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CPI Preview: Inflation to fall below 14% YoY in May

Record decline in API prices signals relief for pharma sector

Record decline in API prices signals relief for pharma sector
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April 16, 2024 (MLN): Prices of Active Pharmaceutical Ingredients (API), which are used to make formulations, are seeing the biggest-ever drop after Covid-19, bringing relief to the pharma industry that has reported a 50% retreat in API costs, as The Economic Times reported.

The trend, industry experts say will result in high operating profit margins of companies in the next two-three quarters.

India's pharmaceutical industry, which is dependent on China for APIs, intermediates and bulk drugs, had seen an exponential price increase during Covid times.

The rise in API prices continued until early this year. However, things have started to change, people in the know told ET.

"Prices have seen a sharp decrease in the last two months. The demand for APIs has gone down, too," confirmed Mehul Shah, who tracks the Chinese pharmaceutical industry.

The price of the API for paracetamol has gone down to ?250 per kg from ?900 during Covid. It touched ?600 per kg after Covid and has seen a dramatic fall now, market sources told ET.

Similarly, the price of montelukast sodium (an anti-asthmatic drug) has declined to ?28,000 per kg from ?45,000 per kg.

Likewise, the API for antibiotic meropenem is down 40% to ?45,000 per kg from ?75,000.

While China scaled up significantly, the demand for APIs has gone down as India has taken steps to become self reliant, industry leaders say.

Dinesh Dua, former chairman of Pharmaceutical Export Promotion Council (Pharmexcil), said there are several factors that led to the pronounced price decline.

"There are various factors, including that of the Chinese cartelisation being broken in the past six months – both for APIs and intermediates," he said.

Dua said India has also become self-sufficient in some intermediates like PAP for paracetamol and there have also been instances of carry-forward stocks of APIs and intermediates for the last one year.

"Very importantly, there has been overcapacity in the hope of higher demand. On the contrary, there has been a demand compression.

All of these four factors in order of priority have made all the difference in terms of a drop in the prices of Chinese APIs and intermediates," he said.

India's imports of organic chemicals, which includes APIs, rose 39% in FY22 from a year earlier to $12.5 billion, reflecting the reliance on key inputs that go into making medicines.

Domestic companies such as Lupin, Sun Pharmaceuticals, Glenmark, Mankind, Dr Reddy's, Torrent and scores of others are dependent on imports from China.

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Posted on: 2024-04-16T12:10:59+05:00