There is a speculation that prices of certain drugs may go up, considering that costs of Active Pharmaceutical Ingredients (API) that India imports from China have increased compared to last year.

“This comes in the light of re-opening of revamped Chinese facilities that had shut shop last year, due to regulatory issues,” said Karthikeyan Thangaranjan, Associate Director, India Ratings and Research Pvt Ltd.

Costs of certain APIs, which are the core ingredients that go into formulation of drugs, had doubled over the last year, as over a lakh Chinese facilities closed. “Prices of APIs and key starting materials originating from China have started to moderate but are likely to settle at higher-than-the-previous-average levels. We are speculating a 20-30 per cent rise in costs of certain APIs that India imports from China,” Thangarajan told BusinessLine.

Hike in API costs will hit anti-malarial and Antiretroviral (ARV) drug categories the most, as these are procured from the companies by global non-profit organisations or governments at fixed price contracts for two-three years and the companies that produce these may suffer a setback, he added.

Meanwhile, India’s API imports have only increased with China claiming a lion’s share of the pie. According to India Ratings data, while in 2014, India imported 2.46 lakh tonnes of API (72 per cent of the requirement) of which 60 per cent was from China, in 2018, India imported 3.10 lakh tonnes, of which China's share was over 60 per cent.

In 2015-16, the Katoch committee report had recommended how India can reduce it’s import dependence on APIs, but the recommendations, including opening API parks or providing tax incentives, have hardly been implemented.

“The committee that was constituted to brainstorm on how to reduce import dependence has not met more than twice in all these years, when ideally they are supposed to meet once a month,” said an official from Department of Pharmaceuticals.

Most large pharma producers in India import APIs from China, and reported lower gross profit margins over the last year, as the Chinese regulations led to a voluntary shut-down of most of their facilities for reworking production cycles.

While there is a fear that the hike in prices of API will be passed on to the end user, Thangarajan said unilateral price hikes by companies will be difficult because of the competition that exists in the Indian markets. But such a speculation cannot be entirely ruled out, he said.

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