The Global Reach of Indian Generic Medicines

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India is often called the pharmacy of the developing world, and for once the slogan understates the case. Indian factories supply a very large share of the generic medicines dispensed in the United States, a majority of the vaccine doses used by many low-income countries, and the bulk of the antiretroviral drugs that keep millions of people with HIV alive in Africa. By volume India is among the largest exporters of medicines on earth; by value it is far smaller, because generics are cheap, which is precisely the point. Understanding how a country that was a net importer of medicines in the 1960s came to occupy this position requires starting with a piece of patent law.

At independence India inherited a patent regime derived from British law, under which foreign firms held most pharmaceutical patents and Indian drug prices were among the highest in the world. Two government committees examined the problem and Parliament responded with the Patents Act of 1970, which came into effect in 1972. Its crucial provision abolished product patents on medicines and food, allowing only process patents of short duration. A company could therefore not stop an Indian firm from making its molecule; it could only stop the firm from using its exact method of manufacture. Indian chemists became extremely good at inventing alternative synthetic routes, and a domestic industry grew up on reverse engineering, competing furiously on cost. Prices collapsed, and by the 1990s India had among the cheapest medicines anywhere.

From reverse engineering to the world market

The moment that made Indian generics globally famous came in 2001, when Cipla, led by Yusuf Hamied, offered a triple-combination antiretroviral therapy for HIV at roughly a dollar a day, against Western prices then running to many thousands of dollars a year. The offer, made in the context of an intense public argument over access to treatment in southern Africa, changed what governments and donors believed was affordable. Once the World Health Organization began prequalifying Indian products and donor programmes including the Global Fund and the American PEPFAR initiative started purchasing them, generic antiretrovirals from Indian plants became the backbone of treatment across the continent.

India's accession to the World Trade Organization obliged it to restore product patents, which it did through an amendment in 2005 with effect for applications filed from 1995. Indian negotiators and civil society groups worked hard to preserve room to manoeuvre inside the new rules. The most important result is section 3(d) of the amended Act, which bars patents on new forms of known substances unless they show enhanced efficacy. Its purpose is to prevent evergreening, the practice of extending monopoly by patenting minor variations such as a new salt or crystal form. Novartis challenged the provision in a long-running case over the cancer drug imatinib and lost in the Supreme Court in April 2013, a judgment read closely by health ministries around the world. India has also used compulsory licensing, which permits a government to authorise production of a patented medicine on payment of a royalty, but sparingly: the licence granted to Natco in 2012 over Bayer's kidney and liver cancer drug sorafenib remains the notable instance.

The industry today is concentrated in a handful of clusters. Hyderabad and its Genome Valley, Ahmedabad and the wider Gujarat belt, Mumbai, Bengaluru, and the excise-favoured hill sites in Himachal Pradesh and Sikkim account for most output. The large listed firms include Sun Pharmaceutical, Dr Reddy's Laboratories, Cipla, Lupin, Aurobindo, Zydus and Torrent. In vaccines the dominant name is the Serum Institute of India in Pune, a privately held company that produces more vaccine doses annually than any other manufacturer in the world and supplies large volumes of measles, tetanus and pneumococcal vaccine to UNICEF and Gavi programmes. During the COVID-19 pandemic Serum manufactured the Oxford-AstraZeneca vaccine under the name Covishield while Bharat Biotech of Hyderabad developed Covaxin with the Indian Council of Medical Research, and India's temporary suspension of exports during its devastating second wave in 2021 demonstrated uncomfortably how much of the world's supply depended on decisions taken in one country.

The weak points

Two vulnerabilities are widely acknowledged. The first is quality control. Indian plants exporting to the United States are inspected by the Food and Drug Administration, which has issued numerous warning letters and import alerts over data integrity failures, falsified records and contamination. The most serious case was Ranbaxy, once India's largest drugmaker, which pleaded guilty to felony charges in the United States in 2013 and paid a settlement of five hundred million dollars over adulterated drugs and false statements. More recently, cough syrups manufactured in India were linked by the World Health Organization to the deaths of children in The Gambia, Uzbekistan and elsewhere in 2022 and 2023, with contamination by industrial solvents such as diethylene glycol suspected. Indian regulators disputed some of the findings in individual cases, and responsibility as between manufacturers, ingredient suppliers and importing regulators is still argued over, but the episodes exposed a real gap: domestic oversight, split between a central regulator and state drug controllers of very uneven capacity, has not matched the scrutiny applied to export production.

The second vulnerability is upstream dependence. India dominates formulation, the business of turning active ingredients into pills and injections, but it imports a large proportion of its active pharmaceutical ingredients and key starting materials, overwhelmingly from China. When Chinese supply was interrupted in early 2020 the fragility became obvious, and the Indian government responded with production-linked incentive schemes and bulk drug parks intended to rebuild domestic fermentation and chemistry capacity. Progress has been real but slow, because the economics that drove that manufacturing to China in the first place, chiefly scale and energy costs, have not changed.

Domestically the industry sits in an odd position: it makes some of the cheapest medicines in the world, and yet out-of-pocket spending on medicines remains a leading cause of household impoverishment in India. Price control through the National Pharmaceutical Pricing Authority covers essential medicines, and the Jan Aushadhi network of generic outlets has expanded to thousands of stores, but branded generics, marketed with heavy incentives to prescribers, still dominate the domestic market at prices well above what the same molecule costs when exported.

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