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India’s Pharmaceutical Industry Booms Amidst Global Shift Away from Chinese Manufacturing

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India is the world’s top manufacturer of generic drugs, which contain the same ingredients as their more expensive, original versions and are sold once patents expire. However, the country heavily depends on China for critical chemicals used in drug production. This includes active pharmaceutical ingredient (API) and other chemical services, which account for around half of India’s $42 billion pharma sector. As Western drugmakers seek to limit their reliance on Chinese contractors, they are increasingly looking at Indian suppliers as an alternative. This shift could mark a significant change in industry dynamics.

Drugmakers that work with contract development and manufacturing organizations (CDMOs) that produce drugs for clinical trials or early-stage manufacturing are seeing a greater interest in India than ever before, according to four of the country’s largest CDMOs. Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Lores told Reuters they had seen increased requests from major Western pharma companies this year to reevaluate their supply chains to reduce dependency on China.

That trend is partly fueled by a growing sense of urgency to limit China’s influence over the global supply chain due to concerns about lax regulatory standards and geopolitical tensions. The US-China trade war and supply chain disruptions during the COVID-19 pandemic have also helped drive the shift.

As a result, some Western pharmaceutical firms are now asking their CDMOs to move work to India from China, according to interviews with ten industry executives and experts. Some are also focusing on building their capacity to manufacture APIs in-house. This is an ample opportunity for India, which can compete with China’s manufacturing prices because of its lower labor costs.

However, reducing dependence on China will challenge Indian pharma companies. Many have built large sales and profit profiles based on US product demand. And the US remains a crucial market, buying 37% of India’s pharma exports in the past three years. The US also gives Indian drugmakers access to intellectual property protections that protect their profit margins.

As a result, some of the biggest global pharma companies — including Dr Reddy’s Laboratories, Cipla, Aurobindo Pharma, and Sun Pharmaceutical Industries — are focusing on improving their manufacturing capabilities in the country. They will do so, in part, by leveraging recent government incentives such as production subsidies. But they will also have to improve infrastructure and speed up approval processes to match their Chinese counterparts’ scale, scope, and pace. If they fail to do so, their US ambitions may prove to be out of reach.


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India’s Pharmaceutical Industry Booms Amidst Global Shift Away from Chinese Manufacturing

India is the world’s top manufacturer of generic drugs, which contain the same ingredients as their more expensive, original...
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