The US Biosecure Act aims to decouple its supply chains from China, presenting a huge opportunity for India’s pharma industry
The United States (US) is set to pass the Biosecure Act—an act that will impact the global biotechnology and pharmaceutical industries, ideally positioning India to dominate the landscape. The Act will prohibit US federal agencies from contracting with or procuring services and equipment from “biotechnology companies of concern” and will extend to companies that source or utilise equipment or services from these listed companies. The list specifies prominent Chinese companies including, BGI, MGI, Complete Genomics, WuXi AppTec, and WuXi Biologics, and includes other entities that are considered as a risk to US national security. If passed, it will present a huge opportunity for India’s pharma industry, but India would need to strengthen its regulatory processes to ensure the safety and efficacy of its products to maintain its standing in the market.
China’s contract development and manufacturing organisations (CDMOs)—the entities that provide services from drug discovery to manufacturing—grip 8 percent of the global market share, while the Indian counterpart commands only 2.7 percent. This Act holds the potential to disrupt American supply chains, sending ripples across different areas, including clinical trials and drug manufacturing. The impetus to propose a legislation that prevents US companies from supporting foreign biotech companies originated from US intelligence that implicated WuXi AppTec, a leading Chinese CDMO, in the unauthorised sharing of sensitive US client data to Chinese entities. This was construed by the US intelligence as a “pattern of behaviour” aimed at furthering China’s technological and military capabilities. Accordingly, these companies are viewed as a threat to US national security by “engaging in joint research with, being supported by, or being affiliated with a foreign adversary’s military, internal security forces, or intelligence agencies.”
The impetus to propose a legislation that prevents US companies from supporting foreign biotech companies originated from US intelligence that implicated WuXi AppTec, a leading Chinese CDMO, in the unauthorised sharing of sensitive US client data to Chinese entities.
Despite outcries on the challenges the Act would bring about, the Biotechnology Innovation Organisation (BIO), the world’s largest advocacy association representing biotechnology companies, assented to the act. Severance from WuXi AppTec will have financial ramifications as it is involved in a quarter of the drugs commercialised in the US. If passed, the legislation would severely impact R&D, cause delays in clinical trials, and shortages in drug production. Although the legislation would not be fully operational by 2032, US companies have begun the search for alternatives to diversify supply chains.
The Act presents a tremendous opportunity for the growth of India’s CDMO industry and the US companies have expressed interest in Indian players as they brace for a soft landing. There is no assurance, however, that the act will guarantee a concomitant boost in India’s sway in the market. India’s CDMO industry stands as a top contender as India supplies 40-50 percent of all generic drugs in the US, offers a highly skilled workforce, and a relatively low manufacturing cost. Estimates place India’s CDMO segment to grow up to US$44.63 billion by 2029 from its present US$22.51 billion at a CAGR of almost 15 percent. Nevertheless, India’s ability to capitalise on the Biosecure Act depends on the safety and efficacy of its products. Drug quality remains a concern, notably in the aftermath of the death of children in The Gambia, Cameroon, and Uzbekistan, which was attributed by the World Health Organization (WHO) to the presence of toxins in cough syrups produced in India. In response, the Drug Controller General revoked the licenses of 18 companies for spurious production of drugs and increased the number of pharma inspections, while the Directorate General of Foreign Trade tightened the export policy of cough syrups.
Pharma companies are regulated by global inspectors such as the US Food and Drug Administration (USFDA) and India house the most FDA-approved pharmaceutical manufacturing units outside the US. According to a report, 13 percent of Indian facilities have been flagged by the USFDA as ‘Official Action Indication,’ implying that the facilities are not compliant with current good manufacturing practices (cGMP). In addition, the USFDA’s Centre for Drug Evaluation and Research cited poor quality control methods in the production of active pharmaceutical ingredients (APIs) and data integrity issues in the production of generics during bioavailability and bioequivalence studies, posing as significant threats to efficacy and safety, and thus undermining public trust in India’s drug manufacturing capabilities.
Pharma companies are regulated by global inspectors such as the US Food and Drug Administration (USFDA) and India house the most FDA-approved pharmaceutical manufacturing units outside the US.
Recently, shortfalls in manufacturing were cited as the reason for the recall of Cipla Limited’s asthma medication and Glenmark’s blood pressure drug, while Dr Reddy’s recalled products used in the treatment of phenylketonuria due to “decreased potency”. According to the USFDA, weaknesses in compliance and defects in manufacturing typically arise when manufacturers lack a “robust internal culture of quality that can comprehensively detect and respond to issues even in the absence of regulatory inspection,” and instead rely solely on continual feedback from external inspections. Furthermore, as mentioned by Dr Bibek Debroy, Chairman of the Economic Advisory Council to the PM of India, healthy manufacturing practices are essential for not only exports, but the domestic market as well as spurious and substandard products can have deleterious effects on health in the long term. Collectively, this demonstrates that a robust management system is needed to cultivate a healthy regulatory machinery within India.
Although the USFDA inspects foreign drug manufacturers as part of its oversight, reports suggest that inspections are subjected to institutional weaknesses that can diminish the impact of regulation. Notably, the current number of FDA inspections of foreign manufacturing plants is reported to be below pre-pandemic levels as it is facing staff shortages and reluctance of inspectors to travel to remote locations. Unannounced inspections seldom occur as USFDA guidelines opine that they are uneconomical, particularly if the establishment is not operational owing to a local holiday or there are no English-speaking personnel available. Pre-announced USFDA inspections are the norm, and researchers opine that this paves the way for opportunities to partake in falsification and omission of data, and non-adherence to approved manufacturing protocols. Language barriers also impede complete understanding of technical issues and hinder opportunities for feedback. In addition, the USFDA notes that such inspections do not indicate “the true day-to-day operating environment” of establishments. Notably, a decade ago, Ranbaxy Laboratories Limited paid a hefty US$500 million fine for the “manufacture and distribution of certain adulterated drugs” and for making false claims to the FDA. The issue had not come to the attention of regulators until a whistle-blower came forward.
Pre-announced USFDA inspections are the norm, and researchers opine that this paves the way for opportunities to partake in falsification and omission of data, and non-adherence to approved manufacturing protocols.
More recently, the European Medicines Agency (EMA) found that generic versions of Valsartan, an anti-hypertensive drug, produced by a China-based pharma, contained traces of an impurity with probable carcinogenic potential. This issue arose due to modifications carried out by the pharma company during the manufacturing process, which had not been conveyed to regulatory bodies. This demonstrates that effective drug regulation not only requires oversight from regulatory bodies but also requires collective efforts between manufacturers and regulatory agencies to ensure the production of safe and efficacious pharma products.
India can adopt a multi-pronged strategy to cement its dominance in the CDMO industry in time for the probable enactment of the Biosecure legislation by attaining self-sufficiency in API production, by inculcating a healthy regulatory environment, and by fostering interdependent mechanisms with the USFDA. India is still dependent on pharmaceutical imports from China; in 2023-2024 India imported 43.45 percent of its pharma products, including APIs, from China. Easing this dependence would be critical as the Biosecure Act would extend to include foreign entities that are associated with “biotechnology companies of concern,” indicating that India’s procurement of APIs from China could potentially be flagged by the US. India is boosting its funding in the production of domestic APIs and bulk drugs, primarily through Performance Linked Incentive (PLI) schemes; nearly INR 15,000 crore was allocated in 2021 for six years. A recent study points out that the scheme has not attracted significant industry response but this is hoped to change with the enactment of Biosecure. Aside from the threat of other market players, American CDMOs are likely to extend their own efforts. The Biden administration has encouraged US companies to focus on domestic manufacturing to reduce their reliance on foreign countries, and this resolve is likely to continue after the US presidential election.
India is boosting its funding in the production of domestic APIs and bulk drugs, primarily through Performance Linked Incentive (PLI) schemes; nearly INR 15,000 crore was allocated in 2021 for six years.
Secondly, CDMOs can adopt stringent measures to enhance compliance by introducing training measures to promote awareness of export requirements and ethical standards. Efforts can be directed towards fostering a culture of feedback and transparency to troubleshoot issues. Finally, as the USFDA has announced increased funding for inspections and a pilot programme to enable unannounced inspections in India, cooperative activities with the USFDA can ease the backlog of inspections, facilitate smoother inspections with English-speaking personnel or translators, and aid in the development of technologies to promote ethical reporting.
This highlights that while India is a critical partner to the US in the supply of therapeutics, it needs to up the ante in its production capabilities and in its regulatory mechanisms. This would ensure that Indian products are safe, efficacious, and market-approved, thus propelling India to the forefront. The momentum gained by US Biosecure Act is a sure way for India to retain the title of “pharmacy of the world.”
Lakshmy Ramakrishnan is an Associate Fellow at the Observer Research Foundation.
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Lakshmy is an Associate Fellow with ORF’s Centre for New Economic Diplomacy. Her work focuses on the intersection of biotechnology, health, and international relations, with a ...
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