The ongoing coronavirus outbreak and the subsequent shutdown of factories in China is having severe repercussions for Indian pharma manufacturers and could lead to global shortages.
Shortages and Price Rises in India
India depends on China for 80 percent of the Active Pharmaceutical Ingredients (APIs) that it uses in pharmaceutical manufacturing. Over a quarter of that total comes from factories in Hubei – the epicentre of the outbreak – and Shandong provinces.
With Chinese factories shuttered indefinitely until the outbreak is better contained, India is facing a serious supply crisis. As Umang Vohra, CEO of Indian generics manufacturer Cipla told investors in early February 2020, “A lot of our pharma value chain is linked to China … It is linked for the entire pharmaceutical industry.”
“If this coronavirus thing continues for more than a month or 45 days, that will begin to create a huge amount of issue for the pharma sector,” he added.
Prices of essential medicines have already soared in India since the outbreak began, with paracetamol said to have doubled in cost. S. Srinivasan, managing trustee of Low Cost Standard Therapeutics, a not-for-profit generic drug manufacturer in Vadodara, Gujarat, told the Financial Times that, “Distributors and traders are making a killing.”
Rahul Soni, CEO of Overseas Healthcare, a drug manufacturer based in the northern Indian city of Jalandhar, added that “When this virus wasn’t there, the rate we got from [importers] was INR 7,300 (USD 102) per kg. Today it is INR 10,500 (USD 147) per kg. Prices are extremely high. It’s a big problem.”
A Knock-On Effect for Global Markets
India supplies 20 percent of the world’s drugs by volume, so any upsets to the supply chain in India stand to have global consequences.
“Many of the raw materials, which we may be buying in India, may have dependence on the Chinese intermediate,” said Dilip Shanghvi, managing director of Indian pharma giant Sun Pharmaceutical, which sells mainly to the US market, during an earnings conference call on February 6th. “We think we are buying from India, but there is a China link,” he added.
Moreover, as KS Khumar of the Asia Times reports, India’s federal government is considering export bans on 12 essential drugs including antibiotics, vitamins, and hormones to ensure domestic supply.
Kunal Dhamesha, an analyst at SBICAP Securities, told CNN that companies involved in the manufacture of anti-infective and hormones therapies, including GSK, Pfizer, and Cipla are most at risk from material shortages.
On February 5th, GSK CEO Emma Walmsley said that, “In the short term, we are fine but obviously this is something that we need to keep under review… We regularly monitor our supply chains overall for these kinds of situations, and we are prepared for these kinds of issues, but we need to keep an eye on how long term it will be.”
Although governments and private companies are putting contingency plans in place to deal with potential shortages, the full impact of the coronavirus outbreak on global medicine supplies remains to be seen.
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