With China expected to reopen several hundred bulk drug units after the Olympics, prices of some key bulk drugs, including penicillin and paracetamol, have crashed in the Indian market.
Industry sources said the price of an antibiotic like Erythromycin has fallen to Rs 7,500 a kg from Rs 10,500 a kg in less than a month and that of the broad-spectrum antibiotic Ciprofloxacin from Rs 1,700 to Rs 1,350 a kg.
Prices of these and other drugs had risen in India after the Chinese government had closed its drug making units owing to environmental concerns over the last one year in the run-up to the Olympics.
Chinese firms are the largest suppliers of bulk drugs to India and control over 70 per cent of the Rs 15,000-crore (Rs 150 billion) annual market for imported bulk drugs.
The price rise has now started to reverse in anticipation that fresh Chinese supplies would start arriving in a few weeks once the closed units come back into production.
"Indian bulk drug importers were hoarding, but with demand turning slack, they have started clearing the stocks before cheaper Chinese imports start coming in," Nipun Jain, managing partner, Pharmchem, said.
Prices have fallen even as the National Pharmaceutical Pricing Authority recently agreed to a long-pending request to raise retail prices of over 100 medicines to help the domestic drug industry tide over increasing raw material prices and exchange rate fluctuations.
A senior NPPA official said the price increase was based on the actual input cost data provided by the drug companies. He pointed out that the NPPA could not act against hoarding or artificial price increases.
"The price decrease cannot be seen as a trend. It just shows the instability of the market. The erratic supplies of raw materials from China had contributed to the price increase. The depreciation of the rupee against the dollar also made imports costlier for domestic bulk drug suppliers," said D B Mody, chairman, International Trade Committee, Indian Drugs Manufacturers Association.
He claimed that even if prices of some bulk drugs fell, the situation still warranted a further increase in retail rates.
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