The woes of the pharmaceutical manufacturers, who are reeling under the pressure of sharp rise in the prices of active pharmaceutical ingredients (API), will be further aggravated as the excipients and specialty chemicals manufacturers have increased the prices to cushion the rising energy and raw material costs.
Major excipients manufacturers like BASF, Dow Chemicals, Evonic Degussa and Lubrizol Corporation have already increased the prices ranging from five to 20 per cent, even as companies like Colorcon are planning to increase the price within a period of six months. The cost hike will have its impact on drug prices as the major portion of the drugs are excipients (the non active pharmaceutical ingredients) while only a smaller portion consists of the API.
The recent increase in energy costs including the increase of crude oil has pressurised these companies to increase the product price, according to the industry sources. According to the announcement made by Dow Chemicals, "The company's energy bill leapt a staggering 42 per cent over the year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher." Andrew N Liveris, chairman and CEO, Dow Chemical Company, said "The new level of hydrocarbons and energy costs is putting a strain on the entire value chain and is forcing difficult discussions with consumers about resetting the value proposition for our products," while announcing a hike of 20 per cent for all its products.
The companies, which have their product price being updated once or twice in a year in a range of five to 15 per cent has been forced for huge price increase in the backdrop of oil price hike and the trend is going to remain some time with the global economic growth seems stagnant, according to sources from excipients industry. "No other company in US manages energy like Dow does and if the company itself is pressurised for a huge price hike, almost all the other companies may follow it," a source told Pharmabiz.
"There is tremendous pressure on the companies because of the rising energy costs and some of it has to be passed on. This is a message to the US government and the customers that the companies need government support to bring the energy costs under control," said a source from Colorcon.
The price increase in raw materials has also played its role in the price hike, according to Atul Marathe, director, South Asia operations of Dow Chemicals. "In our process of developing products with HPMC (hydroxypropylmethylcellulose), we have identified a huge price hike for its raw materials which we are sourcing from suppliers. Similarly, increase in cost of other chemicals like ethylene envelope used in caustic chemistry has a direct impact on our operations," he added.
The industry may also find it more costly to produce modified and controlled release products which needs speciality chemicals as excipients, as these costly materials are poised to get more costly in the coming days. The quantity of excipients used in these products are comparatively more while in common drugs, the APIs would be around 30 percent of the product even as the rest of 70 per cent will be excipients, according to Milind Joshi, president - Global Regulatory Management, J B Chemicals.
The energy crisis may continue upward for some time, as the price of crude oil has reached around US $140 per barrel, added sources. However, the companies may be looking for new energy sourcing contracts with suppliers for reducing the expense.