Covid-19 outbreak could be Indian pharma’s big opportunity in Africa

Pushing pharma exports.
Pushing pharma exports.
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The Covid-19 global pandemic has brought to the fore the intricate interdependencies that exist within the international pharmaceutical market.

China, the epicentre of the global outbreak, is also the world’s largest supplier of active pharmaceutical ingredients (APIs), also known as bulk drugs. India, which is a leading exporter of generic drugs across the world, depends on China for more than two-thirds of its bulk drug needs.

Estimates indicate that India supplies up to 50% of the United States’ generic drug needs, and vulnerabilities caused by Covid-19 have caused disruptions across global pharmaceutical supply chains. Perhaps this is also a good opportunity for India to reassess dependencies and plan for the future.

According to the government of India’s own estimates, India ranks third worldwide for pharmaceutical production by volume and 13th by value. It accounts for about 10% of the world’s production by volume and 1.5% by value. This apparent discrepancy points towards the relatively lower price of Indian pharmaceutical products, and the high demand they enjoy in the global market. A major supplier of affordable low-price drugs across the world, India’s role as the “pharmacy of the world” is well acknowledged by experts.

The Africa prescription

A joint analysis recently conducted by the African Export-Import (EXIM) Bank and the Export-Import (EXIM) Bank of India shows that commercial trade between Africa and India has expanded more than eight-fold (pdf) from $7.2 billion in 2001 to $59.9 billion in 2017. India is currently Africa’s fourth-largest national trading partner. India accounted for more than 6.4% of Africa’s total trade in 2017, considerably higher than 2.7% in 2001. However, Africa still accounts for about 8% of India’s total trade, similar to its share in 2001.

Pharmaceuticals are a major component of India’s trade expansion strategy, particularly with the country’s stated objective of a wider diversification of the export profile in terms of both products as well as destinations. Along with other sunrise industrial products like electronics, India’s export push focuses on pharmaceuticals as global demand expands.

Indian pharmaceutical industry aspires to become the world’s largest supplier of drugs by 2030. India aims to increase its industry revenue to $120 billion-$130 billion by 2030 from current revenue of $38 billion at a compound annual growth rate (CAGR) of 11-12%.

Pharmaceuticals are a major component of India’s trade expansion strategy, particularly with the country’s stated objective of diversification of exports in terms of both products as well as destinations.

India’s historical role in supporting a large number of relatively poorer nations—particularly in Africa to reduce their disease burden and deal with HIV, tuberculosis, and malaria through low-cost, generic medicines is widely acknowledged. Pharmaceutical products dominate India’s exports to Africa and along with petroleum products, account for about 40% of total Indian exports (pdf) in African markets.

Given an increasing buy-in for domestic production within African political leadership and an expanding pharmaceutical market driven by the improved purchasing power of governments and population, an analysis of long-term trends of pharmaceutical exports from India to African countries has been lacking.

The import-substitution resulting from a focus on domestic production may shift the composition of exports to Africa in favour of bulk drugs away from formulations or finished drugs, a category where India has traditionally dominated China.

Percentage of Indian Exports into Major African Pharmaceutical Markets (2017)
Columns highlighted in red colour indicate Chinese dominance over India in pharma exports to African countries. Meanwhile, thosein green show Indian dominance over China in pharma exports.

In 2017, India fared better than China in terms of formulations, across the 10 largest export markets of pharmaceuticals in Africa namely South Africa, Egypt, Morocco, Kenya, Algeria, Ethiopia, Tunisia, Sudan, Tanzania, and Nigeria. However, with regards to bulk drugs, China exported more to five of these 10 markets (Table 1). With Covid-19 bringing to the forefront of India’s blind spots as a global pharma giant when it comes to generics, India might want to reduce its dependency on Chinese bulk drugs for strategic reasons.

Also, with the ongoing trade war with the US, China has offered a major push to its pharmaceutical sector to diversify and produce generics and biosimilars. This move to aggressively replace innovation drugs with homemade follow-on drugs may have an implication for export markets like Africa as well.

The key is scale

India’s need to produce its own bulk drugs can perfectly align with its ambition to become a bulk drug exporter to markets like Africa. Given this context, India should consider embracing economies of scale and increasing the production of bulk drugs to aggressively compete with the Chinese in the Africa market.

Our country-specific analysis tracking exports of bulk drugs and formulations to the ten biggest pharmaceutical markets in Africa over the last three years can inform country-specific policy measures for the government as well as the private sector.

India’s Future in Major Pharmaceutical Markets in Africa
India: A future pharma major.

Our analysis shows that in the three biggest pharmaceutical markets—South Africa, Algeria,  Egypt, and India has room for tremendous improvement. South Africa, a country with a thriving domestic pharmaceutical industry, where India serves as a source of 28.3% of imports of finished drugs, the contribution to bulk drug imports is a meagre 3%.

Even as India strives to expand its finished drugs exports to Africa, the fact remains that in none of these markets is India’s share of bulk drugs more than 24%. Given India’s dependency on Chinese bulk drugs, perhaps it is time for India to help wean itself and its African trade partners off Chinese bulk drugs as well, going beyond the mere short-term economic benefits.

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