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Rise in prices of APIs and KSMs impacts industry badly
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Nandita Vijay, Bengaluru
October 25 , 2021
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Indian pharma encounters hurdles of price rise in raw materials which ranges from 25 per cent to 300 per cent. This cost escalation for active pharmaceutical ingredients (APIs) and key starting materials (KSMs) is impacting the industry badly, particularly the micro, small and medium enterprises (MSMEs).
The ever rising fuel prices also stifle margins and growth. This has resulted in shrinking production output giving little room for optimism.
High input cost to manufacture APIs primarily contributes to its high price. The stalling of sourcing from China ever since the Covid -19 pandemic outbreak is leading to short-supply of these key inputs for many formulations across life-style and infectious diseases. So long, over 70 percent of the APIs are imported from China. It is not profitable to produce drugs on loan license because of government has fixed the conversion cost for those companies engaged in contract manufacture under loan license and compliance to the pollution control norms are also difficult, pointed out Kaushik Desai, pharma consultant.
Funding access mainly working capital for MSMEs is yet another issue. The productivity linked incentive (PLI) scheme too does not support MSMEs, he added.
Adding more fuel to the current crisis is the fluctuating petrol and diesel cost with no uniform pricing pan-India. This will impact supply chain and manufacture. The industry is also facing a dearth of infrastructure to ensure uninterrupted supply chain. This also with non-availability of skill workforce to manage digitized processes across production plants in the country are serious hassles for the sector, Desai told Pharmabiz.
According to Harish K Jain, president, Karnataka Drugs and Pharmaceutical Manufacturers Association (KDPMA) and director Embiotic Labs, there are three key issues. First is the cost escalation of inputs and supply challenges making manufacturing operations unviable. It gives no scope for companies coming under the DPCO umbrella to increase prices.
The second is that we are hampered by capital constraints and low conversion cost in contract manufacture. Third is paucity of trained professionals for product development, dearth of investment resources on basic equipment and dedicated areas even for lab-scale trials to demonstrate even proof- of-concept. There is a lack of consistency in approach and this deters growth prospects, he added.
Therefore the small and medium pharma needs hand-holding in a structured manner. This is because they lack confidence in facing regulatory audits, need guidance on documentation management and submission, said Jain.
Lalit Mistry, partner and co-head, Healthcare Sector, KPMG India said, “The pandemic has transformed the way the government plans to bring about a change. It will be important to shift the focus towards the quality of implementation.”
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