New Delhi: The pharmaceutical sector is a vibrant sector which is growing at a rate of 9 to 10 percent per annum. And the growth of the medical equipment industry is about 10 to 12 percent. For the next five years, India's pharma sector has ambitious targets to achieve. Currently, the size of our industry is around $50 billion, which is slated to expand to $100 billion by 2024-25. Though at the beginning of the current financial year, a slight decline in growth rate was visible during the first quarter, however, July onwards, the initial figure indicates that the sector has bounced back and is growing in positive figures.
From both economic and social point of view, the COVID-19 pandemic has unleashed an onslaught that no one could have foreseen. However, since India is at the forefront in the production of generic medicines and vaccines, the impact on the pharmaceutical sector has not been as grim as on other sectors.
At the time I joined in, my team and I had an opportunity to prepare a vision plan after Prime Minister Narendra Modi called on all sectors to submit one. To start with, we held extensive consultations with stakeholders. Based on the inputs received from them, we formed one permanent advisory group on the pharmaceutical sector, one advisory group on medical devices, and a coordination committee for various research institutions. And that helped us a lot.
We came to know about the real pain points and the challenges in the industry. And there were primarily two: the first was our over-dependence on APIs and on medical devices and the third was Research and Development (R&D). We found that the import of medical devices was increasing because India did not have a strong base for manufacturing high-end medical devices, because of lack of technology and manufacturing.
Based on these inputs received from stakeholders, we prepared a vision plan. For APIs, we came up with two schemes. One was a Production-linked Incentive (PLI) scheme for APIs, under which incentives would be given based on the performance in manufacturing. The second was another PLI scheme for manufacturing of high-end medical devices. Thirdly, we came up with the idea of bulk-drug parks for APIs and medical device parks for high-end medical devices.
In the wake of these announcements, we have assured manufacturers of creating a world-class infrastructure for these parks. If you want to manufacture a drug, you come to us. You don't need to worry about land, electricity, water, common user facilities, even laboratories and testing facilities. The idea behind these parks is to develop them in a plug-and-play model. In July this year, the government announced guidelines for the development of bulk drug and medical device parks in a bid to promote indigenous manufacturing of these products. And I would like to inform you that the department has started receiving a fabulous response from various states. Reason being, bulk drug parks or medical devices parks have the potential to change the finances of states for the better. As soon as they take shape, people will put up industries not only in these parks, but ancillary industries and other related industries around the park as well. These are very encouraging schemes announced by the government for addressing import dependence of our country.
To take care of R&D, we have formed a national committee on R&D which has various stakeholders of the industry as members. The committee comprises of Pankaj Patel of Zydus, Dr Satish Reddy of Reddy Labs, Kiran Mazumdar Shaw of Biocon and all government research institutes. We have also formed sub-groups at the lower level in the national committee. There is a core group as well which has industry representatives as mentioned above, as well as Secretaries of various departments. Based on the inputs received from all possible stakeholders and experts of the field, a very useful vision-document has been prepared, which I think if implemented, will transform the pharmaceutical industry. We are the third-largest exporters in terms of volume, but in value, we are at the 14th position. So the idea is to climb the ladder in value as well, which is possible only if we do drug discoveries, manufacture complex generics, complex APIs and go for high-end medicines and drug discoveries.
We will become self-reliant once these schemes are implemented, which I think is going to take two-three years. We have started working dedicatedly towards making India a 'global' healthcare provider. It will not happen immediately as such projects have a long gestation period. But we will certainly become Aatmanirbhar in APIs and medical devices. Then MSMEs will also be able to put industries up, and the cost of production will go down, and manufacturers will be able to take economies to scale. For example, the eligibility conditions under the PLI scheme require applicants to meet the criteria of threshold investment and minimum annual production capacity. In medical device scheme as well, minimum investment is defined so that the cost per unit of output decreases with increasing scale. In the long run, this is the right direction for an Aatmanirbhar Bharat in the pharmaceutical sector.
We must remember that we should not mind imports. What we should mind is critical import dependence on a particular country.
Vaghela is an IAS officer of the 1986 batch of Gujarat cadre and is a former Secretary of the Department of Pharmaceuticals. The article is an excerpt from a conversation that Vaghela had with Vivek Shukla, Editor, PSU Watch, at the time he was serving as Pharma Secretary. Vaghela is currently serving as Chairman, TRAI. The article first appeared in a special issue published by PSU Watch on Aatamnirbhar Bharat on October 30.
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