Indian companies are paying up to 25 per cent more for China APIs

India's pharmaceutical industry, which is dependent on China for active pharmaceutical ingredients (APIs), intermediates and bulk drugs, has been hit by the Covid-19 surge in that country. Key APIs have become 12-25% costlier in the past few days amid possible supply disruptions that may squeeze margins and raise drug prices, industry executives said. This could also lead to drug shortages, they warned.

There's an an upward trend in APIs of azithromycin, paracetamol, oral and injectable antibiotics, said Mehul Shah, who tracks the Chinese pharma industry.

Beijing exporting less

"The price of APIs from China has gone up in the last two weeks by 12-25%," he said. "China is reducing exports as their domestic demand and consumption have gone up substantially due to the fresh wave of Covid-19."

In the last two weeks, the price of the API for paracetamol has risen to Rs 550 per kg from Rs 450, market sources told ET. That of Azithromycin rose to Rs 10,000 per kg from Rs 8,700, up 15% in a fortnight. The API for the antibiotic amoxicillin is up 13% to Rs 3,200 a kg from Rs 2,850. The price of the API potassium clavulanate has risen to Rs 19,500 per kg from Rs 17,000.

According to news reports, the Covid situation in China is exploding, with hospitals running out of space and shortages of drugs. This may intensify, with an amplifying ripple effect. According to Shah, supplies will become erratic anyway in January due to the Chinese New year.

"Production in China has dramatically come down due to their zero Covid policy and now due to the new wave," said an expert. "Workers have not been going and nothing is 100% automated. Supplies are difficult to come by. The next few months are going to be challenging for the Indian pharma industry if the situation in China continues."

Heavy dependence
India's imports of organic chemicals, which includes APIs, rose 39% in FY22 from a year earlier to $12.5 billion, reflecting the reliance on key inputs that go into making medicines.

Domestic companies such as Lupin, Sun Pharmaceuticals, Glenmark, Mankind, Dr Reddy's, Torrent and scores of others are dependent on imports from China.

"The entire spectrum of the industry - small, medium, large-scale - is going to get impacted if the situation continues, (as) 90% of the antibiotics needed in India are fulfilled by China," said a pharma advocacy group expert.

The government has announced a production-linked incentive (PLI) scheme to boost domestic production of APIs and reduce the dependence on China, given the tension on the border.

About 25-30% of units that have signed up for this have started producing APIs, which eases some of the pressure, but most will launch operations in 2023-24, an industry executive said."Consumers are unlikely to see an immediate impact, but poor people who are dependent on Jan Aushadhi stores are going to get affected as they have only one month's inventory," another person said.