India's pharmaceutical industry is experiencing relief as active pharmaceutical ingredient (API) prices plummet due to overcapacity and aggressive pricing strategies from Chinese suppliers. Increased domestic API production, driven by government incentives and reduced raw material costs, further contribute to the decline. This trend is expected to continue, boosting profit margins for Indian pharma companies.
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New Delhi: Prices of active pharmaceutical ingredients (API) used for manufacturing drugs are seeing a significant drop, bringing relief to India's pharmaceutical industry.
The pharma industry depends largely on China for sourcing APIs, intermediates and bulk drugs. API prices had shot up during the Covid period and stayed elevated until last year. The situation has now started to change, reducing raw material cost and boosting profit margins for pharma companies.
For instance, the price of paracetamol API has dropped from ₹900 per kg during the pandemic and ₹600 immediately after to ₹250 now, market sources told ET. The API for antibiotic meropenem has become cheaper at ₹45,000 per kg compared with ₹75,000.
"Prices of APIs have gone down significantly. It's largely due to over-capacity. We are seeing a huge impact on the prices of antibiotics, steroids, hormones, statins, among others," said Mehul Shah, who tracks the Chinese pharmaceutical industry.
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Shah expects this trend to continue through this year.
An industry expert said the prices have come down because of the aggressive strategy of Chinese suppliers to maintain market dominance. "This aggressive pricing has made Chinese APIs more attractive to Indian pharmaceutical companies, leading to increased imports when prices are low," he said on the condition of anonymity.
Dinesh Dua, former chairman of the Pharmaceutical Export Promotion Council, said there were several factors that led to the price decline.
"While China scaled up significantly after Covid-19, the demand for APIs has gone down too as India has taken steps to become self-reliant," he said. "India's government has implemented the production-linked incentive scheme to boost domestic API production. As a result, companies like Aurobindo Pharma and Torrent Pharmaceuticals have initiated local production of APIs such as penicillin-G. This increased domestic output has contributed to a surplus in supply, exerting downward pressure on prices."
Dua said a decline in the prices of raw materials, such as acetic acid and para-aminophenol, essential for API production, has also contributed to lower costs. "Additionally, easing geopolitical tensions and improved logistics have reduced freight charges, further decreasing the overall cost of API," he added.
According to industry experts, a gradual return of demand to pre-pandemic levels has also contributed to this situation.
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