Pandemics, supply disruptions could turn into security threats

Originating in China in the 1850s, spread by the fleas during a mining boom in Yunnan, and moving to India and Hong Kong, the bubonic plague claimed at least 15 million lives and perhaps catalysed the Parthay and Taiping rebellion. India faced the most substantial casualties - some 10 million - and the epidemic was used as an excuse for repressive policies that sparked some revolt against the British. The pandemic was considered virulent up until 1960.

As the coronavirus advances through China and jolts the rest of the world, the pharmaceutical industry is on vigil over the security of its global supply chain. Over the past decade, China has established its numero uno position in the global market for active pharmaceutical ingredients (API) , the elementary units found in each drug. In 2018-19, China accounted for 67.56 per cent of total imports of bulk drugs and drug intermediates into India at about USD 2,405.42 million. They consist of the fermentation process-based drugs such as crucial antibiotics -- penicillin, amoxicillin, ampicillin, tetracycline, cephalosporins -- and essential vitamin and hormonal pills. 

Why did India fall behind?

The 1970s was momentous for the growth of the Indian pharmaceutical industry. To help compete with multinational companies, the government revised its patent law to focus on process and shortened the life of the patents. Through the 1990s, Indian chemists were able to reverse engineer manufacturing processes, hold domestic prices and compete to eventually hold 20% of the market share in exports. China, however, became a formidable competitor and overtook India in API manufacturing as Chinese companies enjoyed subsidised infrastructure and low – interest credit. In the 1980s, India was one of the largest producers of semi-synthetic penicillin in the world; The Chinese strategically reduced the cost of Penicillin G by over 80 percent which led to the closure of some of the largest bulk drug plants for antibiotics like Gujarat Lyka Organics and Kopran. Over time, India shifted focus to formulated drugs and turned to imports for API. Penicillin, a revolutionary antibiotic discovered 80 years ago, is now in scarce supply. 

 Chokepoint with COVID -19 

The coronavirus (COVID-19) has triggered alarm bells as the Chinese lockdown to quarantine disrupts supply chains across industries. Countries like India, the US, Nigeria and the EU are admitting the dangers of allowing China a monopoly in the manufacturing of essential raw materials. The Federation of Indian Chambers of Commerce and Industry, FICCI, has recommended incentivising manufacturers to tackle the disruptions and position India as an alternative source to China. The disruption has already increased prices of basic drugs in India like Paracetamol by 40 percent and some antibiotics by 70 percent. In a country, where more than 75 percent of the out of pocket expenditure for healthcare by people is for medicine, this could deeply impact the healthcare choices available to the poor. 

Risk and opportunity 

The increasing overdependence of the Indian pharmaceutical industry on imported APIs has been a concern of many regulators. For example, when China cracked down on high polluting industries prior to the Beijing Olympics, it led to a 25% hike in imported API prices. The biggest challenge to Indian manufacturers to produce APIs is low capacity utilisation which is pegged at 30-40 percent compared to their Chinese counterparts at 65 percent. Studies show that India can competitively produce APIs with a 3% variance for labour cost, but Chinese exporters have the capacity to obtain low-interest credit and invest in high capacity infrastructure. These two factors create the cost arbitrage because Chinese plants can be set up in one year whereas, in India, it is most likely to take 3-4 years. 

A strategic initiative to consider would be to revive public sector drug manufacturers and further their capacity to produce API and formulations.  Indian PSUs like Hindustan Antibiotics Limited, IDPL used to play a key role in ensuring uninterrupted supply of basic raw material but withered due to the lack of state support. 

Environmental challenges and drug resistance 

The pharmaceutical industry emits 48,550 kilograms of carbon-dioxide-equivalent (CO2e) per million dollars,  which is about 55 percent more than the automotive industry. Significant amounts of pharmaceutical waste are entering waterways near drug manufacturing facilities resulting in the development of multidrug pathogens. In November 2016, German scientists found that all of the specimens collected from sites around the bulk drug manufacturing facilities in Hyderabad and nearby villages, known as the Patancheru-Bollaram zone, India, were contaminated with antimicrobials. They also found 95% contained worryingly high levels of bacteria and fungi resistant to antibiotic drugs. These discharges have polluted river sediment surface, ground and drinking water. 


The government has to provide more support to establish an ecosystem conducive to API manufacturing. There must be more use of Bioremediation, a technology that can treat environmental pollution using microbes, plants or their by-products. It helps in removing xenobiotic and recalcitrant pollutants through physical and chemical methods. The government also could absorb the differential price to boost capacity utilisation of Indian plants. 

In today's globalised society, emerging diseases and their pandemic potential pose a great national security threat. Preparedness, not prevention is the solution to this escalating problem.