Drugmakers Warn China Flight Halt in India Could Snarl Supplies

(Bloomberg) -- Drugmakers in India are warning that a halt on some cargo flights from China could imperil an important link in the global pharmaceutical supply chain.

The U.S. relies heavily on India to stock its medicine cabinets, and any slowdown in output could leave pharmacies short of drugs used regularly by millions of Americans.

On April 26, China’s state-run Sichuan Airlines suspended cargo flights to India for 15 days amid an alarming second Covid-19 outbreak there. China supplies 60% to 70% of the raw materials used by India’s drugmakers, as well as ingredients for finished medicines sent to markets worldwide, according to Mahesh Doshi, national president for the Indian Drug Manufacturers’ Association.

If the flights remain on hold, the drug industry fears “cascading effects on its entire supply chain,” Doshi wrote in an April 29 letter to India’s external affairs minister. That could lead to domestic shortages of essential medicines and have a severe impact on exports, she said.

Sichuan Airlines didn’t respond to a request for comment made outside of normal business hours during a holiday in China.

Drugmakers are normally secretive about where medicines are produced. However, the U.S. Pharmacopeia, which helps the industry maintain quality controls, has started a project to pinpoint as much manufacturing as possible. Its Medicine Supply Map has identified where 77% of finished generic drugs are made, said spokeswoman Anne Bell.

There are 62 generic drugs that are produced only in India, Bell said, including several antibacterial treatments and antivirals. India also is home to 31% of active ingredient manufacturing facilities named in applications approved by the U.S., according to the U.S. Food and Drug Administration.

To this point, there haven’t been any reported shortages due to the outbreak in India, but doctors and health experts have been bracing for impacts. Last year, the U.S. saw deficits of everything from sedatives to inhalers to a depression medication when the pandemic started and parts of China were locked down.

“This is very reminiscent of where we were right when Covid hit and people were like ‘What’s happening in China?’” said Erin Fox, a drug-shortage expert with the University of Utah who works closely with the American Society of Health-System Pharmacists. “Because there’s so much opacity, we don’t know exactly how we could be impacted. There isn’t a lot we can do.”

Sireesha Yadlapalli, regional general manager for USP in South Asia, said she has been pleased to see the industry in India hasn’t yet been negatively impacted, but said that the effect of the pause on Sichuan flights could be severe.

Protecting Workers

Many drug companies in India have taken steps to try to protect their workers and keep assembly lines running, even as infections soar. On Tuesday, the country had 382,146 new coronavirus cases, according to Bloomberg data.

“As of now there is no disruption in production,” said Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance. “We don’t know the future, how further it is stretched, but at this moment we are making all preparations, working on all contingencies, to make sure that the medicines are available.”

The U.S. Food and Drug Administration has contacted drugmakers in India as infections in the country soar.

“It’s a dynamic situation,” Acting FDA Commissioner Janet Woodcock said in an interview Wednesday. “We’re going to work closely with manufacturers there. We are concerned in several ways: Will they be able to keep up production and continue to manage quality?”

Some drugmakers with plants in India have struggled to meet U.S. quality standards even before the pandemic started. FDA inspectors over the last several years have cited them for ignoring quality failures and in some cases manipulating results from testing meant to ensure drugs’ safety and effectiveness.

The agency has uncovered similar deficiencies at factories in China and in the U.S. as well, though the generic-drug industry is largely focused around India.

Teva Pharmaceutical Industries Ltd., one of the largest generic drug companies, said in a letter to customers Tuesday that the supply it originates from India hadn’t yet been interrupted and that it has contingency plans in place should shortfalls occur.

“We are closely monitoring the evolving situation in India, and are accordingly adapting our business continuity plans,” Christine Baeder, senior vice president of U.S. generics, wrote in the letter.

Teva’s factories in India aren’t among those the FDA has warned for failing to meet quality standards.

Unpredictable Effects

If drug output in India slows, it could have unpredictable consequences globally. Companies in India such as Sun Pharmaceutical Industries Ltd. and Dr. Reddy’s Laboratories Ltd. make a significant share of generic medicines taken by Americans. At the same time, many U.S. and European drug giants have set up manufacturing in India, drawn by low wages and less-stringent regulation.

Sun Weidong, China’s ambassador to India, has tweeted support for India over the last week and said China is encouraging companies to help fulfill India’s need for medical supplies. On Saturday, Weidong said 61 cargo flights have operated between China and India in the previous two weeks.

About 4 million people work in India’s pharmaceutical industry. Attendance at drug factories is down slightly but not enough to impact production, according to Jain of the Indian Pharmaceutical Alliance and Ashok Kumar Madan, executive director of the Indian Drug Manufacturers’ Association, but some states have imposed full or partial lockdowns.

If the crisis worsens, more workers could be kept away from factories. According to the U.S. Pharmacopeia, 32% of factories in India that produce active pharmaceutical ingredients are in cites currently under some kind of lockdown, representing about 6% of global output.

Companies are keeping factory workers distanced and meet weekly to discuss the supply chain, Jain and Madan said. They also said some companies have hired their own buses to transport workers rather than having them use public transportation.

Many companies hope to be able to vaccinate workers at their plants, though low supply has caused immunization in India to slow. About 9% of India’s almost 1.4 billion people have received one vaccine shot and just 2% are fully vaccinated, according to the Bloomberg Vaccine Tracker.

Some investors are betting that India’s drugmakers will falter, and that competitors elsewhere will benefit.

Shares of Chinese pharmaceutical companies climbed last week after Scarlett Shi, an analyst with Zhongtai International in Hong Kong, said that the situation has stoked speculation that Chinese drugmakers could gain if India’s production falters.

©2021 Bloomberg L.P.