To realize rational resource allocation and the sustainable development of the national economy, government intervention is imperative. With supportive policies and regulatory control measures, the authorities shall steer the sound development of the API industry.
First, formulate more specific and stringent pollutant discharge standards for the API industry. For API production, especially bulk APIs such as penicillin featuring high pollution and high energy consumption, the government shall gradually roll out detailed emission standards. It is necessary to establish an environmental law enforcement file database for export enterprises, and implement dynamic management over penalties and rectification for environmental violations. Authorities should encourage API manufacturers to increase environmental protection investment, and safeguard the legitimate rights and interests of compliant enterprises in accordance with laws and regulations.Enterprises failing to meet emission standards shall be ordered to suspend production and restricted from export. Since compliance with pollutant discharge standards is critical to corporate survival, enterprises will actively meet regulatory requirements for long-term development, thereby reducing environmental pollution.Furthermore, by tightening emission regulation, pollution prevention and control will shift from simple end-of-pipe treatment to full-process production supervision. Pollution will be reduced at the source, and the integrated environmental strategy combining pollution prevention and treatment will be fully applied throughout the whole production process.
Second, reduce or eliminate export tax rebates for bulk APIs. As a common fiscal incentive, the export tax rebate system is widely adopted by WTO member states to enhance the international competitiveness of exported goods.Nevertheless, the government should not encourage large-scale exports of the API industry, which is plagued by overcapacity, cutthroat competition, heavy pollution and high energy consumption and dominated by export-oriented products. Cutting export tax rebate rates will raise operating costs of export enterprises, curb export volume, and mitigate disorderly and vicious competition to a certain extent. Therefore, the government shall lower or phase out export tax rebates for API products, so as to refrain from encouraging the export of low-value-added APIs via macro policies.
Third, guide and support enterprises to expand into the downstream segments of the API industrial chain. The government's regulation on bulk API exports should not be limited to export volume restrictions. Instead, enterprises shall be guided to conduct refined and serialized management of bulk APIs and upgrade to high-end downstream APIs.With technological innovation, enterprises are encouraged to cut energy and resource consumption, extend to the downstream of the industrial chain, improve product technological content and added value, and optimize the structure of exported products.For instance, penicillin salts, China's major export API products, can be further processed into high-value-added downstream derivatives through in-depth research and development.
Fourth, boost the R&D and production of generic APIs. A large number of patented drugs worldwide will expire in the next three years, and the booming generic drug market will present new opportunities for China's API industry and drive the market demand for generic APIs.Chinese API manufacturers will embrace broader development opportunities and break the over-reliance on the production and export of bulk low-end APIs. In recent years, local API enterprises have shown a trend of diversified development. Some manufacturers have moved beyond low-end processing and obtained international certifications, enabling China's API industry to gain a share in the global booming generic drug market.Accordingly, the government shall formulate standardized domestic registration procedures and technical specifications for generic APIs, and refine R&D protocols for generic APIs. This will effectively guide enterprises in related research, development and production, accelerate the transformation from low-value-added bulk API manufacturing to generic API production, and further optimize the development layout of the industry.
