With an intention of working and prospering together, way back in the sixties, Indian Prime minister Pandit Jawaharlal Nehru coined the slogan, ‘Hindi-Chini bhai bhai’. Though there was a planned strategy behind this slogan, India failed to reap any benefits out of it. On the contrary, 1962 went down in history books as a painful memory for India, as we went to war with China. Five decades since, India’s defeat continues to colour every diplomatic exchange between the two countries. In almost every major field China is still a ‘big brother’ for India. A few months back, Indian Prime Minister, Dr Manmohan Singh confessed that India is falling behind China in science as well.
However, not just science, there is a major imbalance between the trade of these two countries. Again, during the recently held bilateral talks with China in Cambodia, the Indian PM specifically demanded more access for the Indian pharmaceutical sector into the Chinese market.
Transparent trade
This is not the first time that India has requested China to work towards balancing the trade equation. Currently besides being a largest API manufacturer, along with India, China is also the cheapest manufacturer of medicines in the world. There is a lot of scope for India and China to increase pharma trade. However, the agony is that despite repeated requests, China seems to have turned a deaf ear to its neighbour’s concerns.
Pravin Herlekar, CMD, Omkar Chemicals |
“It’s over two years since China has been ignoring India’s demand for liberal market access. Strangely, the ground reality goes far beyond what meets the eye. Indian pharma companies continue to face serious stumbling blocks in the process of official registration and in getting Chinese companies to buy our services and products. In fact Indian pharma firms are quite cagey of the cutthroat pricing in China and are encountering a series impediments in meeting the system’s requirements, which is largely monopolised by state-run health institutions. The Chinese economy is largely state-controlled and the prices of various inputs are not market determined,” says Pravin Herlekar, CMD, Omkar Chemicals.
He adds, “Indian pharma companies have been thwarted by regulatory hurdles. Registering new drugs can take three to four years in China, as compared to 10 months in India. Moreover, China’s regulators often compel Indian pharma companies to conduct clinical trials within the country, which is quite ominous. What India requires is that the process should to be curtailed to one year and not more to help build conducive bilateral trade ties between two countries.”
According to reports, China and India have set up a panel to examine ways to balance bilateral trade. But it offers little towards putting an end to the widening trade imbalance between the Asian neighbours as the panel has done very little to fix the issue.
Dr Ashok Kumar, President – Centre for R&D, Ipca Laboratories, says, “The Indian pharma industry is fraught with several non-tariff barriers that need to be done away with so that it can make a significant impact in the Chinese market.” While adding to the issues raised by Herlekar, Kumar says, “Process of company registration, procurement of drug license, long customs procedure, banking and foreign exchange remittance procedures, lack of IP standards and lack of transparency in information about local markets are among the major non-tariff barriers the Indian pharma companies face today while trying to enter the Chinese market. The process of product and company registration and procuring import drug license are expensive and time consuming. It may take 18 months to three years to procure an import drug licence.”
On the clinical trial side Kumar says that since China is not a member of the Organisation of Economic Co-operation and Development (OECD) yet, acceptability of clinical trials’ data from other countries is non-existent.
Dr P V Appaji, Director General, Pharmexcil |
Dr P V Appaji, Director General, Pharmexcil, says, “We want Chinese Government to reduce approval processing time for the Indian pharma companies. In India, approval processing may not last for more than a few months whereas, in China it takes a few years to get all the required approvals for the Indian pharma companies. Moreover, in China, Indian pharma companies are charged heavily whereas, charges for their Chinese counterparts are nominal. Such disparity should be addressed as soon as possible.” He adds, “Both the Indian and the Chinese Governments are working towards balancing the pharma trade. However, despite these efforts, things are not improving as expected by the Indian pharma industry. The Indian Government is very proactive in assisting foreign pharma companies. I think, even other countries should extend same facilities to the Indian pharma industry.”
Indian pharma: a threat to Chinese pharma?
China is well aware of the fact that in Asia, as far as the pharma sector is concerned, India would be its biggest competitor. As both India and China offer the cheapest and quality medicines, entry of India into the Chinese market would obviously be considered as a threat by Chinese pharma industry. However, according to industry experts, this approach is not just surprising but also selfish. China enjoys seeing ‘Made in China’ brands in India, however, it does not seem to extend the same courtesy to Indian counterparts.
S V Krishna Prasad CEO & Director, Cito Healthcare |
“There are two angles to this case. One is the positive. The Chinese pharma companies could always look at complementing the growth factors by aligning with the Indian efforts and thereby becoming one of the strongest forces outside of US and EU to run the pharma manufacturing and healthcare industry. The flip side is that any one in business with the same or similar product/ service basket could become a competitor and hence would be regarded as a threat for sure,” opines S V Krishna Prasad, CEO and Director, Cito Healthcare.
He adds, “In terms of language proficiency, scientific manpower, pharma quality control and assurance systems, regulatory affairs management system, India stands out. But certain amount of lack of dedication and easy going attitude is making the hard working Chinese score over Indians when it matters.”
On a positive note, Kumar says, “Many Chinese companies are aiming to go overseas for their next growth opportunities and in a bid to build brand awareness and a trusted image, continued partnerships with Indian companies would offer them better insight into the workings of the international pharma markets and access to advanced technology and resources.” However Kumar also points out that given the monopoly that the domestic Chinese manufacturers currently hold over the pharma market in their country, the entry of Indian pharma companies would obviously be perceived as a threat.
According to Herlekar, as per government statistics, China has emerged as India’s largest source of imports, moving up from being the seventh largest in just over a decade by overtaking the US, Germany and Japan.
He explains, “For example, Indian pharma companies are leading suppliers of low-cost generic drugs to countries such as the US, UK and Germany, but this does not impact China in any way. Some blame the cutthroat pricing in China and a cumbersome system of state-run health institutions for this. For China, another concern is the potential greater market opening in India.”
Herlekar asserts, “It’s high time that New Delhi seriously looks at encouraging investments like Chinese companies setting up manufacturing bases in India and Indian companies contributing and investing in manufacturing in China.”
Hesitant Chinese pharma?
Time and again, the Indian Government has taken up issues related to pharma bilateral trade with Chinese Government. Various organisations representing Indian pharma companies, have too tried to make space for Indian pharma industry in the Chinese market. However, somehow, the Chinese Government seems reluctant to open gates for Indian pharma industry. Is it due to pressure from the Chinese pharma industry?
Kumar informs, “Comparatively, India is currently able to make almost all types of dosage forms with a total of more than 60,000 medicines. Attracted by their capabilities in formulation, a number of major pharma companies have collaborated with Indian companies on co development of generic drugs or licensed the sales rights to them.”
He adds, “In conclusion, China’s current strengths reside in its better industrial infrastructure, large-scale manufacturing capabilities of raw materials, and relatively low labour and material costs whereas India’s current strengths include its stronger capabilities in process development, drug formulation, dosage form manufacturing, and marketing in well regulated markets, and a closer association will be of great help to Chinese pharma companies to go up in the value chain.”
According to Herlekar, the growth of the pharma market in China has added newer complexity and also provided opportunity in every facet of the pharma business. Understanding Chinese legislations and regulations for pricing and distribution is of paramount importance for the Indian companies to gain a foothold in the market.
“Any strategy to enter the Chinese market should be undertaken with the understanding that the government will be involved directly or indirectly at any time. While change will be constant in the Chinese pharma market, Indian companies need to have a firm grasp of the culture, business opportunity and risk before foraying into the region. Cumulatively, the answer lies in actively engaging both China’s Central Government and the local leaders to make sure that the portfolio of pharmaceuticals being offered and the pricing strategy adopted complies with how the local leadership believes it can best bridge the gap between policy mandates from Beijing,” says Herlekar.
According to Kumar, since new drug licenses are difficult to acquire, acquisitions or partnerships would be the pragmatic approach for Indian companies to adopt trying to enter the Chinese drug market. Gaining better access to the market may also call for setting up local manufacturing ability in the country itself.
Kumar cautions, “The pharma industry in China offers many avenues for Indian drug manufacturers. It remains to be seen whether they can achieve the level of phenomenal success companies like General Motors have managed to achieve in automobile segment. However, companies entering the Chinese drug market may very well face a backlash from Chinese drug manufacturers if they do not tread carefully enough.”
Advantage for aggressive
Globally, China is known for its aggressive policies. Every country has the right to safeguard interests of its indigenous industries. However, It should be a give and take. As far as trade between India and China is concerned, India has predominantly been a giver. This disparity should end. There is nothing wrong if India also gets aggressive to achieve its targets. The dove approach will not work when the Chinese dragon is breathing fire.