India's drug manufacturers are facing a cost crisis

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Mumbai: A surge in the prices of key solvents and intermediates, driven by supply disruptions linked to the West Asia conflict, has pushed India's bulk-drug manufacturers into a cost crisis, forcing several units to halt production, top industry executives said.One of the clearest indicators of stress is paracetamol, among the most widely used drugs in the country. The price of the bulk drug, or active pharmaceutical ingredient (API), in paracetamol has more than doubled in recent weeks-from about ₹220-240 per kg earlier to ₹550-600-driven by shortages of critical inputs and energy sources."The new quote of paracetamol that I got yesterday (Monday) was ₹550 per kg, up from ₹240 earlier," said Kilitch Drugs wholetime director Bhavin Mehta, pointing to the speed at which input costs have risen due to gas and solvent shortage.The government price ceiling, or DPCO (Drug Price Control Order) rate, for the most used variant of paracetamol tablet of 650 mg is fixed at ₹2.01 per tablet.The cost increase is at the API level sold to formulation makers, while retail prices remain capped under government price controls."The API industry is facing a double crisis. While domestic suppliers have jacked up prices, many suppliers from China have also increased their raw material prices," said Yogin Majmudar, chairman of the Bulk Drug Committee at the Indian Drug Manufacturers Association (IDMA). The main issue is with companies increasing their prices taking advantage of the Gulf conflict, he said.Prices of several basic chemicals, reagents and solvents used for making APIs have doubled in just a month, forcing many manufacturers to temporarily shut their facilities. Prices of critical inputs linked to crude and petrochemical feedstocks, such as butyl ethanol, ammonia, naphtha, isopropyl alcohol, dimethylformamide and acetic anhydride, have jumped 30-100% within weeks, squeezing margins across the value chain, especially for smaller pharma firms and contract development and manufacturing organisations (CDMOs)."The cost of many base chemicals for APIs that are linked to crude and petrochemical feedstocks have sky-rocketed due to the West Asia tension which is prompting many chemical companies to cut down or shut production," said Pratik Tholiya, director of Institutional Equity Research at Dolat Capital. This in turn is impacting API manufacturers and pharma companies.Rising freight and raw material costs are prompting even large companies to closely monitor supply chains, even as they say the impact is manageable for now."While we are closely monitoring the situation on the supply chain, our endeavour is to ensure uninterrupted supply," said Deepak Sapra, chief executive officer, API and Services, at Dr Reddy's Laboratories.