India has become heavily import dependent on China when it comes to many essential and large volume drugs making it vulnerable to sudden disruption of supplies, according to a study by Assocham.

The study released today cites the gradual erosion of domestic manufacturing capacity for certain key Active Pharmaceutical Ingredients (APIs) and steady migration of Indian pharma players to value-added formulations with higher margins as the primary reasons behind the disturbing trend of heavy reliance on Chinese imports.

Over a period of time, Indian players have steadily migrated up the value chain to focus on value-added formulations with higher margins. As a result, India is today severely dependent on imports for many essential and large-volume drugs, it said.

"This lack of self-sufficiency poses significant risk, given that most of India's drug imports are concentrated in China. Any deterioration in relationships with China can potentially result in severe shortages in the supply of essential drugs to the country," the study stated.

China could easily increase prices of some of these drugs where it enjoys virtual monopoly, the study further said.

Moreover, this risk extends beyond the domestic market to the export markets as Chinese pharmaceutical companies, that have traditionally focused on large-volume intermediates and unregulated markets, are beginning to forward integrate and increasing focus on exports to regulated markets, it said.

The study said it was time to identify key drug categories that address disease areas and India should promote the setting up of vertically integrated manufacturing facilities for essential drugs, at a competitive scale. Old infrastructure of sick PSUs may be leveraged in this regard through public-private partnerships.

In the long term, the government could offer fiscal incentives during the formative years to encourage setting up of large-scale pharma and chemical clusters in close proximity to each other to enable companies to build scale and vertical integration, the study said.

On the contentious issue of clinical trials, the study stressed on the urgent need to allay the myths around clinical trials, observing that clinical trials are not unsafe and are not conducted in India only because of cost effectiveness, patient vulnerability and lack of regulatory safeguards.

On price controls, it said a regulatory framework for pricing of drugs should be put in place so as to ensure availability of required medicines - essential medicines - at reasonable prices even while providing sufficient opportunity for innovation and competition.