Impact of Covid-19 Outbreak on Active Pharmaceutical Ingredients (API) Market
COVID-19 has impacted every single industry, adversely impacting the global economy. One such industry that has faced the wrath of COVID-19 is the pharmaceuticals. The COVID-19 has disrupted both the production and the supply chain of the pharmaceuticals industry.
China is a significant source for many Active Pharmaceutical Ingredients. China being the epicenter of the outbreak, manufacturing and export were stopped completely as factories were closed to curb the spread of the virus. Additionally, with the virus spreading to the other 150 countries, the production and export-import of active pharmaceutical ingredients APIs from other major countries, like the US and India, are also affected. For instance, according to the FDA, China has 15% of the world’s facilities that manufacture APIs for 370 essential drugs, while the US has 21% of those facilities.
The majority of APIs for generic drug manufacturing across the globe are sourced from India, which also supplies approximately 30% of the generic APIs used in the US. However, the Indian manufacturers rely heavily on APIs from China for the production of their medicine formulations, procuring around 70% from China, the top global producer and exporter of APIs by volume.
In the Hubei province, where COVID-19 occurred, there are 44 companies, such as Puracap Pharmaceutical LLC, and Fresenius Kabi, AG that are FDA-approved and manufacture APIs or supply chemical ingredients to API manufacturers. However, since the lockdown, these companies have been shut down hindering the manufacturing and import-export of API in and around China.
It is not just the US and China that are facing difficulties; the entire global demand and supply are affected.
China, for example, is an important destination for exports from several Latin American economies, and it is the top trading partner of Chile, Peru, and Brazil. Usually, pharma players maintain a buffer stock of ingredients for 2-3 months. However, as the pandemic disruption is expected to last longer, the companies dependent on Chinese APIs will be devasted, and production will be curtailed.
Supply chain disruptions and product exportation restrictions from India resulted from manpower shortages in China’s manufacturing plants. This was caused by the quarantine policies adapted and adopted by different provincial governments in China in response to the virus. Supplies were further impacted by the disruption of logistic and transportation systems, restricting access and movement of products to and from ports.
These disruptions in demand and supply eventually will affect the production, which will affect the growth of the global API market.
There are various schemes and policies undertaken by governments to reduce dependency on China for API.
Steps that the Indian government are planning to promote domestic API manufacturing to reduce dependence on China
Additionally, the US has introduced several policies such as exemption of generic drug manufacturers from corporate taxes in Puerto Rico as Puerto Rico was a dominant player in the manufacture of prescription drugs.
It will take some time before manufacturers in China can resume working at their full operational capacity. Till then, countries that are dependent on China need to evaluate and plan for sourcing alternatives.