New Delhi: The prices of raw materials to manufacture medicines have started moving up, yet again. And China is to be blamed.
The prices of raw materials, known as active pharmaceutical ingredients (APIs) or bulk drugs, have grown multifold since November. The same trend was seen in April last year, when several Chinese units and trade corridors shut down due to the Covid outbreak.
Now, as India seeks self-dependence in API production, experts believe China, the largest API manufacturer, is responding with price fluctuation.
According to data shared by the industry, the prices of one of the simplest and commonly used salts, paracetamol, have jumped by over 100 per cent since November. While its regular price is Rs 320 per kg, it is now hovering around the Rs 650/per kg mark — up 103 per cent.
“The organic compound, which is used in making paracetamol, Para Amino Phenol, cost around $3.2 to $3.5 per kilogram, last year. Its price now is around $7.3 to $7.5 per kg. The cost has simply doubled,” V.V. Krishna Reddy, managing director, Sri Krishna Pharmaceuticals, told ThePrint.
The company is known as one of the largest paracetamol manufacturers in the world. It also markets multiple APIs and finished dosage drugs.
According to Baddi-based pharmaceutical firm Ultra Drugs, the prices of Enzyme rutoside, which is used in making formulations to relieve pain and inflammation, have gone up from Rs 1,700 per kg to Rs 5,500 — a jump of 223 per cent.
Baddi in Himachal Pradesh is known as the hub of API or bulk drugs and generic drug production in India.
Prices of APIs of commonly used antibiotic ornidazole, vitamin drugs, and parasite infestation drug ivermectin have also gone up anywhere between 30 and 44 per cent.
“Since November, the prices are again shooting up. Normally winters are considered to be a healthy season with less demand for drugs. Hence, normally during this period, the prices of raw materials generally come down. But this year, we have observed a strange trend in price fluctuations,” said Sandeep Arora, chief executive, Ultra Drugs.
According to data shared by Ultra Drugs, the prices of the API for antibiotic ornidazole have risen by 44 per cent in the last four months — from Rs 970 per kg to Rs 1,400 per kg.
Ivermectin APIs prices have also surged 30 per cent from Rs 17,000 per kg to Rs 22,000.
Prices of bulk drugs for several vitamins have jumped too. For instance, mecobalamin has seen a rise of around 40 per cent from Rs 1.6 lakh per kg to Rs 2.2 lakh.
What APIs are and how much India depends on China
APIs are chemical compounds that are the most important raw material to produce a finished medicine.
In medicine, API produces the intended effects to cure the disease. For instance, paracetamol is the API for Crocin, and it gives relief from body ache and fever.
Every medicine is made up of two main ingredients — the chemically active APIs and chemically inactive excipients, a substance that delivers the effect of APIs to one’s system.
Indian drug makers import around 70 per cent of their total bulk drug requirements from China. In the 2018-19 fiscal, the government had informed the Lok Sabha that the country’s drug makers had imported bulk drugs and intermediates worth $2.4 billion from China.
India-specific strategy or global trend?
While the industry said the upward trend is not specific to India and price rise is being seen across the globe, it is concerned by the drop in prices of raw material ATS-8, which is used in the manufacturing of the popular cardiac drug, atorvastatin.
“The price has come down by 25-30 per cent in the last one year. It is one of the very few products which India exports internationally. If China drops its price further, those few (Indian) players will be out of competition,” said a senior official from Hyderabad-based drugmaker who didn’t wish to be named.
Experts believe this could be the Chinese response to the Narendra Modi government’s Profit Linked Incentive (PLI) scheme, which seeks to achieve self-dependence in API production.
“It is a fact that China is increasing the prices of some of the key raw materials and also adopting dumping methodology,” said B.R. Sikri, vice president of Hyderabad-based Bulk Drug Manufacturers Association (BDMA). He also heads the lobbyist body, Federation of Pharmaceutical Entrepreneurs.
“PLI will take three to four years’ time to take the shape and once it takes off it will have a big dent on China because on one side, China will get affected in India, and on the other, India will become strong in many molecules and will start export to the world, which will dent Chinese base in the overseas market,” he said.
Other factors also in play
According to the industry, there are several other factors impacting APIs’ costs, including the surging prices of crude oil and disruption in free movement of trade.
Sri Krishna Pharmaceuticals’ V.V. Krishna Reddy, who also represents BDMA as national president, said the cost of importing drugs from China has gone up by three to four times.
“Ordinary containers were earlier charged $300-400 which is now $1,500 to $1,800. This is due to the shortage in container movement,” he said. “There is an acute shortage of containers. We are receiving shipments that are just 35-40 per cent of pre-Covid levels. There is still a disruption in the movement of free trade.”
Arora from Ultra Drugs said, “The reason being quoted to us is… pollution norms have become stringent in China, so many industries are closed.”
A senior official from a Hyderabad-based popular drug maker said the Chinese units are also facing higher overhead expenditures due to the pandemic. “The overheads of the units operating in China have gone up. Following Covid-appropriate behaviour at manufacturing units have some costs which are passed on to us,” said the official, who didn’t wish to be named.
“For at least one more year, the cost crisis will continue for Indian pharma. We hope that soon Modi government’s profit-linked incentive scheme gets on to the ground,” he added.