The global pharmaceutical supply chain has been disrupted. India, the largest country in the world as a generic drug, is the world’s 13th-largest exporter of drugs, but it ranks third in exports and is a major supplier of medicines to the world. Behind The Indian generics, however, is highly dependent on Chinese raw materials. Recently, the Indian government also sent a special plane to China to purchase raw materials.
In the past three years, Indian drugmakers have imported nearly 70% of its raw materials from China.
At the beginning of 2020, the new corona virus “attacked” China, workers shut down, factories shut down, manufacturing was put to a halt, the impact of the global impact. The shocked industries are rethinking, and is the world too dependent on “Made in China”?
India, the “world pharmacy”, is dealing with the shortage of RAW materials, but it is also beginning to look at what to do to find a balance between costs and risks.
World Pharmacy “In a Hurry”
“I source raw materials from the world’s medicinal markets, ship them to factories in Jingzhou for purification, and then export them abroad, with the largest orders coming from India, ” Bruce, who does a foreign trade business in raw materials in Hubei, told The Mail.
Affected by the outbreak, trapped in Hubei home Bruce very helpless, “I am in Wuhan, the door can not go out.” The pharmaceutical trade stopped, the factory did not go to work, raw materials also can not go out, customers do not place an order. “
India, the “world pharmacy” on the other side, is also in crisis because of a disruption in supplies of bulk drug and APIs. Stocks have been held in Less Than June by Indian drugmakers, who are struggling with Chinese raw materials.
To add insult to injury, the Indian government issued a decree on March 13th banning the shipment of Chinese raw materials to India, following a March 11 ban on all foreigners entering the country.
To ensure a stockpile of key API, on March 4th the Indian government began banning the export of 26 apimaterials and agents, including several common antibiotics such as paracetamol, stititineandinand and erythromycin, as well as the hormone progesterone and vitamin B12, which account for 10 per cent of total exports.
India’s ban has severely affected the rest of the world. For the U.S. and Europe, they could be in some drug shortages in the next two to three months. The U.S. Drug Enforcement Administration (FDA) issued a warning and compiled a list of 150 drug sources, reminding drug companies to look ahead for alternativesources of raw materials outside China and India.
China is one of the few countries in the world capable of producing all the chemical raw materials and has become the world’s largest producer and exporter. WHO estimates that China’s API production accounts for about 20 per cent of global production.
India is the second largest market for China’s pharmaceutical exports (the United States is the largest), and according to reports, 68% of India’s total value of API in 2019 will come from China. Industry sources point out that India is 80-90% dependent on Chinese raw materials for key drugs, such as statins.
Trapped Hubei drug dealer
Hubei, which was most affected by the outbreak, is in an important part of the API supply chain.
In 2018, the export of Western medicine in China’s main provinces, data source: China Medical and Health Products Import and Export Chamber of Commerce according to customs statistics
From the data, Hubei is not a major province of API production. However, the largest output of Jiangsu, Zhejiang and Shanghai to operate, can not be separated from the surrounding provinces of migrant workers. India’s Economic Times estimates that about 3m to 4m of China’s 10m pharmaceutical workers live in Hubei and surrounding provinces.
Bruce is one of the 4 million practitioners. He took Wuhan as his base and was engaged in foreign trade in raw materials. On the one hand, he buys plant materials around the world and sells them to API processing plants, and on the other, he helps long-time partners take overseas orders, most of them from Indian pharmaceutical companies.
In this long Spring Festival, his business has completely stagnated.
“I ordered a shipment overseas years ago, and I couldn’t send it. Now the outbreak came, Hubei Province logistics only transport key materials, also dare not let the other side to me to ship. “
The API business is a bulk deal, and plant raw materials are purchased in tons. The hoarding of goods means that the funds cannot be turned around. Trapped at home in Wuhan, Bruce had no choice but to stop his business.
Bruce told Zhixiang.com that the source of raw materials is divided into two categories, one is chemical synthesis, the other is plant extraction, he is engaged in the vegetable raw materials trade.
The supply chain of plant-based API is longer than that of chemical raw materials, and Bruce needs to obtain plant raw materials from the most upstream plant collectors (farmers, cooperatives, pharmaceutical companies) through the medicinal market, and transport tons of raw materials to processing plants to obtain purified raw materials with an original weight of 1% to 10%. He told Zhixiang.com: “Drug processing is very high for purity, different varieties, plant raw materials can purify the proportion of active ingredients in the range of 1% to 10%.” “
The difficulty with this business is also that plant extraction of API is non-standard, high inventory costs, and unstable demand, Bruce’s trade cycle is longer, and the risk is greater.
Typically, he does not start purchasing on a volume until he has confirmed an order and a letter of credit (Letter of Credit, a credit document for cross-border transactions).
Procurement is also a technical activity. Bruce needs to judge, based on experience, whether the quality of the plant’s raw materials (i.e., the proportion of active medicinal ingredients that the plant can purify) meets the criteria before talking about the price and incoming goods. Most of the time, the purchase requires cash.
Plant raw materials will be shipped directly to Uncle Bruce’s processing plant in Jingzhou, Hubei Province, and immediately after the plant is purified, it will be shipped to overseas drugmakers.
In general, from Bruce receiving orders, purchasing, to completing the delivery of purified API to indian drugmakers, it can be completed as soon as one month, but it takes three months to get a payment from the drugmaker. Bruce said that this long cycle is “caused by competition by Chinese enterprises”, after all, China’s raw materials and pharmaceutical enterprises to private small enterprises, the bargaining power is not high.
Because the repayment cycle is too long, he now prefers to be a “buyer” who sells the raw materials he buys to a pharmaceutical company rather than taking the initiative to place an order with an Indian company.
Hubei Province for nearly two months, the body is also under the burden of mortgage and car loans, see the raw materials business can not be connected, Bruce is very worried, and even consider whether to change after the outbreak. Trapped at home and unable to go out, he also found a way to ease the financial pressure – finding friends who opened the mask factory and helping to sell several batches of masks.
Send a special plane to China to buy
Bruce is in a hurry, and so is the Indian government.
In response to the Chinese New Year holiday, India’s big drug makers, such as Cipla, Dr. Reddy’s and Lupin, have stockpiled 30-40 days of inventory in advance, but many smaller companies don’t have the cost to maintain such high inventories. Now, affected by the outbreak of the new coronavirus, the already fragile supply chain has been cut off, once the inventory is used up, the drug factory can only stop working.
The Indian government is helping Sipra through the crisis. According to Indian media The Print on February 28th, the Indian government has partnered with Cathay Pacific in early March to airlift 6 tons of raw materials from China to Mumbai for delivery to Sipula.
Faced with a crisis of raw materials, the Indian government has set up a committee to monitor the supply of drugs, asking local drugmakers to notify the government when drugs are in short supply that the government will help them obtain the raw materials from China. Sipra is one of the drug companies that applied for help.
The price of essential drugs such as paracetamol and Nemuslid has doubled or even tripled, according to vibhor Jain, a drugmaker. Retailers are unable to raise the price of these drugs for the time being, so pharmacies and hospitals are not under pressure, but the pharmaceutical sector is already in crisis. “If the government doesn’t change the price, it won’t be possible to supply drugs at the old price,” Jain said. “
India’s pharmaceutical industry has been calling for more government investment, policy support and “self-reliance” over the past few years.
But because India’s own api companies are small, the state’s policy support is not strong enough, resulting in investment is very backward. “It’s a question of whether it’s a chicken egg, or an egg,” said Mr. Mittal, CEO of Biocon. “
In addition, corporate compliance is not convenient. “India’s API industry has a complex licensing system that requires applications from different institutions for renewal, ” says Thakur Foundation founder, a public health activist. “
In an analysis, Health Analytics Asia said India had been building API factories for up to six years because of insufficient policy and financial support.
The good news, however, is that Factories in China are gradually returning to work.
According to the “21st Century Economic Report” reporter survey, non-Hubei region head RAW materials enterprises are more likely to return to work. The raw material stakes in Hubei have also resumed production capacity of about 30%-40% since the beginning of March.
Bruce also told Zhixiang.com that he learned that Changsha raw materials pharmaceutical factory and Ganzhou pharmaceutical market have returned to work, his long-term cooperation in Hubei Jingzhou processing plant is also preparing for the resumption of work.
On the Indian side, a number of pharmaceutical companies, including Granules India, a major supplier of paracetamol, began receiving Chinese API shipments from waterways since March 10.
However, the overall picture remains bleak. With It taking some time for Chinese factories to get back to maximum capacity, Haitong Securities analyst Michael Chalk ei said it would take at least two months for raw materials to stabilize.
The crisis brought about by this round of the virus has given the Indian government a shot in the arm. According to Pharmabiz’s March 12 report, the Indian government has decided to establish a “rapid approval” mechanism and issue a notice to the Ministry of Environment and Forestry instructing the pollution regulator to quickly approve and release environmental permits from the API factory. As a result, entrepreneurs interested in investing in raw material stors can finally expect to get qualification approval in a shorter time.
But the Indian government’s action, can only say that “far water can not save the fire.” There are also industry figures who say they are not optimistic, with an anonymous practitioner telling the Times of India that “the high cost of producing raw materials over the past decade and the months-long approval time have dampened industry confidence.” “