India to restart Penicillin G manufacture: why was it stopped, what changed now

India will start manufacturing the common antibiotic Penicillin G later this year, three decades after the country's last plant closed, Union Health Minister Mansukh Mandaviya announced last week.

Penicillin G is the active pharmaceutical ingredient (API) used in the manufacture of several common antibiotics.

Why was penicillin manufacturing stopped in India?

Penicillin G, like many other APIs that India manufactured, was phased out of production as cheaper, subsidy-driven Chinese products flooded the market. The last plant that stopped producing the antibiotic was Torrent Pharma in Ahmedabad. “There were at least five companies, including Torrent, that manufactured Penicillin G in the country in the 1990s. But the prices of Chinese products were so low that Indian manufacturers went out of business. The huge plants had to be sold for scrap,” said an industry expert on condition of anonymity.

Another industry expert, CM Gulhati, said: “In the early 90s there were almost 2,000 API manufacturers in India. But there were nearly 10,000 units that manufactured formulations. And, to them, cheaper Chinese goods made more sense, especially at a time when the country's economy was opening up and customs rules were being relaxed. The Drug Price Control Order, which capped prices of essential medicines, also ensured that more companies opted for cheaper imported products.”

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Citing the example of paracetamol, he said India used to sell it at around Rs 800 per kg at that time, but China lowered the prices to almost Rs 400 per kg, making it unviable for Indian manufacturers. He added: “Now, there are only a couple of hundred API manufacturers in the country. And many of them produce it for their own products and not for sale.”

Penicillin production will restart in mid-2024 Hyderabad-Based on Aurobindo Pharma.

Why did it take so long to reboot?

First, the need was not felt. “While the industry and government were aware of the decline in API production in India as cheaper alternatives were available in the globalized world, not much attention was paid to restarting production within the country. The supply chain disruption caused during the pandemic was a wake-up call that we needed to be self-reliant,” said Dr Viranchi Shah, president, Indian Drug Manufacturers Association.

This prompted the government to launch the PLI scheme to support manufacturing within the country.
Second, there are huge upfront costs. “Manufacturing an API, especially a fermented one like penicillin G, is expensive. Setting up a factory involves huge capital expenditure and the company can only break even after a couple of years,” said the first expert.

Third, China is already a well-established supplier. “Our neighbor has increased manufacturing several times over the last three decades. Competing on prices would require investments in larger facilities,” Shah said.

What has been the impact of PLI schemes?

Both the first expert and Shah agree that there has been a decline in API imports since the launch of the PLI scheme. “There has been a decline in API imports. Take the example of paracetamol: before the pandemic, we imported two-thirds of the API needed, now that volume has been reduced by half,” Shah said.

The other expert, however, added: “We still import 90% of our APIs for antibiotics and almost 70% of all APIs. It will take time for API manufacturing to recover.”

The plan provides for 20% support during the first four years, 15% during the fifth year and 5% during the sixth year on eligible sales of bulk fermentation-based medicines, such as antibiotics, enzymes and hormones such as insulin. These are more difficult to manufacture and fermentation is used to grow microorganisms for the synthesis of drugs. For chemically synthesized drugs, the incentive will be 10% for six years on eligible sales.

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