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Indian pharma battles rising crude oil prices and feels the pinch of high input costs in manufacture
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Nandita Vijay, Bengaluru
March 22 , 2021
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Indian pharma is encountering different challenges across the value chain like the rising crude prices, hike in raw material cost and slump in sales growth.
Viewing the current scene as a challenge and driven by market dynamics, Viranchi Shah, senior vice president, Indian Drug Manufacturers Association (IDMA) told Pharmabiz, “Input cost is an important cog in the wheel of pharma manufacturing. The cost of certain raw materials for drugs like for instance paracetamol, an indispensable antipyretic, has gone up by 80 per cent. This is because para amino phenol an organic compound to manufacture paracetamol imported from China has seen price escalation. In the case of the anti malarial drug, a derivative of artemisinin which is cultivated in China and Central Asia, the price has gone up at least by 3 or 4 times. These factors impact the viability of manufacturing many products.”
Challenges prevailing in Indian pharma, according to Harish Jain, secretary, Karnataka Drugs and Pharmaceutical Manufacturers Association and director, Embiotics, are huge cost escalation of inputs and their supply challenges. This makes businesses unviable and because of DPCO companies are unable to increase prices.
Uncertainty prevails as many therapies like respiratory, pediatric, gastro intestinal, anti infectives are seeing downward trend. Most of the SMEs are facing tough times due to this. Further, supply chain disruptions and growth of e-commerce favour large companies and overall drop in income levels of middle class seriously affected business operations, said Jain.
In packaging too, rise in crude prices has resulted in an unprecedented rise in cost of PVC foils and corrugated boxes which has gone up by 20 to 30 percent. This is because of import ban on waste paper leading to shortage of pulp, pointed out Shah.
In pharma marketing, the difficulties encountered are a disruption of sorts. There is a visible fall in demand for drugs as acute therapy segments like dermatology, respiratory and anti infectives which were some of the most growing segments faces drastic decline in sales. The pandemic also impacted reaching out to doctors and supply chain companies. The last one year’s work from home, saw medical representatives and sales teams face reluctance from medical professionals to meet face-to-face as hospitals too restricted entry of pharma marketing personnel for fear of virus spread, said the IDMA SVP.
In research, the issue was one of making huge investments. There are many therapies where the returns are far lower than the investments per se. The industry has been requesting the government to restore the weightage tax reduction of 200 per cent for R&D expenses to help innovation, Shah told Pharmabiz.
Agreeing with Shah was Jatish Sheth, member, steering committee, KDPMA, and member CII Pharma National Committee, who said that there are five challenges. First, decline in sales must pick up to accelerate cash flow. Secondly, access to raw material is a concern. Take for instance, doxycycline’s raw material cost in the last 10 days fluctuates between 8 to 10 per cent. Thirdly, export market entry is difficult as it is not yet opened up fully. Fourthly, rising petroleum-based product prices stifle margins and growth. Fifthly, the shrinking production output has resulted in a gloom giving little room for optimism.
Going forward, the industry says, there is no one solution as every problem needs to be handled in a different manner. It will seek government intervention. To a certain extent, pharma companies noted they would work towards bearing the costs but eventually would need to pass it on to consumers.
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