InvestorQ : Why are Indian pharma companies trying to reduce their API dependence on China?
Riya Dwivedi made post

Why are Indian pharma companies trying to reduce their API dependence on China?

shrinidhi Rajan answered.
11 months ago

Active pharmaceutical ingredients or APIs are critical inputs that go into the manufacture of medicines. For long, China was the world’s leading supplier of APIs but now Indian companies are not taking chances after the supply chain disruptions during the pandemic. Now, Indian drug companies are looking at local API manufacturers to end their reliance on China after relations between the two countries soured after the Galwan clashes.

India is the pharmacy capital of the world due to its massive production capacities of generic drugs and vaccines. However, China still accounts for 50% of its API needs. Many leading pharma companies like Cadila Healthcare, Cipla, Sun Pharma and ‎Biocon have confirmed that they were aggressively working towards reducing the dependence on Chinese manufacturers for APIs and farm out orders to domestic companies.

Disruption in supplies from China during the COVID-19 pandemic was a major reason most Indian pharma company had to virtually scramble for ingredients to make important drugs sold worldwide. Companies are de-risking by choice to reduce their supply chain linkages with China. Most pharma companies would also prefer to integrate backward into APIs to exercise better control over the entire pharma value chain, at least for key API molecules.

In addition, these pharma companies are eyeing reliable local vendors who can assure consistency of supply and quality as well as competitive prices. Companies are now evaluating their performance internally based on parameters like API re-imagination, working with local suppliers and percentage of revenue paid out to China.