Bulk drug imports from China hit 75% in FY23: Report

Bulk drug imports from China increased from 62 per cent to 75 per cent in the past nine years and India continues to depend on Chinese shipments despite the commissioning of various domestic manufacturing projects under the government's production-linked incentive scheme, a report said. According to a report by Care Ratings, imports of bulk drugs from China have soared in terms of both value as well as volume from 64 and 62 per cent in FY14 to 71 and 75 per cent in FY23, respectively.

In value terms, during FY14 to FY23, the country's total bulk drug imports from China increased at a compounded annual growth rate of about 7 per cent, indicating that the country continues to rely heavily on its northern neighbour for some of the critical key starting materials (KSMs), said Ranjan Sharma, a senior director with Care Ratings. In FY14, the country imported a total of USD 5.2 billion of pharma, of which as much as USD 2.1 billion came in from China. The numbers rose to USD 6.4 billion and USD 2.6 billion, respectively in FY19, and further to USD 7 billion and USD 2.9 billion, respectively in FY21.

The northward movement continued in FY22 to USD 8.5 billion and USD 3.2 billion, respectively. The total inbound shipments marginally declined to USD 7.9 billion in FY23. However, the Chinese share jumped to USD 3.4 billion during that period, said Pulkit Agarwal, another director of the agency. Bulk drugs emerged as the dominant component of imports, contributing 55-60 per cent of India's total pharma imports over the past decade. Simultaneously, bulk drug imports have seen a steady compound annualised growth of about 7 per cent, reflecting the industry's growing reliance on shipments from abroad. Besides, a significant portion of the country's pharma imports, including that of certain formulations, ayush and herbal, and surgical products, are sourced from various countries.

According to V Naveen Kumar, an associate director of the agency, the massive dependence on China is going on in spite of the commissioning of many bulk drug projects under the production-linked incentive (PLI) scheme along with backward integration being undertaken by various domestic pharma companies, which were launched to reduce the dependence on China to an extent.
In FY24, it is estimated that projects worth USD 516 million are expected to be commissioned under the PLI scheme. But the agency believes that despite commissioning of various projects under the PLI scheme, the dependency on bulk drug imports from China will remain high at about 65 per cent for many more summers.

The domestic pharmaceutical industry has demonstrated impressive growth over the years, achieving an annual growth of around 7 per cent during FY14-FY23. As of FY23, the industry's market size has soared to around USD 49.8 billion. Concurrently, the total pharma imports have also exhibited a similar annualized growth of about 7 per cent to USD 7.9 billion in FY23. Of the overall imports, bulk drugs hold a significant share accounting for around 55 per cent, followed closely by formulations at 30-35 per cent, and the rest comprising ayush & herbal and surgical products.

Interestingly, of the total bulk drugs manufactured, almost one-third is exported, and the remaining two-thirds are domestically sold. The country's contribution to the global supply of generic drugs is noteworthy, constituting about 20 per cent of the global supply. The country's prowess in the pharma domain is further solidified by its rankings as the third largest in terms of volume and the 14th largest in terms of value. However, this position as a prominent supplier of generic drugs also entails a substantial demand for bulk drugs.

There are over 3,000 bulk drug manufacturers in the country but a majority of them are small unorganised players contributing 50-60 per cent of the total share. Overall, China accounts for around 43 per cent of the total pharma imports, making it the primary source of bulk drugs for the industry. While imports of other pharma products are diversified across multiple countries, the reliance on China for bulk drugs stands out as a critical point of vulnerability.

The implications of such reliance on China for bulk drugs are far-reaching, particularly for life-saving drugs, where the dependency on key starting materials exceeds 50 per cent, raising legitimate concerns about the availability, cost, and uninterrupted supply of crucial medicines.

The spike is in spite of the domestic industry commissioning a record number of new plants during this period. In FY24 alone, total project completions worth USD 516 million in the drugs and pharmaceuticals industry are expected, which is the highest in the last decade. One of the prime reasons for such a high run rate of project completions is the PLI scheme introduced along with an overall increase in demand for drugs and pharmaceuticals.

During FY24 and FY25, the domestic industry is expected to grow by 7-9 per cent, which may lead to incremental requirements for APIs (active pharmaceutical ingredients), which are expected to be met through enhanced capacity additions under the PLI schemes. As a result, the overall dependency on the import of bulk drugs from China is likely to continue to be high, warns Kumar.

Over the past decade owing to unattractive business prospects and lower returns on investment for KSMs and APIs, the investments in these segments were weak. Simultaneously, on account of the availability of the said raw materials at lower prices from China, the domestic players have relied heavily on import of bulk drugs from China.
The PLI scheme although is supposed to play a critical role to develop KSMs and APIs at competitive prices and reduce dependency, the results of the same have not been very encouraging and the industry believes that combating the pricing war with Chinese players is extremely challenging, Kumar added.