An elaborate report by CNN had clearly brought out that the Indian pharma industry could be the most vulnerable to the Chinese Coronavirus pandemic. It only magnified the already existing problems for the pharma sector in India.
Why China matters to pharma
Over the last 30 years, Indian pharma companies have become giants riding on the back of the generic drugs wave. Today, India produces nearly 20% of all drugs manufactured in the world by volumes. The big challenge is that India relies on China to supply nearly 70% of the raw materials for the manufacture of these drugs. Popularly known as active pharma ingredients (APIs), the factories to manufacture these APIs are largely based in the Hubel province of China. This region is one of the worst affected by the Coronavirus scare as the virus is expected to have originated there. Most factories in this region are shut and hence production is badly affected. Then there is the challenge of dwindling inventories. Most of the Indian pharma companies keep inventories up to 2 months with them. The production disruption has already crossed 1 month and most of the pharma companies are now worried that this could create a major supply chain problem for them. Companies like Cipla heavily depend on China for feeding their supply chain and the impact is evident on the stock price. Even alternate sources of APIs have an indirect dependence on China.