China Boosts Position as Leading Drug Raw Materials Supplier

Leading Indian generics makers complain that the country's tax regime is forcing them to look to China for pharmaceutical raw materials. Prominent Indian generics firms such as Ranbaxy, Dr Reddy's Aurobindo and Orchid, have already set up in China. Aside from the lure of reaching a potentially huge new market, some of this expansion can be attributed to differentials such as India's 10% tariff on naptha.

Drug producers elsewhere in Asia also look to China to fill supply gaps. In Thailand, where stronger patent protection was introduced in 2001, Chinese bulk drugs and low-cost raw materials already meet significant demand from locally regulated producers and distributors.

However, Thai drugmakers are wary of the impact of WTO legislation on imports from China, as the new regulations are set to increase local prices on raw material imports in the medium term. Assuming that international patent and quality provisions are enforced in China — however gradually — the way could become open for even less regulated Asian markets to fill the resulting supply gap.