INDIAN DRUGS BREAK CHINA WALL
In Dying to Survive, a film that released in China on July 5—and stormed to the top of the Chinese box office—the unlikely protagonist is a box of Veenat, an Indian generic drug used by leukaemia patients. The film tells the story of the exorbitant price of western cancer drugs, and the true account of a Chinese leukaemia patient who began to source Veenat for one-twentieth the cost, and then made it available to thousands of Chinese. He went to jail for his efforts, but was pardoned after huge public support.
That a film on such an emotive issue was allowed to be screened is no accident. Indeed, the film ends with declaring how the Xi Jinping government was committed to reducing the price of drugs and reforming the system.
The new pharma reforms, the foreign ministry said on July 9, would “expand imports and slash tariffs on anti-cancer medicines” and “usher in great opportunities for India”. The announcement follows a May directive from China’s State Council saying it had reduced tariffs on 28 medicines, including cancer drugs.
China says it will announce more India-specific tariffs in due course. “The Chinese chamber of commerce for import and export of medicine and health products is formulating specific measures for deepening bilateral cooperation in medicine trade between China and India and for opening the market for Indian drugs,” the foreign ministry told india today. According to its figures, of the $6.27 billion bilateral trade in pharma—the bulk of which is Indian imports of Chinese Active
Pharmaceutical Ingredients—Indian exports of medicines account for only $890 million.
The movement on pharma comes after Prime Minister Narendra Modi mentioned pharmaceuticals as one of the three commodities—the others being sugar and rice—that could bridge the $50 billion trade imbalance. China’s main motivation, however, could be its ongoing trade war with the US, which has prompted Beijing to slash tariffs with many of its neighbours. Both India and China cut import tariffs on a range of products starting July 1, following the fourth round of negotiations under the Asia Pacific Trade Agreement. China said it would reduce tariffs on 8,549 items, including chemical and agricultural products, while India would do likewise for 3,142 products.
The tariffs reduction, however, is just the first step. Indeed, it is non-tariff barriers that have been the biggest complaint for Indian pharma companies, such as inordinate delays in obtaining licences and registering their drugs for sale in the Chinese market. The State Council reforms mentioned these procedures would be simplified, but that is easier said than done. For one, western pharma majors remain hugely influential in China, and more importantly, Chinese hospitals and doctors, who are poorly paid, count on drug sales as a major source of income.
However, the Chinese government is also under pressure and needs to assuage public anger over the cost of drugs. So desperate are Chinese patients that in Beijing alone, there are at least four companies that organise medical tourism packages for patients to travel to India to buy generics. China has begun to subsidise the cost of western drugs through state insurance, which would keep both doctors and patients happy and buy Beijing some time until it develops its own generics. But what is encouraging for Chinese patients—and Indian pharma—is that Xi has begun reforming the hospital system, starting with raising the salaries of doctors and not allowing them to directly benefit from drug sales. If successful, this could finally help Indian drugs scale the great wall.
Tariff reduction is just the first step. It is nontariff barriers that have been the bigger challenge