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Indian pharma anxious about Israel-Iran conflict disrupting supply chains
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Nandita Vijayasimha, Bengaluru
October 09 , 2024
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The Indian pharmaceutical industry is anxious about the ongoing Israel-Iran conflict as it could disrupt supply chains affecting availability of active pharmaceutical ingredients (APIs) and other raw materials sourced from Europe and transiting through Middle East.
Though the immediate impact may be limited, the evolving nature of the conflict necessitates vigilance. It is sad for Indian pharma to confront this after the Ukraine and Russia battle. Pharma companies will need to monitor closely and prepare for potential disruptions in the coming weeks. Being proactive in risk management and strategic planning are needed to navigate this complex landscape, pointed out Archana Dubey, chief operating officer, Bal Pharma.
Moreover, the perceived risk of doing business in a conflict zone has supply chain issues, higher insurance cost requiring upfront payments or stringent payment terms from buyers. Challenges of delivery timelines and thinner margins are areas of concern, she added.
Israel primarily imports bulk drugs and intermediates from India. Bulk drugs account for around 65 per cent of pharma exports to Iran. While Indian pharma is a key player globally, war can lead to changes in trade policies deter investments, for companies entering these markets and those already operating there, stated industry observers.
Harish K Jain, president, Federation of Pharmaceutical Entrepreneurs (FOPE) and director Embiotic Labs said, “Geopolitical tensions ensuing from the Israel-Iran war impacting Indian pharma is obvious. Crude oil prices have spiked, directly affecting transportation and manufacturing costs for the pharma sector, which relies on logistics for both raw materials and distribution. The unprecedented crisis is detrimental for India which is the pharmacy of world and almost every country is dependent on its APIs, finished formulations, biologicals and biosimilars. The chain reaction will be cost escalation to ship or airlift pharmaceutical cargo. A fall in exports for the 4th quarter of 2024-25 is imminent. Heightened risks often lead to increased insurance and shipping costs, which can squeeze margins for companies.”
The war tore zones impair India’s access to Middle East markets where many countries import pharmaceuticals from India, and any instability could lead to trade barriers, he added.
From a larger perspective, the innovation coming out from Israel in the area of novel technologies for diagnostics and medical devices which scores of Indian companies are dependent will take a backseat. Transfer of technology and related discussions are seen to be indefinitely delayed, Jain noted.
Manoj Palrecha, president, Karnataka Drugs & Pharmaceutical Manufacturers Association (KDPMA) and managing director, Lake Chemicals said that the first major impact with the ongoing conflict could be a steep price rise which is expected in all the solvents particularly methanol, MDC (methylene dichloride) used by pharmaceutical industries in variety of ways. Besides, toluene and hexane crude by- product is also commonly being utilised in the manufacture of APIs.
The second impact will be on the sea cargo movement which will further get restricted and would lead to a longer transit time. The cascading effect is the reality of expensive freight charges which is inevitable. Moreover the vital Red Sea route will remain disrupted for a long time and shipments from India will face the brunt of being adversely affected with supply chain interruptions, added Palrecha.
Kaushik Desai, pharma consultant said, “The ongoing war has increased the supply chain complexities. Even water transport is likely to get affected mainly on delivery commitments. Many airlines have rerouted their flights to avoid conflict zones, resulting in longer times for both imports and exports. Even shipments will be affected disrupting production schedules.”
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