China and India are the world’s two largest manufacturers of bulk drugs, a key raw material for producing pharmaceutical drugs. Currently the two countries cooperate and compete in the field. Now, with changes in the supply pattern of bulk drugs around the world, companies in the U.S. and Europe have also started competing with the Chinese and Indian markets. This situation raises the need for China and India to think about how they should maintain their own advantages and how to break development bottlenecks in the bulk drug industry. In terms of market size, the combined population of China and India surpasses 2.5 billion – huge markets that no country can afford to ignore.
Today, more and more Chinese companies see India as a first step toward going global. A record for overseas acquisitions by Chinese pharmaceutical firms was broken by Shanghai Fosun Pharmaceutical Group when it announced the purchase of 86.08 percent of Indian drug-maker Gland Pharma for up to US$1.26 billion in July. This was also the largest acquisition of an Indian asset by a foreign firm this year.
Analysts believe that Fosun is targeting more than just the Indian market through its acquisition of Gland Pharma. India leads the world in generic drugs and its industry is quite internationally oriented. Acquiring Gland Pharma could help Fosun crack other overseas markets.
This move could allow China to learn from India and could also prompt China to open up its pharmaceutical industry. China is still in the process of transitioning from a planned economy to a market economy and excels in production cost control. However, India is an English-speaking country which has been engaged with the international pharmaceutical industry longer than China. As such, India has a range of experience and expertise in marketing and sales in global medical markets. India also slightly outperforms China in generic drugs as well as research and development capability. As for benefits to India, China offers a huge and rapidly growing market for generic drugs. The sheer volume of China’s population base means that the number of drug applications is remarkable. Through massive market operations, India could turn China into a promising market, which would help raise its production capacity. Meanwhile, China could boost its capability in generic drugs and the development of original drugs by learning from and cooperating with India. India is known for its rapidly-developed specialized downstream pharmaceutical products, while China is seeing its basic upstream pharmaceutical products grow quickly. Pharmaceutical companies from both countries could take advantage of the complementary development of the two markets and prosper together.
At the same time, Fosun should take precautionary measures to avoid repeating the mistakes and failures of some Indian pharmaceutical companies in their overseas expansion. For example, Indian generic drug-maker Ranbaxy Laboratories Ltd has suffered major setbacks in the US market in recent years. The US drug regulator recently discovered that Ranbaxy's Mohali manufacturing site failed standards checks and, as a result, imposed an import alert on the facility. Ranbaxy had previously pled guilty to drug safety charges and paid out US$500 million in civil and criminal fines in a settlement with the US Department of Justice in 2013.
As the global manufacturing center of pharmaceutical products shifts towards India and China, the two countries should seize the opportunity and work together to become world-class pharmaceutical giants amid Asia’s rise.
This article was originally published on globaltimes.cn. The author is the director of the Institute for Southern and Central Asian Studies at the Shanghai Municipal Center for International Studies.