China hikes prices of key pharma ingredients to scuttle India’s Atmanirbhar plan: Pharma experts tell govt to promote public sector units to meet Chinese challenge

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In a bid to scuttle India’s efforts to achieve self-reliance in the pharma sector, China has increased prices of key starting materials (KSMs) up to 20 per cent, according to a report in Times of India. However, China has left prices of active pharmaceutical ingredients (APIs) unchanged.
India is heavily depended on China for KSMs and APIs, as much as 80 per cent. For certain key antibiotics like penicillin, the dependence is almost 90 per cent. According to the report, any increase in prices of KSMs will discourage indigenous API manufacturing, making units unviable and APIs less competitive against Chinese products globally.
In the wake of standoff with China, India has incentivised indigenous manufacturing of APIs.
However, experts say the Chinese move will have an adverse impact on the pharma sector. But through consistent policy initiatives, the threat posed by the Chinese could be neutralised. They said that the government should promote Public Sector Units (PSUs) for manufacturing APIs. According to an expert, PSUs played a major role in the development of Indian pharmaceutical industry. First, PSUs made huge investments and produced APIs and provided this to the formulation industry, which was in the private sector. Further, the PSU also played a role in the technological dissemination and human resource training. However, the public sector units in the pharmaceuticals and vaccines need intensive care or a reboot.
According to the annual report of the Department of Pharma (DoP) there are only five pharmaceutical PSUs with the central government. Out of these five PSUs, two are sick, one is incipient sick and two are in Rs 25-crore profit each.
The role of PSU need not be competing with the private sector in all circumstances and could complement each other. The backbone of the pharmaceutical industry is the API production. The public sector can invest and achieve economies of scale in the production of API and intermediaries and supply to the private sector for formulations. Similarly, the new areas like bio therapeutics need huge investment that can be filled by the private sector. Even the Katoch Committee recommended infusion of capital to each PSU to start manufacturing of important APIs. The Javed Chaurdary Committee recommended that “insulate the UIP from price and supply shocks a cardinal principle of public health policy requires the sourcing of the vaccines from public sector manufacturing units to a substantial extent”.
Though the public sector reliability is accepted within the policy circles the fear of criticism of taking back to license raj prevents the political leadership to take concrete actions in this regard. Though India’s PSU management bears the threat of political interference the experiences of South East Asian countries especially Singapore show that there can be different management structure for PSU. Government can set up plants and lease to the private sector with assured supply commitments. The leasing out model is already implemented at the medical device park at Visakhapatnam. Government should implement this model in API and vaccines. The Government should move away from the revival of the sick public sector and should approach it as a restart. Towards this end the government should take over the existing fixed assets and start new PSU manufacturing with updated technologies and management approach.