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Drugmakers cry ‘monopoly’ as Modi govt picks 1 firm each to make over 20 key raw materials

PLI scheme is supposed to end India’s dependence on Chinese imports, but drug lobby says firms could end up dependent on one company for a molecule, increasing patients’ bills.

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New Delhi: India’s weapon to fight its dependence on Chinese medicine imports — the Production-Linked Incentive scheme — may end up creating a monopoly of just a few drugmakers, and the pharma lobby has expressed its concern about this to the Narendra Modi government.

The PLI scheme launched by the government in July provides monetary incentives to increase the production of 41 critical raw materials, including active pharmaceutical ingredients (APIs), intermediates and key starting materials, distributed in four categories, that are required for manufacturing final formulations (medicines) in India.

The scheme was envisioned after supply chains were disrupted by the Covid-19 outbreak in China, sparking fears of drug shortages in India. Indian drugmakers import around 70 per cent of their total bulk drug requirements from China.

It allowed for up to four companies to be granted approval to produce any raw material. However, government data shows that for more than 20 products, only one firm each has been selected. This means that the entire monetary benefit for a particular molecule will go to just one company — it will be eligible for a 10 or 20 per cent incentive from the government on the incremental sales, which will end up killing off other manufacturers who make the same molecule. This will make all drugmakers dependent on just one manufacturer for that molecule.

For instance, Telangana-based Honour Labs has been chosen as the only company to produce popular cardiac drug Valsartan, HIV drug Lopinavir and epilepsy drug Levetiracetam. Meanwhile, Mumbai-based RMC Performance Chemicals has been awarded the production of blood thinner Aspirin.

ThePrint approached to S. Aparna, secretary of the Department of Pharmaceuticals (DoP), for an official comment through text messages, but received no response till the time of publishing this report.

Also read: Pharma industry warns of Covid drug shortages as raw materials prices surge 200%

Drugmakers’ concerns

The country’s largest body of pharma companies, the Indian Drug Manufacturers Association (IDMA), flagged its concerns to the Department of Pharmaceuticals in a presentation sent to S. Aparna, on 16 April.

The association represents over 1,000 pharma companies, including Torrent Pharmaceuticals, Lupin, Cipla, Sun Pharma and Jubilant Life Sciences.

“In target segment IV, 22 eligible products that are granted approval, 15 products are such in which the approval is granted to only one manufacturer and in one product though there are two manufacturers, they belong to the same group of companies (Oxcarbazepine),” IDMA president Mahesh Doshi wrote in the letter, accessed by ThePrint.

In another letter sent by the IDMA to Chemicals and Fertilisers Minister Mansukh Mandaviya on 12 May, Doshi said the PLI scheme had been “rigged”.

“The scheme was properly designed with a guideline of maximum four manufacturers to be granted approval, but it seems that some companies have taken the advantage of the loophole by applying for the entire capacity and quoting the lowest price to grab the entire benefit. By doing this, the PLI scheme has got rigged,” the 12 May letter, also accessed by ThePrint, said.

“The objective of the scheme was to encourage domestic manufacturers of API and become atmanirbhar, but with these allocations, all the formulation companies will become nirbhar on only one manufacturer,” it claimed.

The letter concluded that in time, “there will be only one manufacturer for one molecule, which will create a monopoly situation. This will make the medicines expensive in the hands of the patient”.

One allottee each for many molecules

An analysis of the list of awardees, announced by the government from time to time, including in March and April this year, shows that in several categories, only one company has been allotted a molecule.

The Netherlands-based Centrient Pharmaceuticals has been chosen as the only company to produce Atorvastatin — a crucial molecule for the production of statin medication that can prevent heart diseases.

Karnataka-based Natural Biogenex has been chosen to produce steroid medications dexamethasone and betamethasone.

In fact, the four raw-materials under the priority ‘Category I’ — crucial for the Indian pharmaceutical industry because the country is totally import-dependent on China for these — have been awarded to just three drugmakers.

In the case of the antibiotic Penicillin G, Hyderabad-based Aurobindo Pharma has received approval for producing almost the entire quantity —15,000 metric tonnes. The government-owned Karnataka Antibiotics and Pharmaceuticals is supposed to produce 1,000 MT.

Aurobindo Pharma has also been selected as the only company for manufacturing 7-Aminocephalosporanic Acid (7-ACA), which is a key intermediate in the process to make several medicines, and Erythromycin Thiocyanate, which is used for manufacturing anti-infective drugs. 

Also read: Budget gives 200% boost to pharma sector as govt looks to curb dependence on China

Govt says processes were followed, due approvals taken

The DoP responded to the IDMA’s presentation, sent with the 16 April letter, on 23 April with its own letter, also accessed by ThePrint.

The government told the lobby group that the “appraisal of individual applications was done scrupulously by the project management agency and the same were recommended by the designated empowered committee following due procedure”.

“The selection of the applicants was finally done with due approval of the honourable minister (chemicals and fertilisers),” the DoP said.

Benefits under the PLI scheme

The issue is gaining traction because under the Modi government’s PLI scheme, the monetary incentives up for grabs are huge.

The objective of the scheme is to encourage domestic production of the raw materials by setting up greenfield plants, with a total outlay amount of Rs 6,940 crore between 2020-21 to 2029-30. Commercial production at these plants is expected to commence from 1 April 2023.

The Ministry of Chemicals and Fertilisers said in a statement on 13 April: “In total, 215 applications were received for the 36 products spread across the four target segments. Out of total, 174 applications were received for 23 eligible products under target segment IV (other chemical synthesis based KSMs/drug intermediates/API).”

It added: “With this, all the 215 applications received have been considered and a total of 47 applications (excluding two successful applications withdrawn subsequently) with committed investment of Rs 5,366.35 crore have been approved by the government under the PLI scheme for active pharmaceutical ingredients (APIs).”

The ministry has re-invited applications for 11 molecules, for which either it did not receive any entries or companies backed out.

(Edited by Shreyas Sharma)

Also read: Production-Linked Incentives for 10 sectors show Modi govt’s intent, but need to be temporary


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