China chemicals starve Indian pharma

At the Bakul factory outside of Mumbai, they are busy making the ingredients for a range of medicines, including theophylene to help combat asthma.

Chemical costs have soared in India

But over the past couple of months, the cost of the chemicals they need has rocketed. Suddenly, raw materials are in short supply.

"Prices are going up for what is available, but quite a lot of is not available at all," says Yogin Majmudar, Bakul's managing director.

"We've had to pay more than double, just to keep our plant going."

Chinese effect

Mr Majmudar points to China as the root cause of the problem.

If the prices of the raw materials for controlled drugs rises any further, there's a chance that the production of such drugs will simply stop J S Shinde, head of the Maharashtra State Chemists & Druggists Association

Over the past decade, many chemicals factories in India have closed down, as they were unable to compete with imports from China.

But during the Olympics, Mr Majmudar says factories around Beijing have been shut in an effort to cut pollution.

That has led to a shortage of raw materials, which has pushed up prices everywhere.

"It's not that all the materials used to come from China," he says.

"But because China has stopped, there's pressure on materials coming from Taiwan, Korea, Europe. And everyone's taking a little bit advantage and jacking up their prices."

Price curbs

For drugs manufacturers, this feels like a perfect storm. Their margins were already squeezed, because of the cost of oil and the rising value of the Chinese currency.

Ms Piramal says price controls hurt the poor in the end

But they cannot just pass on these extra costs, as drug prices in India are tightly controlled by the government.

Swati Piramal from Piramal Healthcare says her company has been using up its existing stocks of raw materials. But now she is having to sell some drugs at a loss, and she says it is simply not sustainable.

"Here in India we have inflation running at 10%, shortages of raw materials, and input costs are rising," she says.

"If you have price control, what choice do you have? You have the choice of cutting down production, and that's when it'll hurt the consumer, the common person."

Shortages loom

Manufacturers say some drugs may already be hard to find in the smaller towns, but the problem is only just about to bite.

Drugs shortages could result and prices are soaring

J S Shinde, head of the Maharashtra State Chemists & Druggists Association, thinks that manufacturers will simply stop making the drugs that are not profitable and that a shortage of medicines could well be on the cards.

"If the prices of the raw materials for controlled drugs rises any further, there's a chance that the production of such drugs will simply stop," he says.

"I think it's highly likely that after September there'll be shortages of those drugs in India."

Rising prices

In an effort to tackle the problem, the government regulator last week agreed to price rises for over 30 medicines.

But all eyes are now focussed on what happens once the Olympics are over.

Will Chinese suppliers re-open for business, or will raw materials still be difficult to find?

All of which leaves the government on the horns of a dilemma.

Elections are approaching, and it wants to stop prices rising.

But that may mean some important drugs become harder to find.

Neither option will be popular with voters.

But they may have to accept that there is little the government can do, and that the era of cheap medicines from China is over, at least for the moment.

(BBC)