The Indian pharmaceutical industry is getting into the next phase of growth. However, the supply chain issues are keeping the sector from offering affordable medicine at ease. Meanwhile, it is also time to prepare for new pharma products and offer customised logistics solutions.
On April 30, 2024, India's central regulatory body for pharmaceuticals Central Drugs Standard Control Organization (CDSCO) withdrew the power of state governments to issue no-objection certificates (NOC) for manufacturing unapproved, banned or new drugs for export purposes.
This comes after Indian pharmaceutical companies came under international scrutiny for exporting adulterated drugs, particularly cough syrups sold in Gambia and Uzbekistan which also caused the deaths of several children. There were also instances of big pharmaceutical manufacturers recalling their products due to manufacturing defects.
Even though the Indian pharmaceutical industry faced several backlashes in the last two years, the country continues to consolidate its position as the pharmacy to the world.
In fact, India exported drugs and pharmaceuticals worth $28 billion in FY2023-24, an increase of 10 percent from the previous financial year, according to the Ministry of Commerce & Industry. Also, in FY23-24, Indian pharmaceutical exports expanded their global footprint to countries like Montenegro, South Sudan, Chad, Comoros, Brunei, Latvia, Ireland, Sweden, Haiti, and Ethiopia while the top markets for Indian pharma exports were the US, the UK, the Netherlands, South Africa, and Brazil.
The United States of America, which accounted for over 31 percent of the country’s pharma exports in FY223-24, has been recently reporting historically high levels of drug shortages. Even though there are several factors affecting the shortages, one of the important factors is the supply chain disturbances. In fact, in April 2024, the U.S Department of Health and Human Services produced a white paper on “policy considerations to prevent drug shortages and mitigate supply chain vulnerabilities in the United States.”
The white paper points out key issues including a broad lack of transparency, concentration among middlemen, and prices for generic drugs that are driven to levels so low that they create insufficient incentives for redundancy or resilience-oriented manufacturing, distribution, and purchasing.
It reads. “These market failures lead to pharmaceutical supply chains that are brittle, disruption-prone, and too slow to recover from shortages.”
On April 30, 2024, The United States Food and Drug Administration (FDA) Commissioner Robert Califf met with the Indian Pharmaceutical Alliance (IPA), comprising 23 Indian generic pharmaceutical companies, to discuss advancing drug quality in India.
The IPA wrote the purpose of the meeting as “to urge a US-India trade partnership to reduce reliance on foreign sources for both nation’s pharmaceutical supply chain and achieve affordable medicine resilience.”
“The time has come to restore balance and build resilience in these critical networks. This is not merely prudent – it is crucial,” said Sharvil Patel, vice president, IPA and managing director of Zydus Lifescience.
In fact, an April 30, 2024 analysis from IIFL Securities reported that export-focused Indian generic companies are likely to benefit from the situation of drug shortage in the US.
“Our analysis suggests that among the Indian generic players – Aurobindo, Sun Pharma and Gland Pharma have the highest exposure to products under shortage in the US,” it reads.
However, the supply chain that supports the exports of Indian pharmaceuticals is met with several disruptions including long transit times due to geopolitical issues in the Red Sea and high airfreight rates due to increased demand.
For instance, Pratyush Kumar, senior general manager, demand planning and logistics excellence, Glenmark Pharmaceuticals, informed that both the US and Europe routes are affected very badly.
“The sea freight transit time for Europe has gone up from 24 to 45 days, which is almost double. The rates have also gone up along with the increase in nautical miles. Thus it has become unviable to send our products by sea.”
To keep the inventory intact in their target markets and make sure that there is no shortage, airfreight is the only other option. However, airfreight rates have also gone up forcing pharmaceutical companies to take the hit on their margins, which has been already shrinking for the generic pharma industry.
He also pointed out that the crisis has also changed the percentage of pharma sent by each mode of transport. “On the Europe lane, we used to send 40 percent by air and 60 percent by sea. Right now I’m sending 85 percent by air.”
For instance, in the first week of May 2024, WorldACD Market Data reported that demand for airfreight from India to Europe appears to have eased slightly in the last four weeks (April 8 to May 5) from the extraordinarily high levels seen in weeks 8 to 14 (Feb 19 to April 7).
“However,” it also wrote, “on the pricing side, average rates from India ($3.94 per kilo, +164 percent) to Europe are still exceptionally high.
Javin Bhinde, founder of Syncore Consulting informed that to deal with the supply chain crisis pharma shippers are taking several strategies but also accept that it has disrupted the normal flow of pharmaceuticals.
“Shippers that can afford the high airfreight rates are sending it by air to meet the market demands while others are dependent on sea freight and have to go through longer transit times. The shippers are trying to prioritise their shipments. Only the very urgent pharma shipments are sent right now. Shippers are expecting the sea and airfreight rates to come down even though none of them are forecasting the Red Sea crisis to be solved very soon,” he said.
The Indian pharmaceutical industry is also preparing for a future where new kinds of pharmaceutical products and solutions are emerging which will also require new types of logistics offerings. For instance, according to reports, India is becoming an attractive destination for clinical trials in the pharmaceutical sector which will require very specialised logistics solutions.
According to Grand View Research, the Indian clinical trials market size was valued at $2 billion in 2022 and is anticipated to grow at a CAGR of eight percent from 2023 to 2030.
In February 2024, FedEx Express unveiled its FedEx Life Science Center in Mumbai, which it claims “is setting a benchmark in the clinical trial supply chain in India and globally.”
During the launch, Nitin Navneet Tatiwala, vice president of FedEx Express, marketing, Middle East, India Subcontinent & Africa (MEISA) said, “This will act as a one-stop shop for all clinical trial storage and distribution requirements of healthcare customers in India. The new centre is in addition to FedEx’s current Life Science Centers in Japan, South Korea, Singapore, the USA, and the Netherlands – making it a global network of storage and distribution depots to support our healthcare and pharmaceutical customers.”
In a conversation with Indian Transport & Logistics News, Vikas Pawar, a supply chain specialist, also pointed out the rising number of clinical trials in India.
“Clinical trials are a smaller but premium portion of pharma logistics. A lot of regulations need to be followed in terms of chain of custody and temperature control. It is growing because clinical research requires a lot of domestic as well as cross-border movement of samples,” he said.
There's a lot of data logging required. Logistics service providers need to keep records of the temperature being maintained for these clinical trial samples.
“These records are very critical in the experimentation phase as the deterioration of the sample can affect the process. The RNA or DNA quality of samples deteriorates over time. It deteriorates very fast after 72 hours. So before 72 hours, it needs to be put in long-term storage, which is -20 or -70 degrees,” he added.
The opportunities for the Indian pharmaceutical industry to grow are immense with new countries joining its global footprint and drug shortage affecting major economies. However, the supply chain and logistics that support the movement seemed to be the weakest link with a lack of capacity to longer transit time to high freight rates. It is in the midst of this chaos that the logistics service providers have to prepare for personalised medicines and clinical trials that require customised offerings.
This article was originally published in Indian Transport & Logistics News' May-June 2024 issue.