Reed Smith Client Alerts

On Saturday, April 4, 2020, India rescinded the exemptions that it had previously allowed to the hydroxychloroquine export restrictions that it implemented on March 25, 2020. India’s decision to ban all hydroxychloroquine exports - without exception - is significant because, as our March 6 and March 16 client alerts discuss, export restrictions such as the one that India has just announced could lead to international commercial arbitration claims and investment treaty claims in the future. This alert provides the background to India's total hydroxychloroquine export restriction and discusses steps that companies should take now in response.
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India bans hydroxychloroquine exports, but initially allows exceptions

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 U.S. Food and Drug Administration (FDA).2

India is also home to some of the largest hydroxychloroquine (HC) manufacturers in the world.3 On March 25, 2020, following the export restrictions that it imposed on 26 other pharmaceutical products on March 3, 2020, India banned HC exports to protect its domestic supplies in the face of growing COVID-19 challenges.4

HC’s potential as a COVID-19 treatment leads to global supply pressures

HC is an antimalarial drug that was first synthesized in the mid-1940s and that was approved in the United States in 1956 for the treatment of lupus and rheumatoid arthritis.5 HC has received significant global attention lately following a small study in France which indicated that HC (in combination with azithromycin) might assist in reducing the duration and/or severity of COVID-19 in less severe cases.6 As a result of that study, the FDA, similar to regulators in several other countries, recently authorized HC’s emergency use as a COVID-19 treatment for certain hospitalized patients.7

HC’s potential for battling COVID-19 has resulted in a run on global HC supplies.8 In fact, global HC supplies have become so pressured that some U.S. states have begun enacting regulations to address HC shortages for existing lupus and rheumatoid arthritis patients.9

India eliminates any exceptions to the March 25 HC export ban

The initial HC export ban that India announced on March 25 was not absolute and permitted HC exports to continue: (1) to fulfill existing contracts where the buyer had made advance payment arrangements; (2) if made from special economic zones in certain circumstances; and (3) if made with government approval for humanitarian reasons.10 Consequently, while India’s initial export ban was significant, it was not absolute, and it allowed limited commercial exports to continue, particularly from economic free zones.

On April 4, 2020, however, India withdrew the three exceptions to the HC export ban that it had previously allowed and rendered “[t]he export of [any] hydroxychloroquine and formulations made from hydroxychloroquine . . . prohibited, without any exception.”11 In addition to rescinding humanitarian shipments and those from free zones, the current ban includes any shipments that were to be made “against full advance payment,” and therefore includes contracts for which foreign buyers had already arranged payment.12