India and China begin discussions for a reverse-trade model for drugs

This would unlock export potential of $6 billion for Indian pharma companies

India has begun talks with China on a reverse-trade model under which bulk drugs imported from China would be converted into finished dosage forms (FDFs) and exported back.

 

This is a move industry experts believe could unlock about $6 billion in drug product exports against China’s $4 billion bulk drug supplies to India, the Pharmaceutical Exports Promotion Council (Pharmexcil) said.

 

China’s tightly-regulated drug market is slowly opening up to Indian pharmaceutical firms with drug approvals and tender orders under its volume-based procurement (VBP). This comes at a critical time when tariff uncertainty pushes India to look beyond the United States (US). 

 

The important shift in strategy is, however, for exploring opportunities for collaboration rather than competition. 

 

China is more focused on key starting materials (KSMs), intermediates, and drug substances, whereas India's core strength lies in FDFs.

 

“India began discussions with China on a reverse-trade model, where whatever bulk drugs we import, we propose to trade back through FDF partnerships. We would add value to the drug substance and export it back to China,” Namit Joshi, chairman, Pharmexcil said.

 

He claimed that the potential identified for such arrangements stands at approximately $6 billion worth of drug products, which China could import against its $4 billion export of drug substances to India. 

 

This creates an opportunity wherein both nations can maximise trade in pharma through collaboration. “As a result, we saw great value in collaborating with China on reverse trade in pharmaceuticals,” another analyst said.

 

While India enjoys a strong position on the global platform through its FDF exports, Joshi said that “we felt the need to walk a mile before we achieve similar credentials for bulk drug manufacturing, where we compete with China.”

 

Meanwhile, Indian drugmakers are seeing a surge in market approvals from China 

 

Zydus Lifesciences recently secured its first-ever Chinese market approval for its antidepressant Venlafaxine capsules, a market projected to be around Yuan 473.63 million ($66.52 million) in 2025.

 

A wholly-owned subsidiary of Glenmark Pharma also secured Chinese approval for its Ryaltris compound nasal spray last week.

 

In the last couple of years, several firms such as Mankind Pharma, Glenmark, Sun Pharma and Zydus have either partnered Chinese companies or received approvals for their own drugs by China’s National Medical Products Administration (NMPA).

 

Similarly, firms such as Hetero Pharma, Cipla and Natco Pharma won bids to supply seven products, including high-demand diabetes drug dapagliflozin, in a recent VBP tender in China. 

 

“Indian companies have in the past faced regulatory hurdles in China, the second biggest pharma market in the world. However, the timing indicates a shift in strategy from competition to collaboration,” an industry executive said.   

 

Indicating that the core lies in collaboration, not competition, Joshi said that for a long time, we have been viewing China as competition, which led us to pursue Atmanirbhar Bharat. 

 

“However, with the looming threat of tariffs from the US, India was constantly evaluating mitigation plans. This made us shift our approach from competition to collaboration as every nation scrambled to look for opportunities outside the US,” he added.

 

The US accounted for $10.52 billion in pharma exports from India, or around 34 per cent of overall drug exports in 2024-25 (FY25). On the other hand, India’s exports to China for the same period stood at only $324.91 million. 

 

China chronic opportunity in place

 

Indian pharma firms are also looking to expand their position in the chronic segments, especially through generics, by taking advantage of the country’s VBP tenders.  

 

China’s VBP is a government initiative to lower healthcare costs by centralising and standardising purchase of pharmaceuticals and medical devices through competitive bidding. 

 

This volume for price strategy involves securing large-volume sales for manufacturers who offer the lowest prices. This results in significant price reductions and increased accessibility of medicines and devices.

 

Experts believe that securing dapagliflozin contracts puts Indian companies among China’s fastest-growing therapeutic categories for diabetes and chronic metabolic diseases.

 

Studies indicate that China has the highest diabetes burden in the world, with more than 140 million people with the disease.

 

According to industry estimates, the Chinese generic market stands at around $35-40 billion, with the potential to reach $100 billion by 2035, where complex generics, biologics and biosimilars will act as growth levers.

 

“The recent winning of bids demonstrates that Indian firms can meet China’s exceptionally tight price ceilings and supply-volume requirements,” the industry executive quoted above added. 

 

Chinese market uncertainty clouds expansion

 

Analysts believe that while India has finally gained a foothold in China’s multi-billion-dollar generics market, it is not yet a seat at the table. 

 

“China’s tariff cut and VBP wins look great on the headline, but the blind spots are huge. We do not know how durable this openness will be and how aggressively China will push prices once foreign suppliers step in. Or, how policy will shift if relations wobble,” Nirali Shah, analyst at Ashika group said.

 

She added that no one knows how quickly Indian companies will be able to navigate Chinese regulatory demands, payment cycles and on-ground distribution risk.