Raw nerve: Drugs may get costlier as prices of ingredients surge 30%

Medicine prices in India may rise sharply amid a 30% surge in the cost of key raw materials or active pharma ingredients in the last fortnight primarily due to a scarcity of container ships since the Iran war broke out.

Top industry officials told ET that vessel shortages have restricted raw material movement from China-the biggest supplier to Indian drugmakers. This may hit local manufacturing besides pushing up drug prices as producers may be forced to pass on the higher costs to consumers.

“Importers, squeezed by surging raw material costs, are passing the pain directly to big pharma companies,” said an industry official. “With APIs up, solvents spiking 20-30%, and every shipping line charging a premium, importers have no room to absorb.”

Data accessed by ET showed prices of some key raw materials have risen by more than 60%. For instance, the price of glycerine has jumped 64% from December while paracetamol prices are up 26%.

“Pharmaceutical solvents- made from petrochemicals-have surged 20-30% within a week as the Middle East conflict continues to disrupt global oil supply,” said Mehul Shah, a pharma industry expert. “Since solvents are a direct production input, this directly inflates pharma manufacturing costs. Importers and suppliers have started passing this on to the pharma companies.”

Experts say the scenario may worsen if the war prolongs and that the industry has urged the government to allow them to raise drug prices to offset the higher costs. “Pharma industry being highly price regulated, it is difficult to absorb unprecedented increase in price of inputs,” Harish Jain, national president, Federation of Pharma Entrepreneurs. “The National Pharmaceutical Pricing Authority (NPPA) should take cognisance of this extraordinary situation and allow price hike over and above mandated as per DPCO 2013 Para 19.”

The Iran war is upending shipping routes, escalating freight costs, and may soon start affecting the availability of essential medicines, said Dinesh Dua, former chairman, Pharmaceuticals Export Promotion Council of India (Pharmexcil).

An industry expert said pharma companies tend to keep stock levels at the absolute minimum due to just-in-time inventory management aimed at production efficiency. However, that cushion may get eroded if the war continues for another 10-15 days.

“With vessels stuck, containers scarce and APIs delayed, there is no second line of defence,” said Dua.

Markets such as the UAE, Saudi Arabia and Oman are highly dependent on India for affordable drugs.

The doubling of freight charges and surcharges of $4,000-8,000 per shipment are also exerting pressure on Indian pharma companies.