India to manufacture Penicillin G again: why it was stopped

INDIA WILL start manufacturing the common antibiotic Penicillin G later this year, three decades after the country’s last plant shut down, Health minister Mansukh Mandaviya announced last week.

This is one of the successes of the government’s Production Linked Incentive scheme, launched during the pandemic to promote domestic manufacturing — the scheme gives incentives to companies on incremental sales of products manufactured in domestic units.

Penicillin G is the active pharmaceutical ingredient (API) in several antibiotics.

Why did penicillin manufacturing stop in India?

Penicillin G, just like many other APIS that India manufactured, was phased out of production because of subsidy-driven cheaper Chinese products flooding the market. The last plant to stop production of the antibiotic was of Torrent Pharma in Ahmedabad.

“There were at least five companies, including Torrent, which manufactured Penicillin G in the country in the 90s. But the prices of the Chinese products were so low that the Indian manufacturers went out of business. The huge plants had to be sold for scrap,” said an industry expert on condition of anonymity.

Another industry expert, CM Gulhati, said: “There were nearly 2,000 API manufacturers in India in the early 90s. But there were nearly 10,000 units that manufactured formulations. And, for them, the cheaper Chinese products made more sense, especially at a time when the country’s economy was opening up and customs rules were relaxed. The Drug Prices Control Order — which capped prices of essential medicines — also ensured that more companies went for cheaper imported products.”

Citing the example of paracetamol, he said India sold it for around Rs 800 per kg at the time, but China brought the prices

down to nearly Rs 400 per kg, making it unviable for Indian manufacturers. He added: “Now, there are only a couple of hundred API manufacturers in the country. And, many of them produce it for their own products and not for sale.”

The production of Penicillin will be restarted by mid-2024 by Hyderabad-based

Aurobindo Pharma.

Why did it take so long to restart?

One, the need wasn’t felt. “While the industry and government were aware of the decline in production of APIS in India, since cheaper alternatives were available in the globalised world, there wasn’t much focus on restarting production within the country. The supply chain disruption caused during the pandemic was a wake-up call that we needed to be self-reliant,” said Dr Viranchi Shah, president of Indian Drug Manufacturers Association. This led to the government launching the PLI scheme to support manufacturing within the country.

Two, there are huge initial costs. “Manufacturing an API, especially a fermented one like Penicillin G, is cost-intensive. There is huge capital expenditure involved in setting up a factory, with the company being able to break even only after a couple of years,” said the first expert.

Third, China is already a well-established supplier. “Our neighbour has scaled up manufacturing several-folds in the last three decades. Competing with the prices would require investments in bigger facilities,” said Shah.

What has been the impact of PLI schemes?

The first expert and Shah both agreed that there has been a decline in imports of APIS since the launch of the PLI scheme in March 2020. “There has been a decline in the imports of APIS. Take the example of paracetamol — before the pandemic, we were importing two-thirds of the API needed, now that volume has halved,” said Shah.

The other expert, however, added: “We still import 90% of our API for antibiotics and nearly 70% of all APIS. It will take time for API manufacturing to pick up.”

The scheme envisages a support of 20% for first four years, 15% for fifth year, and 5% for sixth year on eligible sales of fermentation-based bulk drugs such as antibiotics and enzymes, and hormones such as insulin. These are more difficult to manufacture, with fermentation used to cultivate micro-organisms for the synthesis of the drugs.

For chemically synthesised drugs, the incentive will be at the rate of 10% for six years on eligible sales.

The PLI scheme for pharmaceutical ingredients and medical devices seeks that applicants will commit a certain amount prescribed by the government as investment to build capacities in these areas.