Reji Joseph and Thankom Arun

The Indian Pharmaceutical Industry (IPI) had been playing a major role in facilitating access to medicines at reasonable prices among the global population, especially in the developing world. The supply of generic medicines by IPI in Africa significantly supported the region’s fight with the HIV/AIDS epidemic. The contribution of IPI not just earned it the tag “pharmacy of the world” but enhanced the soft power of India in its foreign policy matters. However, there are a few developments which may lead to eroding of the advantage that IPI has in formulations and thus impact the access to medicines in many developing countries. There have been cases where Indian pharmaceutical firms exported drugs to other developing countries at costs lower than what they charged in India. From global access to medicine perspective, this could be seen as a cross-subsidisation; higher profits earned in some markets are used for providing drugs at lower costs in some other markets. However, the advantage of availing medicines at a reduced cost will be challenged in the coming years which will have implications on many of the Sustainable Development Goals (SDGs).

The “Pharmacy of the World” tag remained intact even when India’s base in the production of active pharmaceutical ingredients (APIs) got eroded due to rising imports from China. IPI was specialising in formulations and cheaper imports from China enabled IPI to supply medicines at reasonable prices without investing in R&D to reduce the cost of production of APIs. China which initially focused on APIs, is now expanding majorly into formulations aided by measures for the compliance of quality standards and use of new technologies that reduce time and cost. During the ten-year period ending in 2018, export of formulations from China, as captured by HS codes 3003, 3004 and 300220 of International Trade Classification, grew at a compound annual growth rate of 15 percent as compared to 11 percent of India. The Share of China in the global export of formulations, has trebled from 0.4% in 2009 to 1.2% in 2018 whereas India’s share more than doubled from 1.5% to 3.6% during the same period. Most remarkable thing about China’s exports is that it has managed to export more than one-third of its exports to the developed country markets of EU and North America, where the regulations are most stringent; share of these destinations in China’s exports increased from 19 percent to 36 percent during the same period.  

The rising share of export of formulations from China indicates that the apprehensions on the quality of medicines from China are waning. China has also put additional measures in place to improve the quality of medicines. For instance, the China Food and Drug Administration (CFDA) issued guidelines (2013) for meeting bioequivalence of generics to originator drugs. In 2016, the rules were made for the mandatory compliance of quality and efficacy of generics as compared to originator drugs. Chinese pharmaceutical industry has laid a lot of emphasis on the use of new technologies such as Artificial Intelligence (AI) and genetics for the development of new drugs. Moreover, the ‘Made in China 2025’ policy of China has identified pharmaceuticals as one of the strategic industries. 

Chinese pharmaceutical industry has laid a lot of emphasis on the use of new technologies such as Artificial Intelligence (AI) and genetics for the development of new drugs. The new technologies enable pharmaceutical firms to identify thousands of molecules those which could, individually or in combination, potentially be used to treat a disease with fewer resources and time. There are many biopharma companies in China such as XtaIPi which are into the new technologies for the development of new drugs and repositioning of existing drugs. However, we need to view the proposed regulation in China for the enhanced protection of test data (data exclusivity) generated in the process of drug development to provide data exclusivity for pharmaceuticals with a pinch of the slat. The generic industries oppose data exclusivity and innovator pharma industries welcome it. This proposal gives an indication of where the Chinese pharma industry is headed which may have implications on availing medicines at a reduced cost.

Another challenge is coming from the rising tendency among leading countries to promote the indigenous pharmaceutical industry to ensure drug security. An Executive Order of the President of United States (US) in August this year on “Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States” calls for the elimination of import of medicines, both APIs and formulations. Strict adherence to the spirit of the Executive Order will have a major impact on IPI and global access to medicine campaign. More than half of the sales of IPI is from exports and exports to the US accounts for 37 per cent of the exports by IPI during the last three years. Access to the US market is critical for leading Indian pharmaceutical firms to maintain their profit rates. In 2001-02, securing 180-day exclusivity for the sale of “fluoxetine 40 mg” under the Hatch-Waxman Act by Dr. Reddy’s led to an increase in its sale of generic drugs by 81 per cent and operating profit by about 50 per cent during that year. 

A thriving “pharmacy of the world” will continue to be the bedrock of access to medicines and vaccines globally. The Serum Institute of India (SII), the world’s largest manufacturer of vaccines, have collaborated with the COVAX facility of Global Alliance for Vaccines and Immunisation (GAVI), Coalition for Epidemic Preparedness Innovations (CEPI) and World Health Organisation (WHO) for the supply of 100 million doses of COVID-19 vaccine at a cost of maximum US$3 per dose. This is the lowest quoted price for Covid-19 vaccine globally and should be compared with the price of US$ 19.50 quoted by German biotech firm BioNTech SE in it’s deal with the U.S. government and US$ 32 and $37 quoted by the US firm Moderna in its deals. COVAX will distribute SII’s vaccine doses in low and middle income countries (LMIC). SII is partnering with Oxford University and Astra Zeneca in the development of ‘Covishield’ vaccine, which is in Phase III clinical trials in India. It has a manufacturing agreement with AstraZeneca for the supply of one billion doses of the vaccine to the latter. SII has also partnered with Novavax (US-based vaccine firm)-CEPI collaboration for the development and distribution of vaccine candidate “NVX-CoV2373” under the COVAX facility. SII will supply a minimum of one billion doses for the supply in India and LMIC. There are two more vaccine candidates developed by IPI which are in phase II and III clinical trials – ‘Covaxin’ developed jointly by Bharat Biotech and Indian Council of Medical Research has entered Phase III trials and ZyCoV-D by Zudus Cadila is in phase II trials.

It is not just in COVID-19 vaccines that IPI is making effective interventions, but in drugs for treating COVID conditions as well. A new molecule – Baladol, developed by PNB Vesper Life Sciences, has entered phase II clinical trials. Studies so far have shown that this molecule reduces death rate by 80 percent as compared WHO approved medication of Dexamethasone,  which reduces the death rate only by 20 percent. Baladol is the first new chemical entity to enter phase II trials globally. The IPI is also the major contributor in the global production of “hydroxychloroquine”, another drug used for treating COVID-19 patients. It produces 70 percent of the drug produced globally and exports to more than 55 countries.

Although IPI has made significant contributions for the progressive realisation of global access to medicines, the Government of India (GoI) has never used the capability of IPI as an instrument of foreign policymaking. The decisions on export destinations and pricing were made by enterprises based on market conditions. Even in the midst of COVID-19 pandemic, where access to vaccines is central to the strategy of containing the pandemic and revival of economic growth, GoI hasn’t so far interfered in the decisions of enterprises in terms of pricing and supply to foreign countries. Whereas some other countries, which have the capability for the development and production of COVID-19 vaccines, are reported to be using this capability as a negotiating tool for eliciting favourable responses from foreign countries. This will put those countries, which do not have the capability for the development and production of medicines and vaccines, in a difficult situation. Therefore, retaining of the “Pharmacy of the world” tag by IPI is critical for global access of affordable medicines.

(Thankom Arun is Professor of Global Development and Accountability, University of Essex. A shorter version of this blog was published by The Conversation on 30 October 2020, Indian pharma is being squeezed – and it’s bad news for drug access in developing countries, https://bit.ly/3edpWE1)