This is an excerpt from the May 6, 2021 edition of Medically Necessary, a health care supply chain newsletter. Subscribe here.
The threat: Drug producers in India are facing rising numbers of COVID-19 cases, skyrocketing prices for raw materials and transportation challenges.
India is a major supplier of drugs for many parts of the world, and the outbreak has the potential to disrupt the global pharmaceutical supply chain.
Some states in India are running out of drugs to treat COVID-19 patients, and drug makers are working overtime to catch up.
Despite those challenges, manufacturers and companies that source drugs say the outbreak hasn’t slowed down production yet.
“For the moment, suppliers believe they can maintain supply,” Paula Gurz, senior director of contracting for generics and biosimilars at the U.S. group purchasing organization Premier, said. “At the same time, it’s something that needs constant attention.”
Exposed: India claims to be the world’s largest provider of generic drugs, and a McKinsey report estimated that India is the third-largest producer of all drugs by volume.
About 10% of drug manufacturing plants serving the U.S. market are located in India, more than any other foriegn country.
India is also home to 19% of facilities producing active pharmaceutical ingredients for the U.S. market.
Given that concentration, Robert Handfield, a supply chain researcher at North Carolina State University, argued India’s COVID-19 outbreak puts drug production at risk.
“I’ve got to believe that the number of cases is going to hurt them,” he said. “You’ve got to start testing people. … When you do find someone who’s sick, you’ve got to get people out of there. It’s going to interfere with operations. I don’t see how it won’t.”
In a recent blog post, Handfield created a map overlaying the number of pharmaceutical manufacturing facilities and the number of COVID-19 cases, which demonstrates why he’s concerned.
On the ground Indian drug manufacturers say the pandemic made manufacturing drugs more expensive and more difficult, and the recent surge in COVID-19 cases is creating new challenges.
In early April — when the average number of daily COVID-19 cases was only 20% of current levels — the Indian Drug Manufacturers’ Association told drug regulators the price for some raw materials skyrocketed over the last year.
According to IDMA members, the cost of paracetamol increased 100% over the last year and prices for propylene glycol rose 300%. Prices for freight and packaging materials have also increased by 20% to 40%, according to IDMA data.
The spike in India’s case numbers over the last six weeks has made the situation worse. According to industry data obtained by The Print, the price of raw materials increased even more dramatically in March and April.
On April 29, IDMA warned India’s external affairs minister that a Chinese state-owned airline had stopped cargo services to India because of the outbreak.
IDMA estimates that about 60% to 70% of key raw materials for the Indian pharmaceutical industry come from China.
“The industry is fearing … cascading effects on its entire supply chain leading to shortage of the essential medicines for the nation’s population as well as severe impact on exports,” IDMA President Mahesh Doshi wrote in a letter to the external affairs minister.
An IDMA publication noted that it expects the Chinese cargo flights to resume by mid-May.
Premier’s Gurz said Indian states haven’t put many lockdown restrictions on drug manufacturers, but the measures could affect transportation.
“Transportation could be a challenge as you have to potentially move goods … to a port through an area that is locked down,” she said.
She also got concerned when passenger flights between the U.S. and India, which often carry pharmaceuticals as cargo, largely stopped. However, she said many suppliers simply switched to cargo flights or sea shipments.
Where are we now? Despite those seemingly major challenges, manufacturers and other stakeholders in the supply chain say drug production carries on.
On the same day IDMA warned the Indian government about problems accessing raw materials from China, IDMA Secretary-General Daara Patel told the attendees of an industry summit that India’s pharmaceutical industry was “normal.”
“This was possible as the pharma companies provided extra facilities to the workers/staff like transportation, food and … lodging facilities,” Patel said, according to an IDMA publication.
A representative from Fresenius, a German company with drug manufacturing facilities in India, said via email that operations are continuing normally.
“Despite the recent guidelines from the local administration regarding curfews and other restrictions, we are continuing our operations as part of the essential services,” a company spokesperson wrote.
On a conference call with investors last week, Steve Collins, CEO of the drug distribution company AmerisourceBergen, said his company’s suppliers have been able to plan ahead and avoid disruptions.
“Manufacturers have had some business continuity plans and … they’re prepared for it,” he said. “We feel that we can get through it but are very cognizant … of what’s going on.”
Backup plans: Gurz credited the absence of major production delays to efforts by Indian drug manufacturers over the last year to make supply chains more resilient.
“There are pharmaceutical companies that are providing essential workers transportation to work or housing them closer to the plant location, changing some shifts so that if there’s curfews the workers are not restricted from getting to work,” she said.
Martin VanTrieste, CEO of the nonprofit generic drug provider Civica Rx, said his organization’s suppliers that rely on ingredients from India have already stocked up to avoid production delays.
Mittal Suttaria, VP of contracting and program services for the group purchasing organization Vizient, said her company’s suppliers also have large stockpiles of raw materials.
“They’re also managing their production differently [compared to] 2020,” she said. “One of them … implemented three different shifts, so if one of the shifts gets impacted, they’re still continually producing.”
Jonathan Kimball, VP of trade and international for the Association for Accessible Medicines, a trade group representing generic drug makers, said generic drug makers have learned a lot from previous disruptions, and it’s paying off now.
“The companies have recognized that you need to have ample stock on hand to weather those disruptions when they impact your supply chain,” he said. “Those lessons have allowed the industry … to get through the global shock to the system following the onset of the pandemic last year and the impact on transportation.”
Shortages: While manufacturers claim production isn’t slowing down, they aren’t able to meet the demand for drugs. Hospitals in India are running out of COVID-19 therapeutics and thousands of people are dying every day.
Drug makers Gilead and Merck are sending resources to India to help boost production of COVID-19 therapeutics, according to Reuters.
Sudarshan Jain, secretary-general of the trade group Indian Pharmaceutical Alliance, told Generics Bulletin that the spike in COVID-19 cases has dramatically increased the demand for therapeutics like favipiravir, remdesivir and tocilizumab. He claims the industry will be able to meet that demand within three to four weeks.