Indian pharma industry is holding China responsible for the acute shortage of active pharmaceutical ingredients (APIs) and their hefty price escalation. With the Union government's meagre registration fee for Chinese APIs, over 90 per cent of the drugs manufactured in India depend on them. DCGI has fixed a registration fee of $2,000 for any Chinese APIs as against the Chinese registration fee of $20,000 per drug from India.
The Chinese API companies are now capitalizing on the 'law of increasing opportunity cost' which has resulted in abnormal price variation of over 200 per cent (3 to 4 times higher than the original cost per drug) since April, 2008.
The cost of ciprofloxacin has gone up from $22 to $35, oxofloxacin from $45 to $65, livofloxin from $47 to $ 80, paracetamol from $3.25 to $ 5.75, metformin from $7 to $ 12.5, erythromycin from $100 to $200, clarithromycin from $149 to $225, methycobalim from $3,300 a kg to $ 5,500 a kg, vitamins and amino acids have also gone up five fold. With looming API short supplies, experts predict a contraction of generic drug output by 40 per cent.
Blaming the recent earthquake, which destroyed production units and a curb on manufacture of chemical products to keep the Olympics pollution-free, China has stopped supply of APIs, claim industry sources. However, Indian pharma companies say this is only a ploy to hike prices.
Since April, pharma industry was forced to put up with the unexpected API shortage and spiralling prices. The crisis is expected to worsen soon. Union government, grappling with inflation and erratic crude oil pricing, is least interested in saving this sector, voiced sources.
"The drug industry's existence is under threat because of serious financial implications. Suppliers from China no longer honour the 'Letter Of Credit' and have stopped the 90-day LC period. Companies are strapped for funds. We can only blame the Chinese government agencies for creating a shortage and the Union government in not taking requisite measures to make Indian pharma totally dependent on APIs from China," Anjan K Roy, vice president, Karnataka Drugs & Pharmaceutical Manufacturers Association (KDPMA) and managing director, RL Fine Chem told Pharmabiz.
To avert a major crisis, the Government should encourage Indian bulk drug industry and ward off Chinese API suppliers by imposing higher registration fees and custom duties, he added.
Indian API exporters are forced to increase their prices as prices of Chinese intermediates have drastically gone up. The reluctant formulation customers have comprehended the reality and are being forced to agree to the new price, informed Roy.
"Uncertain about the future price situation, companies are stocking APIs at a premium. The present scenario is not conducive for production of pharmaceutical products coming under DPCO. In this situation, only innovative branded formulations, which are the forte of multinational companies (MNCs), will succeed. High prices and higher margins will see pharma MNCs prosper," stated Kumar Seth, managing director, Dove Pharma.
Closure of several small units are imminent with steep fall in their productivity and profitability. Medium-sized companies will increase international presence as a survival option. Large companies would prefer mergers or acquisitions, expressed Nirav Maniar, managing director, Abil Pharma.
If the government is not responding fast in this situation, the Chinese API suppliers would swallow India pharma industry. China will increase prices to an extent that they can profit at the cost Indian pharma units, averred Roy.