Home / Industry / Manufacturing /  No major impact on API import ban in US

As news came in that the US government has made it mandatory for Active Pharmaceutical Ingredients (APIs) to be manufactured locally for government procurement, the Pharmaceutical Export Promotion Council of India (Pharmexcil) allayed fears on Friday, saying that Indian manufacturers should not panic yet.

The US government’s move has raised eyebrows as it is expected to impact major Indian exporters. Industry experts said that Indian companies are not allowed to quote for government contracts in the US as India has not signed the World Trade Organisation’s (WTO) government procurement agreement. However, the move will affect companies that have subsidiaries in the US and which source APIs from their parent companies in India.

Bulk drugs or APIs are the active raw materials used in a drug that gives it the therapeutic effect. The decision is likely to impact the affordability of generic drugs in the US.

“There is no need of panic. The US FDA move is meant for those who supply through government tenders and it will have least impact for Indian exporters," said Dr P.V. Appaji. director general of Pharmexcil. “We have approached the commerce ministry to alert them on the development," Appaji said, adding the council is yet to know about the percentage of medicines sold to the government system in the US.

“There are different patterns in states in the US. Somewhere government will purchase while government will provide insurance in other states. So, yet to know about government procurement figures," said a Mumbai-based analyst with one of the ‘Big Four’ accounting firms.

China and India are the largest suppliers of drug ingredients (or APIs) to the US market. Most of the generic or copy cat drugs sold in the US are using APIs from India or China. Recently, a Chinese pharmaceutical supplier, Zhejiang Hisun Pharmaceutical Co., was banned from sending some products to the US as it was the target of a “significant number" of drugmaker complaints about the potency and purity of its ingredients, Bloomberg reported last month.

Drug manufacturers lodged at least 61 complaints against Zhejiang Hisun, a maker of key components for drugs ranging from cholesterol to cancer treatments, between 2012 and 2014, according to a US Food and Drug Administration warning letter sent to the company on 31 December, the Bloomberg report said.

Nearly 3.8 billion of the total 4.3 billion prescriptions dispensed in the US in 2014 were filled using generic drugs. This means that generic drugs now account for nearly nine out of every 10 (88%) prescriptions dispensed in the US, according to the Generic Pharmaceutical Association’s ‘The 2015 Generic Drug Savings in the US report’. Generic drugs were responsible for $254 billion in health system savings in 2014, bringing the total savings over the last 10 years to $1.68 trillion, it added.

On the other hand, bulk drug manufacturers have already pressed the panic button. According to lobby group Bulk Drug Manufacturers Association general secretary R.K. Agrawal, the move may affect at least 40% of India’s bulk drug exports to the US.

“We are exporting about $2-3 billion worth of API to the US. Out of that about 40% are for government purchase of medicine. Hence, the impact on Indian companies having US subsidiaries will be higher," Agrawal added. At present, a majority of Indian companies have their subsidiaries in the US or have strong manufacturing facilities there through local acquisitions. “This ruling is completely against the WTO agreement and hence India should raise its voice against the move," Agrawal said.

According to a report by the Hindu, commerce minister Nirmala Sitharaman has said that India will take up the issue with the US. About 80% of the bulk drug requirement in the US is met by India and China at present.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout