Trade tensions between Washington, D.C. and Beijing continue, but have not yet impacted the pharmaceutical products traded between the two countries. However, if the punitive tariffs continue and pharma is impacted, a third global player could step in to fill the void in both countries.
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Trade tensions between Washington, D.C. and Beijing continue, but have not yet impacted the pharmaceutical products traded between the two countries. However, if the punitive tariffs continue and pharma is impacted, a third global player could step in to fill the void in both countries.
Data and analytics specialist GlobalData predicts that the ongoing trade issues between the U.S. and China could provide the opportunity for India-based pharma companies to step up. The India industry has a significant presence in the United States but is “still in the stage of exploring the Chinese market,” GlobalData said. The U.S. has been the second biggest supplier to China with 15% of the overall drug formulation imports, whereas India’s contribution was only .1%, GlobalData reported. If the Indian sector can increase its influence in both countries, GlobalData forecasts the Indian pharmaceutical market could increase from nearly $30.8 billion in 2018 to more than $38.3 billion by 2022.
Pointing to the Pharmaceuticals Export Promotion Council of India, the U.S. accounted for more than 30% of total Indian pharma exports. In 2018, those imports were worth about $5.82 billion. That was the highest among all countries, the council said, according to GlobalData.
Prashant Khadayate, a pharma analyst at GlobalData, said the Sino-American tensions can be seen as a “grace period” where both the U.S. and China could be seeking other alternatives. The Indian pharma industry, Khadayate said, “can leverage this opportunity to become the partner of choice through strengthening its position in the U.S. market and re-thinking on a long-term strategy for the China market.” India is the largest manufacturer and supplier of generic drugs globally. Eight out of the top 20 global generic drug companies are located out of India. The country is ranked third by volume and 10th by value in pharmaceutical exports, the report shows. Khadayate said India has a strong position in the U.S., particularly when it comes to importing drug formulations. However, Khadayate noted that India’s imports to China, including drug formulations and bulk drugs are “negligible.”
Khadayate went on to add that the United States is cautious of the fact that any disruption related to the supply of bulk drugs from China due to a trade war would have a drastic impact on the pharmaceutical supply chain in the U.S. China is equally dependent on the U.S. for the drug formulations import, he said.
“The Indian pharma industry can take advantage of this situation as it has proven abilities in both drug formulations and the bulk drugs category,” Khadayate said. “Indian players will need to improve their bulk drugs manufacturing capabilities in order to offer more competitive pricing and to gain a stronghold in the U.S.”
Last year, China loosened some restrictions that could benefit India’s industry. In May 2018, China announced the removal of import duties on 28 medicines, including cancer medicines, which provided an opening in the market to Indian pharmaceutical products, GlobalData said. While those restrictions were loosened, GlobalData noted at the time that the Indian industry “exhibited subdued enthusiasm” due to the challenges that had been involved gaining entry into the Chinese market. Regulatory challenges in terms of lengthy clinical trials and delayed approvals were cited as major barriers, GlobalData said.
While the drug supply has not yet been impacted, the White House has raised red flags over venture capital coming out of China. Washington has been increasingly focused on Chinese investment in the United States, particularly in the areas involving intellectual property and biotech. Earlier this year, Congress almost unanimously passed an updated version of the review powers of the Committee on Foreign Investment in the United States. But the law that sought to protect U.S. business interests has led to the termination of a number of deals with China-based companies. For example, in April, the White House ordered the Chinese majority owner of Massachusetts-based healthcare company PatientsLikeMe to sell his stake. The increased scrutiny of the Trump administration has caused a significant decline in Chinese investment in U.S. companies. Over the past two years, direct investment from China into U.S. companies has declined about 90%.
