#320 Pulling a Fast OneDeaths Due to Adulterated Cough Syrup, China's Revamped Export Controls, and Pakistan's Critical Mineral Promises
Programming note: Anticipating the Unintended will be on a two-week Deepavali break. Usual programming will resume on November 2.For this edition, we have three discussions lined up for you. Table of ContentsIndia Policy Watch: Dying In IndiaInsights on current policy issues in India—RSJHow many ways can an innocent life be lost in India? Let me count the ways. We have been writing about stampedes, now a feature of our public life. Rail and road accidents happen with sickening regularity. Things can fall over you from under-construction sites or a hoarding collapsing on you. The other day, I was forced to walk a short distance in the prime business district of a metro because no rickshaw or cab was ready to ferry me. During that obstacle-ridden, ten-minute stroll over a busy pavement in broad daylight, I noticed three different ways I might have died or been seriously injured. Loose electrical wires were hanging overhead that I dodged, not knowing what they were meant for. There was a random concrete slab missing in one stretch that could plunge you into a 2-3 foot deep ditch if you weren’t watching your every step. And, of course, the footpath wasn’t meant for pedestrians alone since a car and a minivan decided to speed over it to beat the traffic that had me scurrying into the safety of the bushes that stretched along. All in a day in the life of our country. There are other ways to die as well. Here’s another (from Reuters):
This isn’t an isolated case. Dying from adulterated or fake drugs is quite common in India. Only when you have a high number of cases from a single cluster does it catch the attention of the media or of the authorities. Otherwise, it is just another statistic of dying unnecessarily in India. Human life is cheap in India. Almost 70 years ago, the famous poet Sahir Ludhianvi wrote this about life in India: यहाँ इक खिलौना है इंसाँ की हस्ती Translation: Human dignity is worth a plaything here In this society that’s long lost its soul Where death is cheaper than life itself Every pursuit seems pointless here Not much has changed since then. I’m a huge fan of Sahir but I will demur on the pointlessness of it all. Else, there won’t be this newsletter itself. Kids dying from adulterated cough syrup isn’t a new phenomenon. As far back as the 70s, we have had incidents of exactly the same nature where instead of pharmaceutical-grade solvents like glycerin or propylene glycol used to dissolve other ingredients of a cough syrup, manufacturers use cheaper substitutes like diethylene glycol (DEG) that are poisonous. DEG, even in small amounts, is difficult to process. It damages the kidney, and kidney failure is a common outcome, especially among children. Back in 2020, 12 children died in J&K after taking a cough syrup manufactured by Digital Vision in Himachal Pradesh. There have been other instances of deaths from cough syrup that have followed the same pattern of abdominal pain, vomiting and kidney failure. In 2022, at least 70 children (younger than five) in the African country of The Gambia died of kidney failure after consuming cough syrup made by Maiden Pharmaceuticals, an Indian company. Similar reports of deaths from Indian made cough syrups came in from other parts of the world. Uzbekistan reported 20 deaths, Cameroon reported 12 and multiple tests on Indian cough syrups being sold in Africa, Central Asia and other poor countries showed samples containing DEG. This is all too familiar for anyone following the story of Indian cough syrups. India is the world’s pharmacy, producing over a quarter of the world’s generic drug supply. Poor countries depend on Indian generics for affordable healthcare. This is a sector where India has done well. It takes effort and time to build a credible brand in this area. India should be focused on getting better on quality and strengthening its brand as a generics powerhouse. Instead of continuing to maintain a high quality of production and coming down hard on manufacturers who were responsible for exporting adulterated drugs, the Indian government went down the tired, old route of conspiracy when faced with the cases of adulteration in The Gambia, Uzbekistan and other countries. The head of the Central Drugs Standard Control Organisation (CDSCO) accused the WHO of amplifying a global narrative to defame the Indian pharma industry. The then Indian health minister, Mansukh Mandaviya, alleged that deaths from diarrhoea were being passed off as deaths from cough syrups to malign the successful Indian pharma industry. This is our best excuse these days. That India is fast becoming a superpower / vishwaguru, and a jealous world is working overtime to prevent it. A pliant media does its best to spread this canard. Now that the adulteration and deaths have happened in India, we are busy finding scapegoats. The first action of the MP government was to arrest the doctor who prescribed this drug, as if he should have known that a particular batch of the medicine he had been prescribing for a long time would turn out to be poisonous. Then it blamed the TN government (led by a party in opposition to the BJP that’s in power in MP) because that’s where the cough syrup was manufactured. The promoter of Sresan Pharma has been arrested. It is a matter of time before he blames his factory head, who will then blame some supplier, who in turn will blame the transporter, and so on. Some licenses will be cancelled, a few products will be banned, some bribes paid, some electoral bonds bought, and soon it will all be business as usual. Except for that doctor who will still be in jail. This is how the criminal justice system works in India. Everything is forgotten. Till the next case shows up. Having spent some time getting a first-hand experience of the Indian pharma supply chain, I have some perspective on this issue. The top-tier Indian pharma companies have developed world-class facilities and follow good manufacturing practices that are comparable to the best in the world. They have done this not because of the governance standards of Indian regulators. Instead, they have gotten there by competing with global players in the mature markets of the US and Western Europe. To qualify as exporters to these markets, they had to stand up to scrutiny from inspectors and auditors from the regulators of these markets. Indian pharma exporters to these markets have learnt the hard way to not take short cuts or mislead these regulators. The likes of Ranbaxy, who tried to do this, eventually went down. The best Indian pharma players have learnt not to game these overseas regulators. The price to be paid is very high. However, those who supply for domestic markets or export to low-income countries have no such compulsions. The complex two-tiered drug quality regulatory structure in India is such that there is always enough ambiguity for rent-seeking in good times and distributing blame when things go bad. This is the golden design principle for almost every sectoral regulator in India. The question that’s being asked in the wake of the MP tragedy is how can a cough syrup have 46-48 per cent of poisonous DEG? Surely, it’s a one-off mistake. That’s what the owner of Sresan Pharma is pleading too. That he’s been making these syrups for decades, and this has never happened before. It is a convenient argument for everyone. It is now in the interest of everyone, from the manufacturer, the regulator to the government, to show this was a one-off error and there’s nothing more here. Except that the one-offs keep happening. The truth is, using a cheap substitute for an expensive ingredient is the good, old Indian jugaad that’s used in pharma extensively. More than any other industry, pharma is ripe for this. There’s always another chemical that’s a cheaper substitute with some downsides, like being mildly poisonous or being dangerous to health with prolonged usage. But all that can be managed. This is the usual mindset. So, at the margin, there’s a 5-10 per cent substitution that’s done without any obvious blow-up of large-scale poisoning or ill effects for patients. People have been consuming cough syrup with possibly 2-3 per cent DEG instead of the permissible 0.8 per cent for a long time. They take the syrup for a few days, get diarrhoea or abdominal pain for a while, but then recover before anyone is wiser. This is true for many other drugs, especially those that are bought over-the-counter without prescriptions. This goes on till there’s a bump on the road. Once in a while, instead of dropping a small vial of the substitute poison into the mix, a whole drum gets unloaded. Or, maybe an empty drum that originally carried pharma-grade glycerine was filled with DEG and mistakenly used as glycerine. As was perhaps what happened in the MP case. This is the starting point of this issue. The internal quality control standards of these manufacturers are such that they either don’t detect this, or don’t have tools to detect these or happily overlook these defects. So, a batch with 48 per cent DEG goes to the market and kills children. Now, who should be checking whether these internal standards within a factory are up to the mark? Well, the local arm of the drug regulator (DCGI). They have a periodic calendar for inspecting these plants. Anyone who has had their factories inspected by any regulator knows what a sham it is. In the best of scenarios, the plant manager knows of the visit, plans for it and ensures everything is stage-managed for the inspection to sail through. In any case, there’s not much to worry about. The sampling techniques used by the inspectors are outdated, the labs that test them are poorly equipped to check for basic quality, and the adulteration only gets sophisticated every year, which the lab has no clue about. There are limited random checks done with samples directly from the market, and it is no surprise, therefore, that there has never been a single case of drug recall from the market in India. Since the regulations and guidelines have only grown over the years (because we never delete any of them), they have become more complex and all-encompassing. It isn’t possible for any inspection team to check for everything that’s now the law. Two things happen here. One, the local inspection team has an embarrassing number of rent-seeking avenues that it exploits to the hilt without actually doing a thorough inspection. Two, the complex set of guidelines to be followed enables them to prepare a detailed report with all kinds of generic observations and defects that need to be rectified without identifying real failures. This gives further opportunities to extract bribes, and a report with these observations can be used in future to show that the regulator had done its job well, and it was the company that failed to comply. This is the classic operating model of the Indian regulator - a shoddy inspection followed by a comprehensive report that doesn’t focus on egregious errors (because they haven’t looked for them) but has a long list of issues that can be used as a fig leaf by the regulator in the future. In almost every case of a systemic failure across sectors, you will find the regulator coming back with some report that says it had already pointed out these flaws (in whatever oblique way) in their report, thus exonerating itself of all blame. When was the last time you found a single regulator being dragged into a criminal negligence case because of their lax oversight or systemic dereliction of duty in maintaining quality standards in such cases? The solution to this is available but difficult to implement, given the entrenched interests. The global standards of manufacturing and testing drugs are available to the Indian regulator and top-tier Indian pharma exporters. It is easier to dump the existing set of guidelines that serve no purpose except to add complexity and adopt the global standards. This will reduce arbitrariness and provide a multiple maker-checker model with accountability defined at each level. Companies that don’t pass these standards won’t be allowed to sell their products in the market. This will mean either companies upgrade themselves to the new standards or get out of the market. This one-time clean-up has been done across many countries that have in the past dealt with the proliferation of fake and adulterated drugs. We won’t be the first. But that will end a perfect ecosystem of corruption and mutual back-scratching. And to benefit whom? The ordinary citizen? That life is cheap in India. Global Policy Watch: China’s at it AgainGlobal issues relevant to India—Pranay KotasthaneDays ahead of the planned Trump-Xi meeting, China predictably announced not one but seven different export restrictions on specific lithium-ion batteries, rare earth products, and superhard materials. Trump responded with a 100 per cent tariff on China, over and above existing rates, along with additional controls on ‘any and all critical software.’ Here’s a quick rundown of China’s new controls:
In short, these are expansive controls on new battery tech, rare earth materials and products, and superhard materials. They apply not just to the US but to the entire world. Think of them as China’s version of the infamous AI CPC’s motivation seems to be that escalating to de-escalate worked rather well for it the last time it negotiated with Trump. So it has now upped the ante by imposing expansive licensing requirements on various materials and processing technologies. Some of these restrictions will be selectively removed during negotiations with Trump. He would again declare victory when some of these restrictions disappeared, while China would have made its point to the world. Whether these controls are brave or foolish is not the most pertinent point. Rather, they again illustrate what we have argued before in this newsletter: China is an international market failure. It is no longer a trusted partner for businesses. To spite the US, China, too, is using export controls that will affect businesses across the world. But to reiterate a point I’ve made before, China is overplaying its hand. Only China can make China + 1 a reality, and it is inadvertently making that happen. The clear abuse of market dominance is not a geopolitical masterstroke but a dumb move that will go a long way in reducing China’s rare earth dominance. Here’s why. One, if Chinese companies can build a DeepSeek without the most advanced GPUs, automakers across the world can definitely build electric motors, drones, and semiconductors without Chinese rare earth magnets. The capability, knowledge, and capital required for getting around chip restrictions are orders of magnitude higher than the effort needed to substitute China’s rare earth magnets. China does not possess any processing and refining techniques that cannot be copied or replaced. Initiatives towards process-for-process, system-for-system, and material-for-material substitutions will likely displace the immediate shock generated by these restrictions over time. Second, Japan has already demonstrated how to counter China’s resource weaponisation. China’s 2010 rare earth export restrictions initially hit the production targets of Japan’s semiconductor, automobile, and advanced material industries. However, there is no evidence of systemic job losses due to this move. This move forced Japan to look for substitute sources, build stockpiles, invest in urban mining, and partner with other countries. The net result is that Japan is less dependent on China’s rare earths today than in 2010 (down to 60 per cent from 90 per cent) and consumes half the rare earths it did in 2010. Third, a rise in prices of rare earths will help companies in other countries compete with China’s unfair subsidies. The problem hitherto wasn’t that these magnets were costly, but that they were too cheap for others to make production viable. Market prices of Neodymium—used in most rare earth magnets—have halved since 2022. These restrictions are raising prices, sending a signal to other foreign companies to get their act together. Previous efforts towards diversification had limited success because China’s export control curbs were country-specific and undeclared. As soon as other countries began diversifying production, Chinese companies resumed exports and flooded the market. The current restrictions differ in that China has formally acknowledged them as retaliatory actions and established a bureaucratic structure for implementing them, giving them a permanency that didn’t exist earlier. This should give hope to competitors worldwide, and drive home the point for foreign companies and governments to collaborate for tackling this market failure. Resource weaponisation is a sign of weakness, not strength. Lend China a helping hand by making China + 1 a reality. Matsyanyaaya: Investigating Pakistan’s Critical Mineral Resource ClaimsBig fish eating small fish = Foreign Policy in action—Pranay KotasthaneI am yet to get over the image of Pakistan’s Field Marshal displaying some shiny rocks from a briefcase at the White House as proof that Pakistan has untapped critical mineral reserves. Since then, the promises have only got bigger. A Chicago-based PR firm PR Newswire has made two claims:
These claims got my head spinning. The International Energy Agency estimates that mining projects take on average of 16.5 years to move from discovery to first production. Thus, for Pakistan to have delivered its first shipment of rare earths, this process would have begun several years ago. It turns out that one needs to take both these claims with buckets of rock salt. Let’s investigate the first claim. The $6 trillion valuation is not mentioned in any recent technical report published by the Government of Pakistan’s scientific bodies, such as the Geological Survey of Pakistan (GSP) or the Ministry of Energy (Petroleum Division). Official data from GSP and the USGS suggests otherwise. According to the authoritative USGS Minerals Yearbook, Pakistan’s mineral and quarrying industry accounted for just $6.5 billion in FY20, and its mineral exports were less than $1 billion. Thus, the claim of $6 trillion seems far-fetched for now. Even if we were to assume that Pakistan has stuck gold, it seems unlikely that these resources are realisable as reserves. Mineral Reserves are the economically mineable portion of a measured and/or indicated mineral resource. A reserve is a proven asset. To be classified as a reserve, a deposit must have undergone detailed technical and economic studies demonstrating that extraction is justified at a specific point in time. The usage of the $6 trillion mineral resource figure indicates that the technical studies to sift reserves from these resources are yet to be done. Overall, this sounds like a nice promotional figure that the government of Pakistan has used in its sales pitch. Coming to the second claim, Pakistan does have gold and copper reserves in the Reko Diq and Saindak mines in Chagai district of Balochistan. One of these mines (Saindak) is being developed by the Metallurgical Corporation of China (MCC) in partnership with Pakistani state-owned enterprises. USGS data on Pakistan also confirms that Pakistan does produce copper concentrates. Thus, the claim on copper concentrates seems to be true. Next, we come to the claims of indigenously prepared Antimony. Antimony is a critical element in flame retardants, semiconductors, and military applications. The global supply chain is heavily dominated by China, while the US has no domestic mine production of antimony. Thus, Pakistan has pitched itself as a player here. However, official data indicates limited production (just 66 metric tonnes in 2021). Recent years have seen a resumption of production but by no means is this some hotspot for antimony production. But the most dubious claim is the one about rare earth reserves. USGS data indicates zero production of rare earths in the 2020-21 minerals yearbook. Pakistan’s own Geological Survey Yearbook has just one throwaway line about investigating the Fly Ash (FA) from Thar Coalfield for rare earth elements. None of the officially released mineral maps point to rare earth element mines. And we are not even talking about rare earth processing and refining here, which requires technical know-how and specialised machinery. This context is crucial for interpreting the claim that the shipment to the US contained “rare earth elements with neodymium and praseodymium”. Neodymium and praseodymium are found naturally within some mineral ores. Therefore, the shipment almost certainly consisted of a raw mineral ore that contains these elements as part of its natural composition. It was not ‘prepared’, i.e. separated or refined shipment of Neodymium oxide or Praseodymium oxide, which are the actual high-value industrial products. Thus, it seems like Pakistan has indeed pulled a fast one. Why the US—despite its infinite state capacity—is willing to countenance these tall claims is a topic for another day. HomeWorkReading and listening recommendations on public policy matters
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#320 Pulling a Fast One
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