Brace yourself for medicine shortage

MUMBAI: Come October, and drugs for common cold, flu, pain and diarrhoea, apart from antibiotics, may become hard to get.

Overall, there would be a 30-40% shortage of key drugs two months from now, including those for cancer and tuberculosis, said JS Shinde, general secretary of the All-India Organisation of Chemists And Druggists, the apex body of medical store owners.
“By November, the shortage could increase to 50% and reach as high as 80% by December,” he added.

There are two reasons for this: one, a severe shortage of active pharmaceutical ingredients (or API, which is the basic drug used by pharma firms to make tablets, capsules and syrups), and secondly, price controls in India.

About Rs36,000 crore worth drugs are sold in India each year, or Rs3,000 crore a month.

“We expect the monthly business of chemists to be down 75% (about Rs900 crore nationally) from October onwards,” adds Shinde.

Daara Patel, secretary in chief, Indian Drug Manufacturers Association, sees drugs made of paracetamol, ibuprofen, sulphonamides (to treat diarrhoea) and antibiotics (cephalosporin and erythromycin, used to treat respiratory and throat infections) going off pharmacy shelves in the next few months.

The API shortage came about as China set out stringent pollution norms to defog its cities as it prepared for the Beijing Olympics. This led to the closure of many API producers.

India imports as much as 80% of its pharma raw material requirement, including APIs, from China because it is 10-40% cheaper, said Swati A Piramal, director, Piramal Healthcare.

Shinde says the shortage is not being felt today because medical stores are coping with pre-clampdown inventories.

“But after September, the shocks will be felt everywhere. The current stock will be consumed by then.

People will find it difficult to source drugs they would desperately want,” Shinde warns.
Domestic manufacturers are hurting, too, because shortage is spiking raw material prices and price control has become a bigger headwind.

“After the clampdown, prices of raw material have risen by 30-50%,” Piramal said. About 40-60% of the total costs of a pharma company is accounted for by raw material. 

Tapan Ray, director general of Organisation of Pharmaceutical Producers of India (OPPI), says companies have primarily been sourcing raw material from China because the low cost offsets the price control in India.

Piramal says the government’s policy of not allowing prices of non-scheduled drugs to be raised more than 10% annually is adding to the current problem.
Some companies have no alternative but to stop production.

“The lack of headroom severely squeezes manufacturer margins,” said Ranjit Kapadia, head of research, private client group, at broking firm Prabhudas Lilladher. “Companies are likely to discontinue manufacturing drugs whose input costs have skyrocketed.”
Incidentally, after months of persuasion by industry bodies, the National Pharmaceutical Pricing Authority on August 7 raised prices of medicines such as ibuprofen, ciprofloxacin, metronidazole and multivitamins.

But the bad news is the situation in China is unlikely to improve anytime soon even after the Olympics.

“I don’t think the scenario will improve drastically. China is the world’s major supplier of APIs. Since the spotlight on the country is so much, the government there will continue to slap restrictions,” says Ranjit Shahani, vice-chairman and managing director of Novartis India.

Shinde says the Chinese units that will return to rails will not start full production till at least January 2009.

All this is going to hurt the business of medical stores badly.