Spike in Chinese raw material prices hits Indian drug-makers

The spurt in prices of raw materials and intermediates being imported from China has adversely impacted Indian drug-makers.

“There has been significant pricing pressure on our import of key raw materials from China, which has led to a gross margin decline by 3 per cent in the first quarter of the current financial year,” VV Ravi Kumar, Chief Financial Officer, Laurus Labs told BusinessLine.

Many firms engaged in production of raw materials in China are being closed down due to strict implementation of pollution control norms leading to dip in production resulting in price increase.

“There is an urgent need to develop a base for indigenous production of raw materials,” said P Eashwar Reddy, Executive Director, Bulk Drug Manufactures Association-India.

According BDMA, about 90 per cent of intermediates being used by active pharmaceutical ingredients (APIs) makers is being imported from China. As per the data available with Pharmaceutical Export Promotion Council (Pharmexcil), India imports worth $6 to $7 billion raw materials from China for APIs and key standing materials.

“We have roped in the research institutes such as Indian Institute of Chemical Technology and industry players. The efforts are on,” Uday Bhaskar, Director General, Pharmexcil said adding the the Ministry of Commerce and CSIR were also looking into the matter. About 60 products have also been identified.

In-house production

GV Prasad, Co-Chairman and CEO, Dr Reddy’s Laboratories said his company was in the process of taking up in-house production of some raw materials. Even for some others, there have been concerns over the profitability of the API segment in view of pricing scenario in China.

Aurobindo Pharma had hinted that in the anti-biotic segment, it had “no other way” except to pass on the pricing pressure to customers. According to its MD and CEO N Govindarajan, it is also looking at alternatives wherever possible to have an Indian source as well.

Pharmexcil had started efforts to spearhead import-substitution by encouraging raw material production last year. “We have roped in research institutes such as Indian Institute of Chemical Technology and industry players. The efforts are on,” Uday Bhaskar, Director General, Pharmexcil said, adding that the Ministry of Commerce and CSIR were also looking into the matter. About 60 products have also been identified.