The ongoing war in West Asia is going to have an immediate and significant impact on the domestic pharma sector with industry players expecting a steep increase in freight rates, delays in the delivery timelines of pharma products and increase in input costs.
In the short-term, the industry is estimating that every West-bound cargo will have to bear higher shipping costs.
But the impact is going to be much bigger because the conflict has disrupted the entire cargo movement through which big markets like the US, Europe, and Africa are served. While the conflict-affected countries account for 3% of the total exports, India’s drugs exports to the Western region is over 87% of the total global pharma exports.
What did IDMA say?
“Most of our exports are towards Western region. If the supply routes get restricted, the shipping costs will increase because the cargo transit routes will become longer, resulting in additional costs for exporters. The insurance cost will also increase since the underwriters have already raised prices,” said Viranchi Shah, spokesperson, Indian Drug Manufacturers’ Association (IDMA).
Department of Commerce data shows that India exported pharma products worth $911.9 million in 10 West Asian countries in FY25 with the biggest markets include United Arab Emirates, Saudi Arabia, Yemen and Oman. In comparison, total pharma exports stood at $30.38 billion in the last fiscal.
Additionally, industry expect the volatility in crude oil prices could result in higher input costs, thereby making the medicines more expensive for domestic consumers and exports market.
What do industry observers say?
“The real concern is the input costs which is expected to rise,” said Sujay Shetty, global health industries advisory leader at PwC. The surge in crude oil prices could affect the active pharmaceutical ingredient (API) segment which uses petrochemical-derived chemicals to produce and utilise solvents that are essential for drug synthesis, extract impurities, and crystallisation.
Experts said besides costs, the shipments would likely face long delays to reach the destinations. “If a product reaches the US in 20 days, it would now take 30-35 days. But since the situation is evolving, these timeline would keep on changing in the short-term,” said a pharma analyst.
Though some industry players believe there could be market opportunities for the industry. “On the formulations side, the demand could pick up in conflict-affected areas,” said Shetty.