‘Speed up approvals, help industry meet green norms’

It’s not an alarming situation yet, but the uncertainty over supply of bulk drugs from China is forcing Indian pharma companies to reckon with the absence of an adequate API manufacturing ecosystem in India, Siddharth Mittal, CEO & Joint MD, Biocon, tells DH’s Mahesh Kulkarni.

How serious is the situation on API imports from China?

There has been some disruption of bulk drugs imports since the coronavirus outbreak forced Chinese companies to shut down their manufacturing units. It started with the Chinese New Year holidays, which got extended due to the outbreak and it has been almost a month now.

Good news is that some factories have resumed production this week. Out of the four major pharma clusters in China, two have resumed work and the other two are yet to start. Till all production resumes, there will be supply challenges.

If the shutdown in China continues for another three months, companies in India may start running out of their inventories. Due to this fear, we may see instances of hoarding in the marketplace, which is likely add to the challenges. The industry needs to be very careful to ensure this does not happen. We are already experiencing a price increase of 15-20% by some vendors.

How and why have we become so dependent on China for APIs?

India is still a big hub for API production. However, Indian pharma industry has become dependent on China for raw materials over the last several years for three specific reasons.

First, the scale at which Chinese companies operate is much larger, and this is not just in the pharma sector. Large-scale manufacturing allows Chinese manufacturers to sell their products in India at cheaper rates.

Second, India has not been able to scale up its capacities like China due to lack of adequate government incentives and high cost of capital. India has not been able to create mega industrial zones like China.

Third, the pollution norms in India are more stringent than in China. The cost of compliance with environmental norms is significantly higher in India. The approval process also takes longer, and all this adds to the cost of production. With the National Green Tribunal playing an active role, companies in India are finding it difficult to expand and stay viable.

India is the only country in the world that has a ‘zero liquid discharge’ policy where pharma companies are concerned. As per the norms, the effluents generated during API manufacturing need to be treated through inhouse Effluent Treatment Plants (ETP) and the final residue needs to be disposed through authorised vendors for approved use only, such as to the cement industry for co-processing.

Is the coronavirus crisis also an opportunity for Indian companies?

There is an opportunity. However, setting up manufacturing for new products takes time. So does the approval for an alternate source-based manufacturing of formulations due to the existing regulatory approval processes. Moreover, the cost of credit is at 9-10%, and it takes 4-5 years to get approvals and set up a factory, leading to very high capital cost. You cannot address the problem of dependence on China without addressing these three issues. Indian pharma players will prefer to source raw materials and APIs from China for the competitive pricing, which in turn helps them to offer formulations at affordable prices.

What support can the government quickly give the industry so they can push up API manufacturing?

The first thing is to expedite the review timelines for qualification of alternative sources of production. If companies want to change the source of their APIs from China to India, it will take them 6-9 months currently. It should be done within a month once the filing is done to meet challenges such as that due to coronavirus. The government could temporarily relax some requirements. It could allow quick inspection and cut down the timelines in every process on a case-to-case basis where life-saving drugs are concerned.

Similarly, another area could be the stability data, where there is scope to reduce the timeframe for data required while filing. The government should allow filing with 14 days stability data in place of 6-9 months data.

There is worry about large-scale environmental pollution if APIs are manufactured in India on a bigger scale than at present. Are there ways the industry can adopt to mitigate environmental pollution, rather than seek an easy regulatory regime?

The Indian pharma industry operates in compliance with regulations, and it is imperative to have this. We have to be very careful about our environment. Given India’s diversity, the landmass and depleting green cover, we need to have strong pollution control norms. However, what we also need from the government is to invest in infrastructure that helps the pharma industry comply with these norms in a cost-effective manner to stay globally competitive.

For instance, government can consider setting up special economic zones equipped with infrastructure for common utilities, including ETPs, for the pharma industry. The pharma city set up by the Ramky Group in Visakhapatnam has such common facilities that comply with environmental laws, which are offered to the companies established there and who pay for its use like they do for power and water.

It is extremely expensive for companies to set up the entire infrastructure individually, which makes small companies unviable and hence they stop manufacturing. We should emulate the Chinese government in creating pharma clusters.

The government has to enable the industry, otherwise it will increasingly become unviable for companies to sustain their operations in the long run.