Why is China surpassing India almost in all the verticals of Pharmaceutical industry?

To make India a major hub for Pharmaceutical outsourcing of all types, the country has all the required ingredients. India has indeed the potential to be a contender for global supremacy, in these fast growing sectors. However, despite all these, China is racing ahead to effectively avail these global opportunities and in that process fast distancing itself from India, widening the competitive performance gap between the two countries.Why is it happening? In this article, I would like to focus on some of these areas to assess the progress made so far, in a comparative yardstick, by these two countries and the key factors responsible for such growing disparity.China is ahead of India in country ranking both in value and growth terms:

In global ranking, China is currently the seventh largest pharmaceutical market and is expected to be the fifth largest market by 2010 and the third largest by 2020. The Chinese pharmaceuticals market is expected to grow by around 15% per annum at least in the next five years.

China is also ahead of India in healthcare coverage of its population:

In China, out of a population of 1.3 billion, 250 million are covered by insurance, another 250 million are partially covered by insurance and balance 800 million are not covered by any insurance. Against these statistics of China, in India total number of population who have some sort of healthcare financing coverage will be around 200 million and penetration of health insurance will be just around 3.5% of the population. India is fast losing grounds to China mainly due to better response to healthcare infrastructure and regulatory challenges by China.

Strong commitment of the Chinese Government in globalization process:

A very high level of commitment of the Chinese Government to make China a regional hub of pharmaceutical R&D and contract research and manufacturing (CRAM) activities within next seven to ten years is paying rich dividends.

Department of Pharmaceuticals (DoP) of the Government of India (GoI)recently expressed its intention to make India a R&D hub in not too distant future. This cannot be achieved just by good intent of investments of couple of million U.S$ through public Private Partnership (PPP), as announced by the DoP recently through the media . A strong commitment of the GoI to hasten regulatory reform processes with visble action, will be the deciding success factor. IPR regime in the pharmaceutical industry has been put in place, but in half measure. While product patent is in place, regulatory data protection (RDP) both against disclosure and unfair commercial use is yet to see the light of the day.

Regulatory data protection and better infrastructural facilities make China a better destination for Clinical Trials:

In China, the local law provides for 6 years regulatory data protection (RDP). Drug Registration Regulation (DRR) September 2007 of China is based on common technical data standards and allows only use of published data during protection period. In preclinical testing and animal experimentation, China is far ahead of India, because of regulatory constraints in our country. The report from ‘Biospectrum, Asia edition, Resource Guide 2009’, the number of Clinical trials being conducted in China was 961 against 834 in India. As a result, towards clinical trials China is attracting more foreign direct investments (FDI) than India.

‘Country Attractiveness Index’ for clinical trials:

‘A.T. Kearney’ developed a ‘Country Attractiveness Index’ (CAI) for clinical trials for pharmaceutical industry executives to make more informed decision regarding offshore clinical trials. As per this study, the CAI of China is 6.10 against 5.58 of India.

China is ahead of India in pharmaceutical patent filing:

In patent filing also China seems to ahead of India. Based on WIPO PCT applications, it has been reported that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India as against 8.4% located in China. This will give an Indication how China is making rapid strides in R&D areas.

China will replace India as country with largest pharmaceutical exports, by 2010:

Both India and China used to be the preferred pharmaceutical outsourcing destinations across the globe. Though pharmaceuticals exports of India are currently ahead of China, PriceWaterhouseCoopers (PWC) reports that China may reverse this trend by 2010, establishing itself as the largest country in the world for Pharmaceutical exports. In API exports, China already overtook India in 2007. The report titled, “The Changing dynamics of pharmaceutical outsourcing in Asia” indicates that in 2007 against API exports of U.S$ 1.7 billion of India, China clocked a figure of US$ 5.6 billion. In 2010, China is expected to widen this gap further with API exports of U.S$ 9.9 billion against India’s U.S$ 2.8 billion.

Brain drain from India to China:

Korn/Ferry International has reported recently that more and more Indian talent is being pulled to China to fill key roles, especially in the API sector, signalling ‘brain drain’ from India to China.

Where India is regarded as a preferred destination:

However, India is globally considered as a more mature venue for chemistry related drug-discovery activities than China. Probably, because of this reason companies like, Ranbaxy, Aurigene, Advinus, Piramals and Jubilant Organosys could enter into long-term collaborative arrangements with Multinational Companies (MNC) to discover and develop New Chemical Entities (NCEs).

As I said earlier and as reported by Korn/Ferry that China’s infrastructure in the pharmaceutical space is better than India, primarily due to firm commitment of the Chinese government to accelerate reform measures to fetch maximum benefits of globalization process in the country.

Government of India seems to have fallen short of this commitment and is embracing more protectionists policies, which have been proved counterproductive almost all over the world to bring forth rapid progress to the nation and make the industries globally competitive.

Just a wishful thinking sans prudent regulatory policy reforms processes will helplessly make us see the gap between the Chinese and Indian pharmaceutical industry, fast widening.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

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