Daily News
Fears Of US Drug Shortages Grow As India Locks Down To Curb The Coronavirus
Analysts warn that the COVID-19 pandemic could disrupt the global pharmaceutical supply chain which is heavily reliant on China and India, as India takes harsh measures to combat the spread of the virus, exacerbating an already fragile supply situation.
Key raw materials in drug production are manufactured in China, then exported to India where they are used to make the final product. These drugs are then shipped to countries around the world.
Now, analysts have warned that the COVID-19 pandemic threatens this critical supply chain and could cause significant disruption to the availability of drugs over the next several months.
According to experts who participated in a Morgan Stanley investor call last week, China’s supply activities are improving but India is now a key country of concern.
Risk of disruption
India is the global leader in generic drug production, while China is the world’s largest supplier of active pharmaceutical ingredients (API). India imports nearly 70% of its APIs from China and also depends on them for a variety of other key ingredients in drug production.
The coronavirus outbreak in China has caused supply issues for Chinese drug-ingredient manufacturers resulting in curtailed production and shipments. However, Morgan Stanley’s pharma equity research team noted on Sunday that Chinese manufacturing of API and intermediates — other raw materials — had improved in recent weeks.
Rohit Bhat, research analyst at B&K Securities, a Mumbai-based financial advisory firm, echoed the point, writing on Monday that full disruption in China looked unlikely. Still, he warned that Indian companies dependent on Hubei Province, the original epicenter of the outbreak, would feel the heat and may need to source quickly from other suppliers or traders.
The Morgan Stanley analysts also warned that, “although coronavirus cases are currently limited in India, our experts see risk that rising infection rates could disrupt the drug supply chain.”
The U.S. drug industry has meaningful exposure to India supply; Bhat estimated that Indian pharmaceutical companies supply approximately 40-50% of all U.S. generic drugs.
In a statement on February 27, the U.S. Food and Drug Administration (FDA) Commissioner Stephen Hahn acknowledged that it was closely monitoring the supply chain with the expectation that the COVID-19 outbreak would likely have an impact. This included potential disruptions to supply or shortages of critical medical products in the U.S.
In early March, India restricted exports of 13 APIs and the drug formulations made from them in an effort to protect itself against domestic shortages. Following this decision, on March 11, Hahn told the Senate Committee on Health, Education, Labor and Pensions that the agency had not yet determined how the restrictions would affect U.S. drug supplies.
India locks down
Now the Indian government is stepping up measures to control the outbreak on its own soil. A 14-hour “public curfew” was implemented on Sunday, transport was substantially restricted and authorities announced a lockdown in dozens of cities and districts.
Coronavirus cases in India are still fairly limited relative to the rest of the world. It has 519 confirmed cases, according to Johns Hopkins University, and 10 deaths. In contrast, China and Italy, the worst-hit countries, have reported 3,281 and 6,077 deaths from coronavirus respectively.
However, the Indian government is acting now in an effort to prevent rising infection rates.
Drug shortages?
Given drug companies do not disclose supply chain specifics, it is difficult to predict which specific drugs would be affected by further disruption in India.
Morgan Stanley’s analysts cautioned that drug shortages happen faster in today’s environment given customer hoarding and stockpiling. There is a concern that supply shortages could lead to price-hikes for consumers.
While the outlook remains highly uncertain, pharmaceutical companies plan for disasters.
After hosting a series of COVID-19 calls last week, the Cowen pharma team concluded in a published note that, “any adverse impact (on pharma value chain from COVID-19) thus far has been minimal and the companies appear adequately positioned for the future.” However they gave the caveat that this could be affected by the duration of the pandemic.-CNBC
