Dumping of non-pharma grade ingredients: Impact on the Indian pharma industry

By Manoj Dinne Pragya Gupta

As the West rethinks its reliance on China for key pharma ingredients, India appears as a natural alternative offering compelling value for relocation of the pharmaceutical supply chains. This paradigm shift will position India as a key player in shaping the future landscape of the global pharmaceutical industry.

The Indian pharmaceutical industry has been at the brunt of narrative warfare by the powerful big pharma lobby, which has tried to paint Indian medicines as of poor quality.

Such narrations have been repeatedly proven to be incorrect, nations after nations have thanked India for providing inexpensive high quality medicines that saved billions of lives globally.

Now a new threat to the Indian pharma industry in terms of a surge of imports of Non-Pharmacopoeia (technical-grade) products, being imported at prices that are below sustainable levels, especially from China, e.g. IPA. (Iso-Propyl Alcohol)

Understanding the Non-Pharma Grade IPA: A Clear Demarcation
Technical/Industrial (non-pharmaceutical) grade IPA as the name suggests, is specifically produced to be used in commercial and industrial applications such as degreasing of heavy machinery, surface cleaners, ink & coatings manufacturing etc. This IPA falls under the category of Non-Pharmacopoeia grade due to its lower impurity standards.

The influx of Non-pharma grade products from China not only jeopardizes the quality of India’s pharmaceutical output but also undermines the resilience of our pharmaceutical supply chain.

Interestingly, the USA is also alarmed at the threat to its own pharmaceutical supply-chain, due to over-reliance on China as a supplier. The USA has repeatedly stated that it wants to have India as an alternate source of its medicines. However, in its recent analysis it has found that the Indian pharma industry itself is highly dependent on Chinese raw material supplies, one of which is Isopropyl Alcohol or IPA.

The Government of India is cognizant of the opportunities and threats to the Indian pharma industry. It has taken a series of steps to strengthen the industry, including mandating compliance with international quality standards and GMP for, both, pharma corporations and MSMEs to fortify India’s position as the pharma capital of the world.

However, post-COVID, India has become the dumping ground for this Non-Pharma grade IPA, which saw an unprecedented surge in imports.

Precedence of Penicillin G
This is not the first time China has disrupted the Indian market dynamics by flooding the market with its surplus exports. In 2011, China played with our Penicillin-G industry, first getting our local industry, including Public Sector Enterprises shut down by dumping cheap Penicillin-G, and then substantially increasing the prices when our production capacity was decimated. The same is now happening with IPA.

In 2020, when India needed IPA during Wuhan COVID, China, a major supplier of IPA restricted the supply of this critical input in desperate times as shown in the figure below. However, the IPA imports from China spiked to 64% in FY 23 immediately as COVID-19 eased out.

It is clear that India’s pharma industry, and the healthcare of Indian citizens, cannot be dependent on the vagaries of the whims and fancies of China, which also has a penchant for weaponizing anything and everything, including allegedly viruses such as the Wuhan COVID virus.

Non-Pharma Grade IPA Contaminating Indian Pharma Supply Chain
What is also critical to note is that most of the IPA that is being dumped by China now is of Non-Indian Pharmacopoeia grade (non-IP grade). And this is the crux of the matter.

As per Vikas Biyani, former Assistant Commissioner, Maharashtra FDA, Chemical Industry Digest, the Indian pharmaceutical sector accounts for roughly 70-75% of the total IPA consumed in India.

The paradox here is that only about 12 % of this IPA consumed by the Pharma industry is actually pharmacopeia grade that meets Indian and other Pharmacopeia Standards. The rest 88% is non-pharmacopoeia grade. This is absolutely unacceptable. Our pharmaceutical supply chain is getting contaminated with non-pharma grade IPA coming through imports and this needs to be stopped immediately.

The non-pharmacopoeia grade IPA used in the pharmaceutical industry fails to meet various critical parameters covered in various Pharmacopeia Standards, such as UV Absorbance Test,

Benzene & R Substance, Non-Volatile Residue / Substance, Acidity or Alkalinity, etc. The failure to meet these parameters eventually leads to the usage of substandard material and ultimately compromises the quality of the drug.

Further solvents such as IPA, Toluene, Acetone, etc. are imported in bulk and stored in a commingled fashion in shore tanks located at Kandla, Vizag and such other ports in India. Traceability of source, which is one of the important parameters carefully pursued by the Pharma industry is completely missing when it comes to commingled storage of solvents including IPA.

The possibility of contamination and ingress of impurities at various handling stages starting from the load port to the eventual destination at the customers’ end continues to remain very high.

Such contamination threatens the sanctity of our USD 65 billion pharmaceutical industry. Also, the surplus imports of IPA weaken the supply-chain resilience of the domestic industry, exposing it to being weaponized during times of conflict.

Way ahead
To address such a situation, India may consider adopting a two-pronged strategy on an urgent basis. (a) India needs to rapidly expand its own IPA production capacity and (b) India needs to stop Non-Pharma Grade IPA from being dumped into India and degrading our industry.

Looking at the issue of building India’s own IPA capacity, it is to be noted that demand for IPA is expected to grow at a CAGR of 6-8% between now and FY30 when India aims to become a USD 10 trillion economy. Such growth necessitates an exponential addition of domestic production capacities. In the nick of time, the Indian private sector seems to be rising to this challenge and an estimated INR 1400 cr has been lined up for the capacity additions.

Unfortunately, this INR 1400 cr investment is also under threat due to the unrestrained dumping of IPA by Chinese companies which appear to be aimed at destroying India’s domestic capacity and deterring any future investments.

This brings us to the second point of the need to stop the imports of non-pharma grade IPA into India. Such a step feeds into not only protecting the quality of medicines coming from our domestic pharmaceutical industry but will also act as a trade remedy and provide the domestic industry with some respite from injuries due to dumping.

In addition, it will protect the investments that are committed to increasing the production of IPA in the country and strengthen the supply-chain resilience for all downstream industries of IPA, including Pharma.

This usage of substandard grade IPA in Pharmaceuticals will lead to severe repercussions as it risks the nation’s health and deters access to quality medicines.

Notably, while the industry is legally bound to utilise pharmacopeia-grade IPA, its dependence on imports stems from the ready availability of significantly cheaper, industrial-grade imported IPA. Being a vital ingredient, the country cannot afford substandard IPA as it will be detrimental to not only patient safety but also its global prestige as the ‘world’s pharmacy.’

Challenges and Solutions: Navigating the Path to Self-Reliance
To mitigate the impending crisis, the Government must enforce that only pharmacopeia-grade chemicals are used in our pharmaceutical industry, as the industry is currently undermined by industrial-grade, dumped from China.

In April 2023, the Directorate General of Trade Remedies (DGTR) implemented a safeguard quantitative restriction (SGQR) on Isopropyl Alcohol (IPA) imports. This trade remedy, aimed at regulating the quantity of imports during a specified period, resulted in a significant reduction in IPA imports from China.

The absence of SGQR will lead to the resumption of Non-Pharma IPA dumping from China, which will not only hamper India’s vision of self-reliance but will also engender a trickle-down effect in the broader pharma ecosystem, where patients’ health is at stake. Hence, it calls for a swift re-evaluation of the extension of trade remedies such as SGQR or the implementation of an interim anti-dumping duty against China to ensure a level playing field for the long-term interest of the country.

Additionally, it needs to strengthen on-ground monitoring through collaboration with established local/regional drug inspection networks, and port entry points to ensure that the technical grade chemicals do not get commingled and reach the pharmaceutical industry to ensure legal compliance with pharmacopeia grade IPA usage.

A combination of these trade interventions is pivotal not only for bolstering India’s self-reliance but also for positioning the country as a preferred alternative to China in the global pharmaceutical market.

As the West rethinks its reliance on China for key pharma ingredients, India appears as a natural alternative offering compelling value for relocation of the pharmaceutical supply chains. This paradigm shift will position India as a key player in shaping the future landscape of the global pharmaceutical industry.