What Can India Learn From China?
The Indian pharmaceutical industry’s claim to the sobriquet, The Pharmacy of the World because of its hard-earned preeminence in the pharmaceutical industry covering drug intermediates and APIs (Active Pharmaceutical Ingredients) to start with and moving up to generic formulations and value-added generic manufacturing and even in innovative space. India has displaced Italy a few years ago as the major global source of APIs. Now China is in the process of displacing India as the global source of APIs and eventually even in formulations, unless the government and the industry stop taking a complacent view of the situation and take immediate corrective measures. While one need not be paranoid about it, one cannot take it lightly.
First things first. To gain a total perspective of the situation it is important to understand the current state of the Indian drug industry by a quick SWOT analysis and find out how China has been able to what it did for its pharmaceutical industry. This understanding will be of immense help in formulating winning strategies to put the Indian pharma industry back on its track to claim its legitimate The Pharmacy of the World status.
Snapshot of SWOT Analysis of Indian Drug Industry
How China Did it!
China made rapid strides in manufacturing sector and became the factory of the world. It has overcome the stigma of poor quality with improved manufacturing methods and implementation of quality systems. Now, it is doing the same thing in the pharmaceutical sector. It has beefed up its good manufacturing practices to overcome the stigma of poor quality and inferior product perception by implementing the Health Reform Plan of 2009 with a $125 billion investment in overall healthcare revamping. Chinese government gives attractive fiscal incentives such as a two-year tax holiday followed by three years of 50 per cent tax for its pharmaceutical industry to become globally competitive. It also gives seven per cent of FOB value via export benefits to its drug intermediate and API manufacturers.
The Chinese government is pursuing very aggressively its New Drug GMP 2010 program (published in 2011) to put stringent quality manufacturing systems in place to be on par with the regulated countries. Its disciplined labour force is a distinct competitive advantage. What is more, the government of China is encouraging overseas Chinese PhDs to return home. Already 80,000 PhDs have returned to serve their motherland. Above all, the capitalistic aspirations of China coupled with its communist control make it a formidable competitor. It is therefore, prudent to practice co-optetion with China rather than competing head on. The slice of the world market is big enough for the two Asian giants to share. One cannot ignore the fact that China itself would be the second largest market for drugs after the US, in the next few years and gaining access to the Chinese market is vital for the growth of Indian pharmaceutical industry.
What India Should Do!
India should first, abandon its irrational policies such as extending coverage of drug price control to over 70 per cent of the drugs, no-tax-holidays and start giving adequate fiscal incentives for R&D activity etc, to give a shot-in-the-arm for the pharmaceutical industry. The industry, which has every chance of emerging with a distinct competitive advantage and come out as a winner, needs the governmental support in creating a climate that is conducive for accelerated growth. The government should find a way to implement industry-relevant policies over political compulsions to spur economic growth and prosperity for all in the long run. Ramesh Adige suggested some very important steps that the government could take on October 18, 2012 in The Financial Express article he wrote.
The government could give subsidies like Chinese government does for effluent treatment plants and other similar investments for stepping up the fermentation-based manufacturing capabilities for APIs. The government could also creatively restructure its import tariffs to support the industry. It should also ensure uninterrupted water and power to these industries at subsidized tariffs. Currently only about twenty-five to thirty companies have been responsible for all the progress that the Indian pharmaceutical industry has made. The rest of the manufacturers should also come forward to invest in the right things to make them globally competitive. World class quality and world class competence are necessary even if your objective is just to remain as a viable, profit-making domestic player. Because in this era of globalization whether you like it or not, world class companies are competing with your products in your back yard. Therefore, to survive and grow even in the domestic market, world class competence is mandatory.
These are not difficult-to-do things. What is needed is a political will and a strong determination, and an unflinching focus to stay the course!