Lax industry norms, tough entry process slows pharma exports to China

Currently, pharma shipments make up only 0.3% of the total $13.33 billion exports to China

Exports to China of pharmaceuticals, a sector considered crucial to India’s plans of reducing its trade deficit with its northern neighbour, remain restricted due to lax industry standards, high costs, and regulatory gridlock, according to a latest government report.

After being assured of greater market access by Chinese authorities in March, India had pinned its hopes on boosting its pharma exports from the low $41 million worth of exports registered in 2017-18. But numerous instances of data falsification and inadequate documentation by the industry, and high export costs, delays due to procedural issues are still holding back the sector.

Commissioned by the North East Asia division of the commerce ministry, the report is expected to be the first in a series focusing on various export sectors that are being pushed by the government, specifically with China in mind, a senior official said. 

Currently, pharma shipments make up only 0.3 per cent of the total $13.33 billion exports to China. On the other hand, bilateral trade deficit has continued to balloon, standing at a massive $62.93 billion in 2017-18, up by more than $10 billion from $51.09 billion in the year before. China is India’s fourth-largest export destination, but has only a 4.4 per cent share of total exports by value. 

“This is due to the predominance of raw materials in India’s export basket to China, which are lower down the value chain, are more sensitive to price volatility, and have lower value realisations. We are focusing on other sectors where India has a competitive advantage,” the official said. Significantly, China had last month decided to remove import duties on 28 medicines, including all cancer drugs.

Lax standards lead to questions over efficacy

But Indian firms may still have a hard time entering China’s pharmaceutical market, which is currently the third-largest in the world, estimated at more than $118 billion. With little or no standard operating procedures in place and several cases citing the problem of data traceability, strict scrutiny of shipments from India failed to pass muster several times with Chinese regulators, the report pointed out. “The Chinese side has complained that regulators have found pest infestations and dilapidated basic infrastructure at major manufacturing sites,” another official said.

Quality and safety issues continue to haunt even the top companies, with increasing scrutiny from both domestic and external regulatory agencies becoming the norm. Of the 42 warning letters issued by the US Food and Drug Administration in 2016, nine went to Indian drug manufacturing sites.

“Issue with the efficacy of Made In India drugs, data integrity, and hygiene factors also remains. For example, Avandamet, an Indian-made drug used to treat Type 2 diabetes, was found to contain less than the required amount of the main ingredient, rosiglitazone, rendering it ineffective,” the report pointed out. All these cases have led to delays or rejections of drug applications, but industry may not be the only culprit.

Non-tariff barriers galore in China 

Back in March, Chinese Commerce Minister Zhong Shan had visited New Delhi and recognised pharma as one of the areas to reduce the trade disparity between both nations. He had also assured that the over 240 applications of Indian pharmaceutical exporters that are currently pending with China will be processed soon.

But regulatory backlogs with the China Food and Drug Administration continue to remain high, especially with regards to Indian applications, the report pointed out. Also, recent changes in the review policy have meant that innovative medicines manufactured locally in China are granted priority review.

“Biosimilars from foreign companies remain blocked from the multi-regional clinical trial pathway and can only apply for clinical trials in China after receiving approval in the European Union. This puts foreign biosimilar producers at a disadvantage to domestic firms and can result in additional market access delays of five years or more,” the report said.

The lack of transparency in the process as well as few patent term adjustment provisions to compensate for regulatory review and patent office delays have led Indian manufacturers giving the country a miss.

Ease of doing business remains an issue

A comparison between procedural practices in India and other similar economies showed that the number of documents needed for securing a license to export pharma products is much higher in India than other countries. “There is a need to further streamline the documentation process and reduce the number to the barest minimum. To further improve India’s ease of doing business, multiple compliance requirements, both statutory and administrative, need to be reduced and judicial reforms with time limits for disposal of litigations need to be introduced,” the report argued.

Non-clearance of pollution certificates have also effectively led to a ban on active pharmaceutical ingredients in some states such as Gujarat.