Strengthening India’s Pharma Sector As National Security Imperative
The COVID-19 pandemic, while primarily a humanitarian and a health crisis, has had a wider and far-reaching impact if we look beyond the first order consequences. The point is well illustrated by the emergence of healthcare as a national security imperative. Moreover, the Government of India has recognised the importance of industries such as pharmaceuticals and medical devices to be self-reliant. And this is reflected in the two production-linked incentive (PLI) schemes that have been launched over the last year under the umbrella of Aatmanirbhar Bharat Abhiyaan.
As the world grappled with the coronavirus outbreak in the early months of 2020, countries across the world were forced to close their borders which brought global supply chains to a standstill. This exposed Indian pharma’s dependence on the import of key inputs such as active pharmaceutical ingredients (APIs) and key starting materials (KSMs) which hampered the production and supply of medicines and healthcare equipment. Additionally, it also disrupted the fight against COVID-19 with shortages in essential drugs as well as masks and personal protective equipment (PPE) for the frontline warriors, and later in the production of vaccines.
Recognising the need for strengthening domestic manufacturing and insulating the supply chain against global disruption, the Government of India announced the Aatmanirbhar Bharat Abhiyaan (self-reliant India programme) in May 2020. For the pharmaceuticals and medical devices industry, the shift in thinking took the form of a PLI scheme implemented in 2020 which was further expanded earlier this year.
This is a welcome move that balances short-term interests with long-term goals of consolidating India’s position as the “pharmacy of the world”. If we peel the layers and delve deeper, the PLI scheme offers the following potential benefits:
Create a resilient domestic supply chain: Aligned with the immediate priority of reducing dependence on imported inputs, the PLI scheme offers pharma companies incentives to set up greenfield projects for manufacturing APIs and KSMs. This, combined with a separate scheme for establishing bulk drug parks will make Indian pharma self-sufficient. More importantly, integrating the supply chain with the larger pharma ecosystem will provide end-to-end pharmaceutical development capabilities. This will help create a resilient and shock-proof supply chain while enhancing production capacities across the board.
Enable Indian pharma move up the value chain: Indian pharma is largely known as a generics powerhouse and most Indian pharma companies operate at the lower end of the global pharma value chain. As a result, the industry has remained stuck in a loop for decades, despite the potential, manufacturing capabilities and talent. The PLI scheme identifies this issue and expressly provides incentives to promote the development and manufacture of complex drugs, biopharmaceuticals as well as drugs in niche therapies and high-value categories.
Promote innovation and R&D: In response to industry feedback, PLI 2.0 covers a number of key expenditures for eligible investments. These are specifically geared towards encouraging indigenous innovation among Indian pharma companies. These include R&D expenditure, technology transfer, new product registrations as well as the construction of factories and infrastructure encompassing new plants, machinery, and equipment costs. Given the lifecycle of innovation in the pharma sector, PLI 2.0 will help Indian pharma in the medium to long term.
Make healthcare affordable and accessible: The National Health Policy announced in 2017 envisioned universal healthcare coverage for all Indians by delivering quality healthcare. Indigenisation of the supply chain and encouraging innovations and R&D in India as envisaged by the PLI scheme can go a long way in achieving that vision by making healthcare affordable and accessible.
The story of India’s pharmaceutical industry has been written and rewritten several times in the 75 years since Independence. The journey from being fully reliant on MNCs for drugs and medicines to becoming the largest manufacturer of generic drugs has been a result of forward-looking policies and the spirit of Indian entrepreneurship.
The PLI scheme is a step in the right direction in fulfilling India’s domestic healthcare needs in the immediate to medium term by developing a resilient supply chain and creating an integrated pharma ecosystem. In doing so it will help project India as a global champion in pharma manufacturing. And the way it is designed, it also rewards the enterprise of companies that have the potential to be world-beaters and are willing to invest in India's long-term future. All things considered, this scheme could very well be the biggest turning point in the Indian pharmaceutical industry’s history.
