Coronavirus crisis’ latest victim could be India’s pharmaceutical industry

India is heavily reliant on China for imports of raw materials and active ingredients used in making an array of drugs and medicines
But restrictions on travel, trade and production in the wake of the outbreak have throttled supply, sending shock waves through the industry

Coronavirus pandemic

Vasudevan Sridharan

Published: 10:30am, 13 Feb 2020

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As China works to control the spread of the new coronavirus that has claimed more than 1,300 lives so far, there has been another, less likely victim of the outbreak: India’s pharmaceutical industry.

India imports the bulk – nearly 70 per cent – of its raw materials and active ingredients for drug production from China, about US$4.5 billion worth each year. These active pharmaceutical ingredients and key starting materials, as they are known in the industry, are used in everything from vitamin tablets to hormone injections, blood pressure medication and life-saving antibiotics.

Since 2015, pharmaceutical ingredients have been among India’s top 10 imports from China and a sizeable chunk of these were used in the US$19.1 billion worth of pharmaceutical products that the latter exported last financial year, according to official figures.

Even United States drug makers are reliant on China for raw materials, with the vast majority of key ingredients for medicines that many Americans rely on being manufactured there.

As a lot of the raw ingredients that India imports come from producers in and around Zhejiang province, more than 600km away from the outbreak’s epicentre in Wuhan, there had been some initial confidence that the unfolding crisis would not affect supply.

But when the World Health Organisation (WHO) declared the coronavirus outbreak a global health emergency on January 31, it led to protocols over travel and supplies being tightened globally, and the movement of materials and people becoming more restricted.

This, combined with the Chinese government’s own containment strategy and decision to extend the Lunar New Year holiday – keeping factories and other large businesses closed so as to limit the virus’ spread – has sent waves of uncertainty through India’s drug manufacturing industry as producers check their inventories and try to calculate how much longer stocks of raw materials might last.

An employee of Cadila Pharmaceuticals packs strips of capsules at a manufacturing facility in Dholka, Gujarat. Photo: AFP

“Large companies may have stock for two to three months. But the small-scale firm’s inventory can last for only about 30 to 40 days,” said Sudharshan Jain, secretary general of the Indian Pharmaceutical Alliance lobbying group, which counts several top drug manufacturers among its members.

“If there’s a week-long delay in the supplies … the production will not be affected. But, if it lasts a longer period – which no one can predict at this point in time – what will happen then? Prices may shoot up sharply in the short run or there may be a shortage [of medicines].”

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Dr Reddys, an Indian multinational drugs manufacturer based in Hyderabad that has recently sought to expand into the Chinese market, sounded a more optimistic note on the possible impact on supplies, saying it did not anticipate any disruptions “at this time” as a result of the coronavirus outbreak.

“Our current inventory levels of active pharmaceutical ingredients and key starting materials remain unaffected and are sufficient to offset the Lunar New Year holiday extension,” the company said in a statement.

India’s government has yet to make an announcement on the country’s preparedness for a possible pharmaceutical shortage, but authorities are rumoured to be holding regular meetings with industry leaders to assess the state of the nation’s ingredients stockpiles.

A senior official at the health ministry told This Week In Asia, on condition of anonymity, that not only had concerns been raised about a possible impending crisis in India’s pharmaceutical sector – industry experts have warned of price rises of up to 20 per cent for certain medications – but that the outbreak could mean the loss of the “significant progress” several major Indian drugs manufacturers made last year in trying to enter the China market.

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India’s problem is not that it is incapable of producing active pharmaceutical ingredients, said Sujay Shetty, a leader in PwC India’s pharmaceutical and life sciences division, but that “it is a bit expensive”.

“There are several companies which can quickly ramp up the production,” he said, before noting that “even then, the Chinese angle cannot be avoided as we need to import base chemicals from them”.

A pharmaceutical factory is seen near Chandigarh in northern India. Photo: AFP

One industry source, who did not wish to be named, agreed that the process was “not complex”.

“We were exporting these ingredients until the 90s before China started dumping them for low prices,” said the source from a leading lobbying group that represents more than 1,000 pharmaceutical companies in India.

“The industry and the government should see the outbreak as a challenge and an opportunity to reduce dependence on China.”

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