Reed Smith Client Alerts

On Tuesday, India restricted the export of certain pharmaceutical products because of shortage concerns arising from the coronavirus (COVID-19) outbreak. As India is the largest global producer of generic pharmaceuticals, and as Indian companies obtain the majority of their active ingredients for those pharmaceuticals from China, India’s exports restrictions could signal the beginning of global supply-chain disruptions that are likely to spawn a multitude of international arbitration claims. This alert examines the background to India’s decision to restrict exports and recommends actions that life sciences companies should take now to position themselves for the claims that might follow.

Authors: James P. Duffy IV

test tubes

Background

India is the world’s largest manufacturer of generic drugs. It accounts for approximately 20 percent of the world’s generic drug supply,1 and accounted for almost 25 percent of U.S. imports in 2018, according to the US Food and Drug Administration (“FDA”).2

Indian drug makers are highly reliant on China for the active ingredients they use to make those drugs. Sources estimate that Indian drug makers obtain approximately 66 percent3 to 70 percent4 of their active ingredients from China, and the Indian government recently estimated that as many as 450 drug ingredients sourced from China could be impacted by Chinese efforts to contain COVID-19.5

That reliance on China is driving global supply-chain concerns.6 The result is that “[t]he whole supply chain will be disrupted, partly from China and partly from India,” said Jagdish Dore, who leads pharmaceutical-industry consultancy Sidvim LifeSciences.7