In a first, India’s Dr Reddy’s Labs to supply a generic drug to China’s public hospitals

Amid concerns about rising trade deficit between India and China, Dr Reddy’s has won a tender to supply Olanzapine, a drug used to treat mental ailments.

Dr Reddy's Laboratories Ltd campus in Hyderabad | Photo: Prashanth Vishwanathan | Bloomberg

New Delhi: For the first time, India is set to export generic drugs to China’s state-run hospitals, after pharma major Dr Reddy’s Laboratories Ltd won a national tender for the supply of Olanzapine, a drug used in the treatment of mental ailments.

The move is expected to help New Delhi address the rising concerns over its trade deficit with Beijing.

“In a recent national procurement bid in China, Dr Reddy’s became the first Indian pharmaceutical company to win the national tender for supply of one of the generic drugs (Olanzapine). This is a significant achievement for us and we look forward to bringing more high-quality and affordable medicines to patients in China,” said M.V. Ramana, CEO, Branded Markets (India and Emerging Markets), Dr Reddy’s Laboratories.

Sun Weidong, China’s ambassador to India, also tweeted Friday: “Glad to know that Dr. Reddy’s Lab will get contract for selling generic drugs to China’s public hospitals. Good news for Indian Pharma. China will always welcome high-quality Indian products. Let’s work together for balanced #China-#India bilateral trade.”

Glad to know that Dr. Reddy's Lab will get contract for selling generic drugs to China's public hospitals. Good news for Indian Pharma. China will always welcome high-quality Indian products. Let's work together for balanced #China–#India bilateral trade.

— Sun Weidong (@China_Amb_India) September 27, 2019

The announcement comes just a month before Prime Minister Narendra Modi and Chinese President Xi Jinping are slated to meet in India for an informal summit, a follow-up to their meeting in Wuhan last year.

State of India-China pharma trade

According to pharma lobby group Indian Drug Manufacturers’ Association (IDMA), India imports around $2.7 billion worth of pharmaceutical products from China, and exports just around $400 million worth of goods. China imports medicines worth $20 billion per year from other countries, including the US.

Sources said while Beijing has taken a “landmark” decision by allowing India’s second-largest drug maker to be part of its new bulk drug procurement plan, whether it addresses the concerns of the ballooning trade deficit remains a question as that will depend on the scale.

Trade deficit between India and China reached $57.86 billion in 2018. The issue is expected to come up during the talks between Modi and Xi at the informal summit, which is likely to take place on 11 and 12 October.

“This is good news, but we will have to see if this truly addresses the trade deficit to some extent. However, this does not solve the other issues both countries are facing in terms of other strategic challenges,” said Jayadeva Ranade, a former intelligence officer, and president of the Centre for China Analysis and Strategy.

“The pressure was anyway building up on them to tame the rising cost of public healthcare. We must not forget that China uses economy and trade as a weapon.”

For several years, India has been lobbying actively with Beijing to export medicines, but Beijing imports essential and life-saving drugs mostly from the US. Earlier this month, at the sixth India-China Strategic Economic Dialogue, India had asked China to provide “easy entry and quick clearances” for ‘made in India’ drugs, a source said.

Ashok Madan, executive director of the IDMA, said, “We hope China’s drug regulatory authority NMPA would go for fast-track registrations of Indian formulations which are already approved by USFDA, UK’s MHRA, EU, Japan etc., which are counted among the stringent regulators.

“Also, India has 2,000 plants which are WHO GMP compliant, which can export quality products in Chinese market.”

Strained relationship

Diplomatically, the relationship between China and India has once again come under strain since the scrapping of Article 370, which took away special status from Jammu and Kashmir while bifurcating the state into two union territories.

While the Indian government is viewing this as a positive development before the two leaders are to meet, the differences on other issues remain, sources told ThePrint.

China is also upset with Union Home Minister Amit Shah’s statement in August that India will take back Pakistan-occupied Kashmir as well as Aksai Chin — which India’s eastern neighbour claims as its own territory.