Madhurima Nundy, Associate Fellow, Institute of Chinese Studies.

The pharmaceutical sectors in India and China have evolved from their nascent phases in the 1970s to become mature industries over the last three decades that compete effectively at the global level. They are also attractive investment destinations for many multi-nationals.

If one were to compare the sector in both countries, there are many similarities in terms of technical capacities, production know-how and regulatory knowledge, but there are significant differences too that delineate the strengths and weaknesses. India had developed its domestic pharmaceutical industry much earlier than China and hence, began with a considerable advantage, but this was squandered through inadequate policy support, and short-sighted attitudes of the industry leaders.  China on the other hand has invested in building its research capacities and education systems in biology, molecular biology and life sciences, but their market is dominated by multinationals. This is now gradually undergoing change with focus shifting to ‘Make in China’ medicines that will be a means of expanding its generic drug industry and shifting its reliance from multinationals. While Indian pharmaceutical companies are more focused on complex drug formulations and in the process have reduced their production of Active Pharmaceutical Ingredient (API) production, China presently is the world’s largest API producer and over 50 per cent of India’s APIs or bulk drugs are imported from China. There has been a growing concern over this dependency on China. As part of agreements and cooperation during President Xi’s visit to India in 2014, MoUs were signed that aimed at facilitating drug markets and cooperation on drug regulations. This will eventually improve access for Indian companies who have found it tedious to enter the Chinese market in the past.

While comparing the pharmaceutical sector in India and China, the discussions, by and large, centre on profits generated through exports and sales, investments made by multi-nationals and potential steps required to exploit market opportunities in order to promote growth and be in an advantageous position in the global market. The overemphasis on the workings of pharmaceutical markets takes away the focus from what this growth and advancement means for its own population. Have these advancements benefited its citizens and made medicines freely available and accessible to all? This is the paradox, because despite the considerable development the sector has made in both countries, it fails to reach out to those in need at home. Unpredictability of illness and cost of care impoverishes thousands annually and cost of medicine constitutes a large proportion of the out-of-pocket expenditure in both China and India.

It is true that the pharmaceutical sector is extremely complex, but policies must address a whole lot of issues in the larger public interest. These would include, among many things –

1. Building capacities for research and development (R and D):  India has witnessed stagnation in R and D investments by domestic companies. The two companies, Dr Reddy’s and Ranbaxy, who had started with major investments in R and D, have brought down their investments due to high failure rates of innovations. In contrast, companies in China have invested millions to develop capabilities of research centres that are able to function independently. India definitely needs to encourage investments for innovations and rejuvenate its public sector undertakings for this purpose.  This leads to the point that, it is important to prioritise R and D of medicines that are essential to address public health needs. Much of the development of medicines, at present, is focused on profits and not public health needs.
2. Strengthening the generic drug industry: The goal of ‘Make in India’ and ‘Make in China’ needs to be real. There is a realisation that both countries have to beef up their generic industries and policies have to reorient towards decreasing the dependency on imports and improve domestic production. China has just about started strengthening its generic industry. India needs a much more vibrant generic industry so as to boost its API production along with production of drug formulations.

• Negotiating with an aggressive product patent regime: The nature of the patent regime is critical to the development of the generic industry. Indian courts have generally favoured the manufacturing of generic drugs. They have not allowed multi-nationals to patent insignificant novelties in the medicines. India’s landmark judgement against Novartis seeking patent protection is case and point. In a welcome move, in 2012, India was also able to issue its first compulsory licence to a domestic company to produce a cancer drug that was patent protected. China too has made amendments in its patent laws to allow its drug companies to manufacture generic versions of patented medicines during public health emergencies and in the larger public interest.

1. Pricing of medicines: Both India and China have moved towards a market-based pricing which is extremely problematic and in the long run can lead to inflationary costs. Governments must be vigilant and monitor prices periodically especially those listed as essential medicines so as to avoid any disruptive practices.
2. Strengthening health service systems for distribution of drugs: This calls for investing more in public health in order to strengthen health service systems that must have the wherewithal to deliver medicines at affordable costs or for free if they are part of the essential medicine list. Government mechanisms and public sector health centres/hospitals must be in place to procure and distribute drugs.
3. Addressing corruption at all levels: Again, government must be vigilant as the pharmaceutical market is driven by narrow profit-maximising goals. Chinese government was able to take GlaxoSmithKline to task for bribing doctors but, is finding it difficult to reverse its policy of incentivising doctors from profits made from pharmaceutical sales, which has led to corrupt practices in the public sector.

Instead of focusing on threats and viewing each other as opponents, both countries must leverage their strengths and work towards strengthening their weaker aspects. There is an urgent need to improve domestic production by strengthening public sector undertakings/state-owned enterprises for manufacturing drugs and enhancing research capacities, as well as strengthen the public health delivery system by investing more in it.

Finally, there is a lot that India and China can do with regard to low and middle income countries that have insufficient capacities to manufacture drugs and are in need of cheap medicines for their people. India has been instrumental in scaling up access to low-cost antiretroviral medicines to those seeking treatment for HIV in the African continent. Both countries have the potential to further expand their exports to countries in need of low-cost drugs by prioritising easily treatable diseases and averting large number of deaths. This would definitely make a difference at the global level and help build strong relations between nations.