India’s pharmaceutical industry — the world’s largest producer of generic medicines — is feeling strain as the Iran war drives up energy prices and disrupts trade routes. The country’s $50 billion pharmaceutical sector supplies about 20% of global generic volumes, with more than half of exports destined for tightly regulated markets such as the US and EU. Indian firms also account for nearly half of the generic prescriptions filled in the United States.
The core vulnerability is reliance on imported active pharmaceutical ingredients (APIs). Some 60%–70% of APIs used by Indian manufacturers come from China. Rising oil prices linked to the conflict have pushed freight rates higher and raised the cost of petroleum-derived chemical solvents used in drug manufacture, increasing the cost base even for basic medicines.
Raw material and solvent prices have surged, packaging costs have climbed, and logistics and insurance bills are rising, including conflict-related surcharges on cover. “The disruption has exposed just how fragile the pharma supply chain is,” said Javin Bhinde, director of SynCore. He noted sharp spikes in inputs such as methanol and isopropyl alcohol have raised production costs for drugs like metformin and paracetamol. Though supplies are easing, Bhinde said prices remain elevated and suppliers are pushing for price increases while higher packaging, freight and container costs add pressure.
Some companies are buffered by two to three months of inventory, but executives warn the real effects could appear within months if resupplies remain uncertain. Commerce Secretary Rajesh Agrawal has said a prolonged conflict could start hurting India’s exports beyond the Middle East, urging the industry to reduce import dependence and increase domestic production. The government has offered short-term relief — waiving import duties on key inputs and permitting limited price hikes on essential medicines — but deeper structural issues persist.
Dinesh Thakur, a former pharma executive turned public health activist, warned the risks vary by product. Chronic medicines can be cushioned by stockpiles for a few months, but cold-chain items such as vaccines and injectables are immediately vulnerable. He argued the current crisis has not reduced dependency on China and may be reinforcing it. Domestic API production exists but can cost 20%–25% more, a “sovereignty premium” many small manufacturers cannot absorb given thin margins and price controls. Building new API capacity takes years; the short-term priority, experts say, should be keeping plants running despite higher energy bills while planning strategic reserves.
Less visible pressures are mounting: solvent price spikes, insurance surcharges tied to conflict risk, and longer, rerouted shipping paths that can add up to two weeks in transit. Companies holding extra inventory tie up cash, and rapidly rising packaging costs have in some cases made the container more expensive than the product inside. “If supply chain disruptions continue, pharma production is likely to be impacted, with rising costs or even global shortages,” said Soumya Swaminathan, former WHO chief scientist.
Swaminathan urged early coordination with major purchasers such as WHO, UNICEF and Gavi on mitigation strategies, recalling special cross-border efforts during the COVID-19 pandemic to ensure flow of vaccine inputs and production by makers like the Serum Institute of India and Bharat Biotech.
Industry estimates put the immediate disruption cost to Indian drugmakers at roughly $300 million to $500 million, with potential for higher losses if shipping problems persist. Many manufacturers are relying on two to three months of safety stock, but some plants that have shut down due to energy issues can take weeks to restart. Bhinde warned that if supply chain pressures persist into the summer, “the real impact could begin from June.”
Generic drugmakers operate on thin margins and under strict price controls, leaving little room to absorb cost increases of 30%–40%, increasing the risk of supply stress if current pressures continue.
Edited by: Keith Walker