India’s $50b pharma industry faces cost pressures, risk of shortages amid prolonged conflict
Rising oil prices and trade disruptions threaten global generic drug supply from India
India’s pharmaceutical industry, a cornerstone of global generic drug supply, is facing mounting pressure as the Iran war disrupts energy markets and key trade routes.
As the world’s largest producer of generic medicines, India supplies about 20 percent of global volumes, with a significant share exported to regulated markets such as the United States and the European Union.
The sector, valued at around $50 billion, plays a critical role in global healthcare, with Indian manufacturers accounting for nearly 47 percent of generic prescriptions in the US.
However, its heavy reliance on imported active pharmaceutical ingredients (APIs), with 60 to 70 percent sourced from China, has exposed structural vulnerabilities amid the ongoing crisis.
Rising oil prices linked to the conflict have sharply increased freight rates and the cost of petroleum-based inputs used in drug manufacturing. Key solvents such as methanol and isopropyl alcohol have seen notable price spikes, driving up production costs for widely used medicines like paracetamol and metformin.
The impact is spreading across the supply chain, with higher costs for raw materials, packaging, logistics, and insurance. While some of these increases have yet to fully reach consumers, manufacturers are already experiencing significant margin pressure. Industry experts warn that the current disruption highlights the fragility of global pharmaceutical supply chains.
For now, many companies are relying on existing inventory buffers that could last two to three months. However, executives caution that the real impact may emerge in the coming months if supply uncertainties persist, potentially leading to production slowdowns or disruptions.
The Indian government has introduced short-term relief measures, including waiving import duties on key inputs and allowing limited price increases on essential medicines. Officials have also emphasized the need to reduce import dependence and strengthen domestic API production over the long term.
Experts note that while stockpiles may cushion supplies of chronic medicines temporarily, more sensitive products such as vaccines and injectables face immediate risks due to cold-chain requirements. At the same time, shifting to domestic API production remains costly, with local manufacturing estimated to be 20 to 25 percent more expensive.
With additional pressures such as higher insurance premiums, longer shipping times, and rising packaging costs, the industry faces a growing financial squeeze.
Analysts estimate potential losses of $300 million to $500 million if disruptions continue, raising concerns about higher drug prices or even global shortages if the situation persists.
