Indian active pharmaceutical ingredient (API) makers clearly see outsourcing business sustain the traction gained by the sector of late, despite the temporary setbacks caused by the COVID-19 outbreak and the subsequent ban on the export of select APIs from the country.

An export restriction on some 13 APIs and their formulations was imposed by Indian authorities in early March as part of their plan to create a “war chest” of essential medicines to deal with the emerging coronavirus threat.

The government was compelled to resort to the export ban in view of potential shortfalls of these APIs following global supply-chain disruptions in the aftermath of the lockdown in some key API hubs in China.

Even though the Directorate General of Foreign Trade (DGFT) reassured the industry that the short-term trade restrictions would not affect exporters who have old orders, contract manufacturing organizations (CMOs) feared they may not be able to honor the contracts and the action is likely to send out wrong signals to potential outsourcers.

Pharmaceuticals Export Promotion Council of India (Pharmexcil), the trade-promoting body, has already approached authorities, urging a review of the decision to facilitate permission based on genuine urgency and commitments. And the ban is currently under review. 

Also, API manufactures argue that such an export ban is unlikely to benefit the country’s emergency stockpile of medicines because these APIs and drug products have been made as per the specific requirement of the importing countries which cannot be diverted and sold to the local market.

While the pressure to lift the ban on exports mounts, the government has once again re-emphasized its commitment to bring down the country’s reliance on Chinese bulk drugs and promote the production of made-in-India APIs.

The ministry of chemicals and fertilizers had set up a high-level task force to draw up a road map as part of its ongoing program to revive the country’s API sector. The task force recommended providing incentives to local companies to help increase production. Besides financial assistance and subsidized power and land to set up factories, construction of “mega parks” with shared facilities such as drug testing labs, power plants, and effluent treatment sites were also suggested.

The long-standing proposal has again come up high on the policy-makers’ agenda given the precarious situation arising out of the COVID-19 emergency.

The initiatives by the government, however, has infused a fresh dose of vigor into the API manufacturing sector steeped in the uncertainties created by the pandemic.

Some reports show that, already, the ministry of environment has issued a notification to all pollution control boards (PCBs) with clear directions for granting permissions and clearances on a fast track for all the bulk drug and intermediates manufacturing facilities so that projects could go on-stream expeditiously.

This will remove a major bottleneck faced by the companies planning to start API factories. Currently, they have to approach multiple agencies administered by various state and central ministries to get environmental clearance. Quite often, the drug makers find the long-hauled process of securing a permission from the PCB as the most cumbersome in establishing an API factory in India. Many of them even shy away from the venture in order to avoid the bureaucratic hassle.

Therefore, such an intervention by the government can go a long way addressing much of their concerns, the API makers say. Even as the speedier environmental clearance quickens the established process, the promised financial incentives for expansion will help companies build better infrastructure. The proposed “pharmaceutical clusters” would also help bring down the production costs, they hope.

As a matter of fact, the API industry started growing at a faster clip since the previous year as more and more companies prefer India to meet their API requirements as a risk mitigation strategy and to ensure a more secure supply chain.

According to the Pharmexcil, India’s exports of APIs and intermediates rose to $3.9 billion in FY19 with a 10.5% increase over the previous year. This category contributed to about 20.3 percent of India’s $19 billion overall pharmaceutical exports in the year.

Sector analysts predict significant growth for quality-compliant API players in the coming days. Many Indian API firms have been continuously improving their quality standards to comply with the requirements of international regulations. At the same time offering cost-competitive products through enhancing R&D activities.

As these salient features continue to keep Indian partners attractive for outsourcing, the government incentives will place them in a better standing to leverage the trend to diversify their supply chains by global players.