A recent paper by the Research and Information System for Developing Countries highlights major gains in export of drugs and pharma products. It notes a greater focus on the value-added segmentsformulations. The share of this category has increased from about one-third in early 1990s to two-thirds in 2007-08. And to keep their high volume-low value markets safe, the largest of Indian generic firms have concurrently entered the highly regulated and at the same time highly profitable markets of Western Europe and North America. In contrast, smaller firms have largely focused on the less regulated and high volume-low value markets of Asia and Africa.
The share of export earnings of the largest firms has grown from about one-fifth in early nineties to about two-thirds by 2007-08, while that of the industry as a whole has increased from less than 10% in 1990-91 to 35% in 2007-08. The study also noted that the Indian pharma sector has a growing trade deficit, mainly because of the larger imports of intermediates and bulk drugs. This may indicate a change in strategies to favour import of raw materials and intermediates to process them into formulations. A reason for this may be the abolition of the ratio parameter linking production of intermediates and bulk drugs to production of formulations. Also, the expansion of exports has been restrained by factors like growing competition from China, anti-counterfeit drives and application of non-tariff barriers.
The expansion of formulations exports is contrary to expectation as the industry was believed to be focusing more on the export of intermediates and bulk drugs. Surprisingly, there seems to be no sharp rise in imports of formulations. This is because the patent law has limited the number of patented medicines, which has reduced the scope of import of formulations. However, there has been no substantial change in the structure of imports. As much as 90% of imports are that of intermediates and bulk drugs, and most of these are from China, which at times supply 60-70% of the requirement of intermediates. Consequently, India has a huge trade deficit with China in intermediates and bulk drugs. Such an excessive dependence on China puts the industry at risk in case of any disruptions in supply.