'Sick' pharma PSU offers to step in to reduce China drug dependence

Topics Coronavirus | Pharma Companies | HAL

The coronavirus outbreak has exposed India’s vulnerability when it comes to sourcing crucial raw materials for medicines from China, which meets about 70 per cent of the country's bulk drugs, or active pharmaceutical ingredients (APIs), requirement. 

As the Indian government scouts for options to deal with any potential scarcity that can arise in the near future, the country's oldest public sector pharma company, Hindustan Antibiotics (HAL), has submitted a proposal to the government to reduce dependence on China for fermentation-based bulk drugs, it is learnt. 

HAL can make up to 50 per cent of these bulk drugs if it is provided financial assistance to upgrade its infrastructure, the company said. 

India sources almost its entire requirement of fermentation-based APIs from China. These bulk drugs are used to make key antibiotics (penicillin, for example) and vitamins. 

HAL, a sick public sector undertaking (PSU) which the Centre plans to sell off after meeting its liabilities, is the only state-owned entity that makes fermentation-based APIs. It last made them in 2003, revealed sources. 

HAL sent a proposal to the Department of Pharmaceuticals (DoP) a few days back, outlining the need to refurbish its plants and machinery after which it could manufacture these APIs and intermediates and also the formulations based on these APIs, said sources. 

A senior government official confirmed that such a proposal had come and that the Centre was exploring all possible options to reduce dependence on China. "This can be achieved either through strengthening the local industry (through anti-dumping duties and other means) or establishing bulk drug parks, etc. We are also exploring the HAL proposal," the official added. 

If an in-principle approval is given, then HAL can start work on the project. It would take four to six months to upgrade the manufacturing infrastructure. However, it can offer a permanent solution to substitute imports of key APIs from China, besides a revival route for HAL. 

Status check

• India imports 70% of the bulk drug requirement from China
• Almost entire requirement of fermentation-based active pharmaceutical ingredients (APIs) is imported from China
• Fermentation APIs are used to make antibiotics, vitamins, etc
• Hindustan Antibiotics, which the government is looking to sell off, has sought financial aid for infrastructure upgrade to help reduce dependence on China for such drugs

"If such a plan is approved, this can permanently solve the problem of India's dependence on China for these key APIs," a source said. The source added that initially, the production could be sufficient to meet about 30-40 per cent of India's requirement of fermentation-based APIs. This can be eventually scaled up to over 50 per cent of the country's overall requirement of these bulk drugs and intermediates. According to rough estimates, India's requirement of fermentation-based APIs is around 2,000 tonnes per annum. HAL can make up to 1,200 tonnes per annum once it achieves full production capacity at its Pune plant. The Centre, however, has to approve the investment required to upgrade HAL's infrastructure. Sources claim that an investment of about Rs 50 crore per product is required and around 12 such key products can be made at HAL. 

Sources in the bulk drug industry say it can be a crucial move for the country and perhaps one of the few options left before the government to ensure India is not dependent on China for essential commodities such as medicines. "The local bulk drug makers can also make fermentation-based APIs. However, there is a glitch. One, these units would need at least 3-5 months before they can tweak their existing portfolios and start making these products. Secondly, once the current crisis is over, there is no assured market for them," said a bulk drug unit owner in Gujarat. 

He felt that in case the government wanted indigenous manufacturing of key raw materials, it had to take steps like imposing anti-dumping duties to ensure cheaper Chinese products did not flood the market. Chinese imports are at least 30 per cent cheaper compared to Indian production.  The Indian bulk drug industry shifted to making high-margin complex APIs as they had constraints on expanding their capacities here owing to stringent pollution norms. Low-value products thus started getting imported from China. 

Global experts, too, have pointed out the huge opportunity this crisis has created for the Indian industry. Former USFDA chief Scott Gottlieb had tweeted a couple of days back that there was opportunity to work now to make up the lost China supply. "There's idle manufacturing capacity that can be brought online. Regulators can work closely with industry. India, for example, has about 1,500 plants that make APIs and are running at 40 per cent of their capacity," he had said on the microblogging site. 

The DoP has already proposed four bulk drug parks in Andhra Pradesh, Telangana, Himachal Pradesh, and Assam through the special purpose vehicle route. The industry, however, highlighted that unless steps were taken to ensure viability, local units were unlikely to switch to making low value APIs. HAL, on the other hand, is on the verge of shutting down. In 2016, the Cabinet had decided for strategic sale of the PSU after meeting its liabilities from the proceeds of sale of surplus land it owned. There have not been many takers and it is estimated that HAL's liabilities are to the tune of Rs 800 crore or so.

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