Govt pins hope on Hyderabad’s pharma city to break China’s grip on industry
HYDERABAD: On the edge of Hyderabad, a vast patch of arid shrubland the size of about 14,000 football fields is becoming a testing ground for a model that could help wean the world off its dependence on Chinese drug ingredients.
This empty site of Hyderabad’s pharma city, marked out by scuffed sign posts and a rubble-strewn access road is expected to attract about $8.4 billion and employ 560,000 people in hundreds of sprawling plants. Within two years of land being allotted, it will be rolling out vital raw ingredients for medicines such as penicillin, ibuprofen, and anti-malarials that make their way around the world, according to officials.
At the heart of the endeavour is India’s race to wrest control from China, which supplies almost 70% of the active pharmaceutical ingredients (APIs), or the bread-and-butter chemicals, that go into the medicines produced by the Indian pharmaceutical industry.
It’s a vast project that shows how governments are growing increasingly concerned about China’s stranglehold over drug supplies and the challenges they face in loosening it.
India’s ability to secure not just its own drug supply but that of Africa, the Americas and Europe is at stake, as it supplies most of the generics sold in American pharmacies and hundreds of countries globally.
India’s reliance on China to keep raw material supply going is increasingly fraught, because the two countries often engage in skirmishes along the border and China has in recent years also increasingly used its trade advantages against other countries during disagreements on political matters.
Prime Minister Narendra Modi has eagerly promoted his country as the “pharmacy of the world”, but the glaring dependence of India’s $42 billion drug manufacturing industry, much of which is headquartered in Hyderabad, was exposed at the start of the covid-19 pandemic. In early 2020, China locked down Hubei province, its own medicine manufacturing heartland, as the coronavirus spread outside Wuhan. That caused missed shipments and shortages, with API prices surging as much as 100% in India and around the world.
“Supply chains got completely disrupted, China shut down,” recalled Samina Hamied, the vice president of Cipla Ltd, one of India’s largest drugmakers. “We had to deal with distorted supply chains on one end, and, obviously, on the ground craziness on the other,” Hamied said.
China accounted for 28% of the $236.7 billion global API market in 2018, according to data compiled by Dongguan Securities Co.
US lawmakers have recently introduced a batch of legislation to protect the country’s pharmaceutical supply chains from China. “It’s time to bolster onshore manufacturing of pharmaceuticals to ensure Americans never have to rely on China for lifesaving medicine,” Senator Tom Cotton, an Arkansas Republican, said last week.
Multiple Indian efforts to redress the South Asian country’s reliance have sprouted from the Hyderabad facility. The state government’s plan is the farthest along with 19,000 acres already acquired. Companies including Sun Pharmaceutical Industries Ltd., Dr. Reddy’s Laboratories Ltd., and Zydus Lifesciences Ltd. have already said they will consider building plants there and officials said about 450 Indian and international companies have expressed interest.
Hyderabad is a sprawling metropolis that has been at the forefront of attempts to transform the country into a scientific research hub.
The planned pharma city, set about 22 miles south of Hyderabad’s airport, will focus on bulk drugs and promises to ram through India’s treacle-like web of red tape around environmental clearance and land-acquisition by providing drugmakers plots that have ready-made approvals for the heavily polluting industry.
The man leading the initiative is Shakthi Nagappan, a slight, bespectacled 36-year-old government employee. Working out of an administrative office in central Hyderabad, Nagappan spouts the jargon of a startup founder. The walls of his side office are decorated with inspirational quotes and canvas-print portraits of figures such as Barack Obama and Elon Musk.
Over cups of sugary tea, Nagappan sketches out how he wants the massive project to emulate the success of Genome
Valley, a research and development cluster set up two decades ago to the north of Hyderabad, which now houses labs for companies such as Novartis AG. The upcoming pharma city to the south will compete with China’s ability to drive down costs, Nagappan said.
The main idea is to help Indian pharma companies cut costs and become more competitive on price by giving them land where environmental clearances are sorted, waste disposal facilities already built, and other infrastructure ready.
“When we started planning pharma city, we started looking at various regions, including China,” he said.
“Within pharma city we’ve brought in elements that can bring down capital and operating costs for the industries in a range of anywhere between 25% and 30%.”