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PLI Scheme Holds Promise For Pharma, Execution & Scale Of Benefits Critical

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India Ratings and Research (Ind-Ra) expects the production-linked Incentive (PLI) scheme could be a growth driver for the pharmaceutical sector in the medium to long term. The scheme will not only attract foreign investments, but also promote the development of complex and high-tech products, emerging therapies and in-vitro diagnostic devices in India. According to the government estimates, the scheme is expected to bring in investment of INR150 billion in the domestic pharmaceutical sector. The agency believes PLI will reduce India's dependence on imports for key active pharmaceutical ingredients (APIs) to around 43% in the medium term from around 70% currently.

 

The benefits of the scheme will be a function of the pace of rollout of the scheme and interest of Indian pharmaceutical companies. The agency opines that the scheme will benefit API manufacturers by giving them extra push to setup the necessary infrastructure along with their pre-planned infrastructure. Whereas, the benefit to formulations manufacturers will be limited, because compared to the industry size, the incentives are unlikely to be strong enough for them to move up the value chain. Bulk drug parks will help integrate infrastructure facilities, thereby reducing the manufacturing cost of APIs. Ind-Ra believes, if bulk drug parks are setup as envisaged to address infrastructure and approval issues, this will improve the ease of doing business. The agency believes the PLI scheme to be a positive step in reducing India's dependence on China, though the benefits of the scheme will be visible after five to seven years.

PLI Scheme Holds Promise For Pharma, Execution & Scale Of Benefits Critical

Repeated raw material supply disruptions from China has been a cause of concern for global pharma companies including India, due to their high dependency on China. MNC companies have started looking for an alternative to keep their supplies going uninterrupted. Ind-Ra believes India can emerge as the preferred destination for an alternative supply chain, driven by 1) its highest number of USFDA approved API plants, 2) strong chemistry skills and 3) around 50% market share in drug master files with USFDA. Also, de-risking of supply chain from China is a structural change and it is going to benefit India's pharma exports (China's API export at 7x of India). Ind-Ra highlights that the Indian pharmaceutical industry is the third largest in the world, by volume and is worth USD40 billion with strong presence in the regulated markets such as US and Europe.

Read more about: pharma
Story first published: Tuesday, June 29, 2021, 14:25 [IST]
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