India’s medicine makers in logistical ‘mess’ as coronavirus crisis disrupts pharmaceutical supply chain
- World’s largest provider of generic drugs is seeing its pharmaceutical companies stagger shifts as factory workers fall ill and supplies from China are delayed
- Nearly a third of Indian factories that make active pharmaceutical ingredients are located in areas that were recently placed under pandemic-forced lockdowns
This is the second in a series of stories about the impact of India’s Covid-19 crisis on the Indian and Chinese economies, and the global initiative to restructure supply chains.
At a pharmaceutical facility in Goa, western India, more than 20 employees were recently diagnosed with Covid-19 in rapid succession, but there are no plans to suspend operations as the coronavirus spreads unabated through the country.
“At the end of the day, it is medication, so we have to continue our production,” said Kavita Coulagi, a director at Sigma Laboratories, a solely export-oriented generic and branded drug company. “What we have done is just reduced the number of people coming in, staggered shifts, had more stringent PPE requirements for the staff, and stepped up sanitisation measures.”
Coulagi’s moves are in line with those of other pharmaceutical manufacturers across India, which is currently averaging more than 4,000 coronavirus-related deaths every day.
The international interdependence of the [pharmaceutical] industry has contributed supply shortages, whereas earlier we had implicit faith in supply pipelines
In total, Covid-19 has sickened about 25 million people in the most populous democracy in the world, with the death toll approaching 280,000, according to the Johns Hopkins Coronavirus Research Centre.
“It’s not only about the prices, it’s also about the availability,” she said. “The pandemic is affecting absolutely every part of the manufacturing and packaging process. So, we’ve actually had to absorb a lot of price increases and supply delays.
“The international interdependence of the industry has contributed to supply shortages, whereas earlier we had implicit faith in supply pipelines.”
Coulagi said that while their manufacturing slowdown may affect delivery timelines, they are trying to work smarter to overcome challenges “in a constantly shifting ecosystem, to minimise delays in the delivery of essential medication”.
India is the world’s largest provider of generic drugs, accounting for 40 per cent of US generic drug imports and 25 per cent of all drugs in Britain, according to the India Brand Equity Foundation, adding that India’s pharmaceutical industry fulfils more than 50 per cent of global orders for vaccines, on the whole.
Some of the factory workers [in India] are now demanding gloves and full vaccinations before they even return to work, and of course that’s not happening
While India is such a large manufacturer of finished medications, it still needs active pharmaceutical ingredients (APIs) – the precursor components used in generic drugs – along with inactive ingredients and packaging. Many of those are made in China.
As of July, India was importing 68 per cent of its APIs and reaction intermediates from China, according to a council under India’s Ministry of Science and Technology. China is the world’s largest producer of APIs. More than 11,000 manufacturers pump them out, with India, the US and Japan being the top three export destinations.
The airline reversed its decision after 12 days, resuming flights on May 9 as the coronavirus situation continued to worsen in India.
And on Friday, Beijing-based Caixin Media reported that two state-owned airlines had cancelled a number of cargo flights to India and were applying to suspend all cargo flights to and from India due to “increased cargo instability in the country”, without naming the airlines.
Furthermore, she added that “Indian buyers usually make the same demand through various channels” for a particular number of goods, but then may opt to buy from only one of those sources.
“This has overly inflated demand, which has, to some extent, affected market order and pushed up prices,” Hua said.
Cameron Johnson, an adjunct faculty instructor at New York University and a partner at Shanghai-based Tidalwave Solutions, said that the logistical situation in India was “a mess”.
“There are multiple issues affecting the supply chain in India right now,” he said. “For example, some of the factory workers are demanding gloves and full vaccinations before they even return to work, and of course that’s not happening.”
Johnson expects the supply-chain disruption to continue through this year, but he took a more positive outlook long-term, noting that Indian labour is still relatively cheap, and the country has a large ecosystem for developing generic drugs.
Meanwhile, some experts in India have downplayed the impact of the pandemic on the pharmaceutical market, saying it has not caused major disruptions to the exports of generic drugs nor APIs.
“There won’t be any disruption on the exports [to the US]. On the contrary, exports are bound to increase compared with previous months because of the rising demand,” said Mahesh Doshi, president of the Indian Drug Manufacturers’ Association, which comprises more than 1,000 pharmaceutical companies of various sizes.
“There is no problem at all on the manufacturing side. But there is a bit of a concern about the raw materials from China.”
He added that there will be some price fluctuations of both APIs and generic drugs because of the rising demand, but he emphasised that the supply side is already stepping up.
Home-grown pharmaceutical giants, along with several American and European drug makers, have manufacturing facilities in India due to affordable wages and more lenient regulations. Meanwhile, more than 4 million workers are employed in the country’s pharmaceutical industry.
According to US Pharmacopeia (USP), an independent body monitoring the quality of medicine supplies globally, about 32 per cent of factories that make APIs in India are located in places that have recently been under some form of pandemic-forced lockdown.
Between April 2020 and March 2021, India exported about US$24.44 billion worth of pharmaceutical products, registering an 18 per cent annual growth.
According to the Pharmaceuticals Export Promotion Council of India (Pharmexcil), India’s apex pharmaceutical export body that operates under the Ministry of Commerce and Industry, these numbers are only set to grow in the foreseeable future.
“Reports over increased orders [placed with] Chinese manufacturers could be a panic reaction from purchasers because of the pandemic. The industry wants to be more cautious and seek more inventories. These people may be in a hurry and are rushing to more intermediaries and APIs,” said Pharmexcil’s director general, Udaya Bhaskar.
“Factors such as the highest number of FDA-approved facilities in India, bolstered vaccine production, the struggling global economy and mounting health care expenses will help India in the long run. All of these will add value to the Indian pharmaceutical industry, which already has a global reputation.”
Since last month, several Chinese securities firms have been bullish on the likelihood of Chinese manufacturers replacing those in India – in terms of fulfilling orders for API and generic drugs – in the global supply chain. This, in turn, has pushed up the stock prices of several Chinese pharmaceutic companies to the fluctuation limit.
However, the opportunities for Chinese API manufacturers amid the coronavirus disruption in India will be short-lived, and it is ultimately “impossible” for China to replace the international market share of Indian APIs, according to an official from a Chinese pharmaceutical trade association who asked not to give his name due to the recent “highly sensitive diplomatic tensions” between China and India.
He added that overcapacity has long been a problem for Chinese APIs, and the issue re-emerged after 2019, but this was partially offset by the pandemic as demand for APIs surged last year.
“Chinese API manufacturers should not blindly expand production capacity because of the immediate benefits, because once the pandemic eases or even disappears, companies will lose more than they gain,” he said.
Shi Lichen, founder of Beijing Dingchen Consultancy, also agreed that it was impossible for Chinese manufacturers to replace Indian APIs and generic drugs.
“The impact of the pandemic on the global API market is limited because India manufactures high-end APIs while China supplies bulk APIs, and there is only a little overlap,” Shi said. “China is also lagging behind in generic drug manufacturing, compared with India.”
Sireesha Yadlapalli, regional general manager for USP in South Asia, also attributed the high demand for Indian-made drugs to their “quality and affordability”.
“The pandemic has certainly created challenges for the organisations and people working in manufacturing and supply chains, but the Indian pharma industry continues to be resilient and works in multiple shifts to minimise these effects,” she said.
“There has been an overall increase in drug demands within India and the global market due to Covid-19. If the Chinese manufacturers are witnessing an increase in orders, it may be due to this overall growth in demand.”
