. Many factors must be considered in the production of APIs, such as product quality control, cost, process and environmental protection. India’s only advantage is the low labor cost, which is of little use for API production that requires technical know-how, because production APIs require engineers and skilled workers with rich professional knowledge. Moreover, China's API industry did not happen overnight. It took decades of development to form today's industrial advantages. The quality of Chinese APIs not only meets European and American Pharmacopoeia standards, but more importantly, their prices are extremely competitive in the international pharmaceutical market. Therefore, European and American manufacturers are competing to purchase Chinese APIs.　

U.S. self-produced APIs increase costs

If you completely reject Chinese-made APIs, India will regress for decades and return to the level of the early 1980s. If all APIs are domestically produced in India (not yet possible), it is estimated that the price of drugs in the Indian market will increase by 23% to 48%, because the cost and price of many self-produced APIs in India are much higher than similar APIs in China. The high-priced drugs are unwilling to see by the Indian people.

Senior Indian officials plan to "unilaterally cut" the cooperation and win-win relationship between the Indian pharmaceutical industry and the Chinese pharmaceutical industry over the past decades, which seems to do more harm than good. The head of the Indian Pharmaceutical Association stated not long ago: “In the past few decades, most of the common API products in India have relied on imports. Among them, price is the biggest consideration. If the government only uses domestic (raw material) drugs instead of For foreign imported APIs, have you considered the cost factor? Who will pay for the high-priced drugs in the future? Are there government subsidies? "What's more, for some high-end APIs, it is difficult for Indian pharmaceutical companies to master the production process in a short time. For example, carbapenem APIs and hormone products with raw material advantages in China. China has the world's largest production capacity of dioscin, and they are the starting materials for the synthesis of all hormones. Therefore, the person in charge of the Indian Pharmaceutical Association believes that the Indian government's consideration of the localization of raw materials to replace Chinese imports is more like a "painting cake to alleviate the hunger", an infinite plan.

What is really worrying is that, according to foreign media reports, the US government has also begun the process of localizing raw materials to reduce its dependence on Chinese raw materials. According to reports, the Trump administration has allocated funds to PHLOW CORP, an API manufacturer in the United States, to support its expansion of API production capacity, so as to gradually get rid of the US pharmaceutical industry's dependence on Chinese APIs. In addition, US President Trump recently signed an executive order to increase the domestic production of essential drugs, medical equipment and protective equipment. This order requires the U.S. government to develop a list of essential drugs and purchase these drugs and medical supplies from U.S. companies rather than from foreign countries.

The United States is different from India. The United States has a strong pharmaceutical production capacity and is capable of producing various APIs. In the past, American pharmaceutical companies imported a large amount of APIs from China in order to reduce production costs, because the price of Chinese-made APIs was only 1/3 or even 1/4 of the price of self-produced APIs in the United States. If the US government is determined to produce its own APIs, it will undoubtedly push up the domestic drug market prices and greatly reduce the profits of pharmaceutical manufacturers. This is definitely not what American pharmaceutical manufacturers want to see.

In any case, Chinese API manufacturers should pay close attention to the new trends in the self-production of APIs by governments of various countries and their impact on my country's API exports, and make preparations as soon as possible.