The first quarter of 2020 has been one of the most challenging periods for the entire world, facing illness and deaths every day. Coronavirus Disease or COVID-19 caused by the Novel Coronavirus is unanimously the substantial topic of concern. Be it a newly born baby or a senior citizen, this virus is impacting everyone. Although similarities can be drawn between SARS (November 2002, China), MERS (2012, Saudi Arabia) and COVID-19 (2019, China) the impact of COVID-19 unlike others, goes beyond health and life to economic slowdown, widespread unemployment and business shutdown. COVID-19 was declared a pandemic on 11th March 2020, when total cases stood around 120,000 compared to cases in excess of 1,900,000 today. This rapid rise in cases followed by deaths has impacted all spheres of economy. However, we shall be focusing particularly on Pharmaceutical Industry which is the major source of medical innovation.
PHARMA IS BETTER OFF
Pharmaceutical is one among the few sectors to benefit as a whole from the pandemic as it is among the few allowed operation during lockdown. This pandemic is a once in a lifetime opportunity for pharma companies. Increasing demand and sales of testing kits, Personal Protective Equipments (PPE), ventilators and other medical equipments has paved the way for growth and huge profits for pharma companies. There is global boost in demand for medicines as people have started stocking it. Working mechanism for them is simple, more the increase in cases more will be the demand for medications and ultimately profit, especially in countries like USA that lacks regulatory measures for such companies.
IMPACT ON CHINA
The immediate impact of Covid-19 outbreak was increase in cost of some key medicines due to panic buying in chronic categories not only in China but throughout the world. This led to steep rise in cost of drugs and raw materials. Factories are either not producing or producing at a limited scale which disrupts the global supply of medications at the time of emergency. Whether to be understood as a coincidence or bad luck, China was the first struck country with Covid-19. As of today, China is the largest producer of pharmaceuticals which accounts for almost 1/3rd of global production. It is the biggest exporter and producer of Active Pharmaceutical Ingredients (API). Major companies around the globe depend on China for raw materials. With Covid-19, China was forced for having a severe lockdown during initial months of the year. This disrupted production and supply chain of one of the most important country in regards to pharmaceuticals. Although China has resumed its operations after successfully overcoming the peak of pandemic, it will be a while before companies actually produce at their peak capacity. Added to this is delay in supply of equipments from China as a result of quality inspection by authorities due to worldwide complaints.
IMPACT ON INDIA AND USA
Indian Pharmaceutical market is third largest in terms of volume. India largely works on a value added model where it imports raw materials and APIs from China and manufactures the finished product. More than 60% of API requirements of India are imported of which China accounts for almost 2/3rd. Reduced production of APIs led to price rise of generic drugs (drug similar to original drug that have chemical patent) of which India is the leading exporter. Due to Covid-19 India imposed restriction on several drugs initially but lifted it after a month. India also faces inter and intrastate transportation problem. On one hand, trucks carrying coal for running factories are detained whereas on the other hand printers that manufacture packaging are shut. Covid-19 is unlikely to hit credit profiles of Indian pharma companies in short term. U.S.A. is likely to be affected more as 3/4th of API for US is manufactured overseas. It relies on drugs either directly from China or made from APIs which is manufactured in China. Covid-19 has led to disruptions in all sectors; however pharma has emerged as a strong contender.
NEED FOR TREATMENT
All around the globe, large companies having stockpiles are not facing short term shortage and are likely to pass swiftly through this global emergency, however if a prolonged lockdown takes place, shortage is inevitable. Companies have started their hunt for vaccine. However, as per the reports it will be a year before the vaccine arrives in a usable state. The danger of rushing for vaccine is that the nature of virus is not yet familiar to mankind. Possibilities of it becoming stronger always exist which might render the vaccine ineffective and inefficient. Therefore, focus needs to be shifted on enhancing the existing treatments that led to current recoveries.
Covid-19 has highlighted the importance of having a risk management framework. Be it any sector, it is important to have a diversified supply chain which is not restricted to a single supplier like China. Global dependence on one or two countries can blow up the entire industry. Covid-19 has provided India an opportunity to become an alternate hub for manufacturing. Pharmaceutical Industry holds the key to end the pandemic however while we study the impact of Covid-19, we realize that pharma companies all around the world are alarming over fragile supply chains and shortage amid the state of lockdown. Although they are earning much more profit, the pandemic has put a pressure to come up with medications and vaccines. No doubt, the industry has been playing salient role in turning the tide on research and innovation as vaccination is the only possible way out at the moment.