Estimating India's Trade in Drugs and Pharmaceuticals

s ecretions; medicated bandages and dressings; medical devices, dental cements and fillings, etc, are excluded.

Trade data given in the working group, which is sourced from the DGCIS, are substantially different (99.4 per cent difference in exports and 132.1 per cent difference in imports) from the data given in the annual report, which have also seemingly sourced from the DGCIS. This may be due to the different methodologies adopted by these two agencies. Surprisingly, the data of the working group are the same as that given by one industry association – IDMA. To understand the methodology, it is important to know the products considered while compiling the data. The IDMA is the only source which gives a list of products that are exported and imported. The 42nd annual publication (2004) of IDMA gives a detailed list of exports and imports of intermediates, bulk drugs and formulations (from ITC chapters 28, 29 and 30) at eightdigit level for 2002-03; 581 products for exports and 738 products for imports. Trade quantities and values of these products are the same as given by the DGCIS. Exports add up to Rs 9,714.41 crore and imports to Rs 8,846.1 crore. However, the values of total exports and imports given in the same publication are very different – Rs 11,925 crore exports and Rs 1,102.5 crore imports. Thus it comes out that there are serious problems with the aggregate trade data given by the industry associations as well. In this confusing scenario, it may be wise for one to collect data at the level of individual items to arrive at the aggregate trade figures.

Significantly, all recent studies on India’s trade in drugs and pharmaceuticals have glossed over the above-mentioned data problems by relying on data either from the annual reports of the department of chemicals and petrochemicals or from the annual reports of IDMA or OPPI. For instance, Dhar and Rao (2002) use the data of the department of chemicals and petrochemicals and OPPI to argue that the I ndian pharmaceutical industry has turned into a foreign exchange net earner on its trade account in 1988-89, and this surplus has been increasing. Chaudhuri (2005) and Lanjouw (1999) have used the IDMA trade figures to arrive at the same conclusions. In the following section, we provide the estimates of pharmaceutical trade that India is involved, based on what we consider is a more accurate definition of drugs and pharmaceuticals.

The Real Story

This section is an analysis of India’s trade in drugs and pharmaceuticals, using the definition given in the Drugs and Cosmetics Act, 1940. Section 3(b) of the Act (1940), which covers all aspects of drug regulation in India, defines a drug to include:

Under this definition the term drug would include formulations (medicines ready for the internal or external use), active pharmaceutical ingredients (APIs/ bulk drugs), intermediates and excipients which go into the production of formulations; medicated bandages and dressings; medical devises such as syringes; blood products; glands, organs and extracts of them. APIs can be of two types: APIs consisting of single chemical substances which fall under the category of fine chemicals6 and APIs consisting of two or more c hemical substances. Thus the term “drugs and pharmaceuticals” is used to mean

broad categories – intermediates and bulk

has consistent trade surpluses in two cate

gories – bulk drugs and formulations. Of

the remaining two categories, the balance

of trade is consistently negative for inter

mediates and negative for most of the

p eriod for other drugs and pharmaceuti

cal products. On the exports front, the

groups account for only 9.2 per cent of the

total drugs and pharmaceuticals exported

in 2006-07. The growth in the export of

the other two groups, which account for

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Our estimates show that there has been a decline in the growth rate of exports of intermediates and bulk drugs and formulations, which account for 90.8 per cent of the export of drugs and pharmaceuticals from India in 2006-07, in the post-19992000 period, the period during which the monopoly rights of the inventor got protected in India. Bulk drugs and other drugs and pharmaceutical products, on the other hand, have shown an increase in the growth of exports under the new patent regime; but they constitute only one-tenth of total drugs and pharmaceuticals exported from India. The trends in the growth of imports are more alarming. The growth rates of import of almost the entire drugs and pharmaceuticals (intermediates and bulk drugs, bulk drugs and formulations accounting for 97.3 per cent of imports) have increased in the post1999-2000 period. Formulations being the category showing the highest growth in imports, exhibit an increase in the growth of imports by 21.2 percentage points. The rates of growth show a declining trend in the exports front and an increasing trend in the imports front have long-term adverse implications for the b alance of trade in drugs and pharmaceuticals which is already running into deficits. Thus the findings of this article confirm the apprehension that changes in the patent regime would adversely affect India’s trade in drugs and pharmaceuticals – exports will decline and imports will increase.

Notes

1 For the largest three pharmaceutical firms, viz, Ranbaxy, Dr Reddy’s and Cipla, exports in terms of values were more than half their total sales turnovers. Therefore, for these firms, foreign markets were relatively more important than the domestic market, and this gave them the impetus to improve their operating efficiencies [Dhar and Gopakumar 2007].

2 See http://chemicals.nic.in/pharma1.htm, accessed on May 20, 2008.

3 Twenty-one per cent of imports of the BDMA in 2004-05 consist of intermediates. The BDMA is the only source giving separate figures for intermediates. The IDMA gives the list of intermediates and bulk drugs together; thus intermediates cannot be separated out from this list.

4 The figures are same for all the years, except for the import figure for 2005-06. The DGCIS figure for import of pharmaceuticals in 2005-06 is Rs 1,949 crore. The DGCIS data were accessed from India Trades of the Centre for Monitoring Indian Economy (CMIE).

5 Board here refers to the ayurvedic, siddha and unani drugs technical advisory board constituted under Section 33C (relating to ayurvedic, siddha or unani drugs) and the drugs technical advisory board constituted under Section 5 (relating to any other drug).

6 Wikipedia, defines fine chemicals as “pure, single chemical substances that are commercially produced with chemical reactions into highly specialised applications. Fine chemicals produced can be categorised into active pharmaceutical ingredients and their intermediates, biocides and speciality chemicals for technical applications”. Pharmaceutical fine chemicals include both intermediates for drug production and bulk active drugs ready to be compounded with inert pigments, solvents and fillers – called excipients – and made into dosage forms.

References

Chaudhuri, Sudip (2005), The WTO and India’s Pharmaceutical Industry, Oxford University Press, New Delhi.

Dhar, Biswajit and K M Gopakumar (2007): ‘Effect of Product Patents on Indian Pharmaceutical Industry and Healthcare Services’, EU-India Trade and Investment Development Programme, January.

Dhar, Biswajit and Niranjan Rao (2002): Transfer of Technology for Successful Integration into the Global Economy: A Case Study of the Pharmaceutical Industry in India, UNCTAD/ITE/IPC/Misc.22, New York and Geneva.

Lanjouw, Jean O (1999): ‘The Introduction of Pharmaceutical Product Patents in India: Heartless E xploitation of the Poor and Suffering’, NBER Working Paper No 6366.