With the advent of COVID-19 Indian Pharma companies are focused on enhancing the domestic capacity of the Active Pharmaceutical Ingredients (API) production system. Companies are incentivized to do this because of price hikes, USA’s decision to open the export and free trade of drugs, and the impact on the industry due to the pandemic and the lockdowns imposed because of it. India is one of the largest providers of generic drugs and vaccines across the world. Hence, to get the best result in this situation the government is strengthening India’s position in the industry by revamping its policies for a supportive regulatory set-up.
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Enhancing Self-Reliance and Carving out Chinese Raw Materials
Due to problems with raw material or API supply from China, Indian stockpiles are highly affected. According to India’s Drug Regulatory Authority, 57 APIs including some crucial drugs like antibiotics, steroids, vitamins are in limited stock (2). This is causing major Supply and storage disruptions. Therefore, to boost the Indian pharma companies, the Government has approved the investment budget for the Production Linked Incentive scheme and Promotion of Bulk Drug Parks. This is a part of the Indian government’s incentives for domestic industries under the “Atma Nirbhar Bharat” vision.
Under the first scheme, PLI, any pharma company registered in India with a minimum net worth of 30% of the proposed investment are eligible to apply for the incentive scheme. It allows only greenfield projects (3).
The second scheme is to set up three bulk drug parks in India. The grant-in-aid can be up to 90% of the project cost. This investment prioritizes fermentation-based products. 53 bulk drugs will be produced under this scheme (4).
Price Hike of Medicines in India
Due to the inaccessibility of API from China, the price of some essential medicines like antibiotics, vitamins, penicillin, and drugs related to the cardiac disorder, thyroid, cancer, and diabetes has risen. The government with assistance from The Indian Council of Medical Research (ICMR) is endeavoring to control this (5). These incentives will change the status of Indian pharma companies.
Impact of USA’s Restriction on Foreign Medicines
The US government’s decision to buy essential medicines from American companies instead of foreign countries will have a minimal impact on India. “While Indian pharmaceutical firms that have substantial manufacturing and R&D presence in the US will continue supplying, irrespective of the current order, it would also be difficult to move generic manufacturing to the US due to cost differential.”(6) The Indian Government has downplayed the effect by trying to benefit from this strategically. The impact of this move on the Indian pharma companies will be evident only after the negotiation of Free Trade.
Effect on Cash Flow of Indian Pharma Companies
“The COVID-19 had minimal impact on the Indian pharmaceutical industry, which posted a stable growth of 8 per cent during FY20 thanks to a domestic overall growth of 12.7 per cent due to seasonal factors and stable growth in chronic therapies and a rebound of 14.2 per cent growth in the second quarter of that year. ICRA’s study of 21 leading companies said sample companies registered a domestic growth of 9.2 per cent in second quarter and 4.8 per cent growth in the first quarter of last financial year. The second quarter of last year had witnessed outbreak of many diseases in many parts, aiding the growth of the anti-infective segment” (7).
Since the majority of clinics were closed during the lockdown and many surgeries were postponed, there was a sharp fall in the sales of drugs related to the acute-segment. However, there was a sharp rise in the sales of drugs related to chronic therapies. Hence, pharma companies catering to the chronic portfolio were not affected as prescription growth is yet to come down the line (8). Overall, the Indian pharma industry growth rate is expected to be stable at8-11% CAGR in FY 2020-23.
Communication and Work-Force Challenge
During the lockdown process many pharma companies are facing challenges in communication. This due to a lack of stable internet connection and cyber security measures taken by different countries.
Due to the lack of availability of the workforce, the production process has also slowed down. Many companies have constructed incentive plans for maintaining workflow, however, social distancing, transport issues, and other norms have vastly affected the laborers.
The employees at Indian pharma companies are doing better than those working in other industries. Even though the hiring process and the increment process are kept on hold, the pharma industry is doing better than the others in the pandemic and hence it can keep most of its workforce (9).
Anzen Exports’ blog posts are based just on our research from cited websites. To be best informed, we advise consulting a doctor about an ingredient or medicine prior to taking it.
- Financial Express
Website – https://www.financialexpress.com/industry/why-indian-pharma-industry-needs-policy-revamp-despite-being-worlds-largest-provider-of-generic-drugs/2059650/https://www.financialexpress.com/industry/why-indian-pharma-industry-needs-policy-revamp-despite-being-worlds-largest-provider-of-generic-drugs/2059650/
Article – Why Indian pharma industry needs policy revamp despite being world’s largest provider of generic drugs.
Date – 19th Aug 2020.
- Pharma Tutor
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- Live Mint
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- Express Pharma
Website – https://www.expresspharma.in/latest-updates/govt-announces-guidelines-to-set-up-parks-for-bulk-drugs-and-med-devices/#:~:text=Salient%20features%20of%20the%20schemes%20are%3A&text=6%2C940%20crores.,in%20case%20of%20other%20States.
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- The Print
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- The Economic Times
Website – https://economictimes.indiatimes.com/news/economy/foreign-trade/centre-may-take-up-trumps-foreign-medicines-restrictions-during-fta-talks-downplays-impact/articleshow/77425914.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Article – Centre may take up Trump’s foreign medicines restrictions during FTA talks, downplays impact.
Date – 8th Aug 2020.
- Business Today
Website – https://www.businesstoday.in/sectors/pharma/domestic-pharmaceutical-industry-to-grow-at-8-11-percent-cagr-in-fy-2020-23-icra/story/412250.html#:~:text=The%20COVID%2D19%20had%20minimal,second%20quarter%20of%20that%20year.
Article – Domestic pharmaceutical industry to grow at 8-11% CAGR in FY 2020-23: ICRA
Date – 6th Aug 2020
- Financial Express
Article – Pharma earnings to reflect full COVID-19 impact in Apr-Jun quarter; 4 pharma stocks to gain up to 16%
Date – 7th July 2020
- The Economic Times
Article – Pharmaceutical industry expected to see positive growth this year: Charu Sehgal, Deloitte India
Date – 9th May 2020