'Rest of Middle East may rely on India': How Israel-Hamas war will impact Indian pharma exports

In the wake of the escalating conflict in Israel, the Indian pharmaceutical industry finds itself at a crossroads, with analysts and experts weighing in on the potential impacts and opportunities. The trade between India and Israel initially raised few concerns, but recent developments have caused some to rethink the situation. 

Salil Kallianpur, a pharmaceutical analyst, noted that the conflict’s escalation suggests a broader regional impact. “This escalation could affect the approximately $1 billion trade, with countries like the UAE, Bahrain, Oman, Qatar (BOQ), and Egypt potentially feeling the repercussions. The Kingdom of Saudi Arabia (KSA), a crucial export market for Indian pharmaceutical companies, is also on the radar,” said Salil Kallianpur. 

“While Israel has a self-sufficient pharmaceutical industry with strong generic players, the rest of the Middle East and the Commonwealth of Independent States (CIS) region may rely on Indian exports. The duration and scale of the conflict, as well as its impact on air and sea trade routes, could deplete buffer stocks in the region, potentially leading to shortages of essential drugs,” he said. 

Sun Pharma, through its Israeli-based subsidiary Taro Pharmaceutical Industries Ltd (Taro), is among the Indian companies that could be directly affected. Other prominent pharmaceutical companies like Dr. Reddy’s, Lupin, Torrent, and Divi’s Labs may also face challenges if the conflict spreads to the broader region, as highlighted by Kallianpur. 

Some analysts offered a different perspective, suggesting that the impact may be minimal. “Israel is a well-developed market, and even if the conflict persists, Indian companies might seize opportunities to fill gaps in the U.S. and European markets,” said Hari Natarajan, Founder and Managing Partner at Pronto Consult, a consulting firm that works with companies across sectors, including healthcare. 

Rajesh Pherwani, founder of Valcreate Investment Managers, echoed the sentiment of minimal impact, particularly in the context of Sun Pharma's marginal presence in Israel through Taro. Pherwani pointed out that only facilities related to FDA manufacturing could potentially be impacted. Furthermore, he raises an intriguing possibility: the Israeli company Teva, which has plants in Israel, might face supply disruptions. “This situation could create opportunities for Indian companies, depending on which Teva products are sourced from its Israel plant,” he said. 

Sun Pharma said that it has a presence in Israel through its subsidiary, Taro Pharmaceutical Industries Ltd (Taro). Taro is listed on the NYSE.  As Taro is a listed entity, Sun Pharma doesn’t comment on behalf of Taro, Sun Pharma said in a statement. 

R. Uday Bhaskar, Director-General of the Pharmaceuticals Export Promotion Council (Pharmexcil) has said that the ongoing conflict between Israel and Palestine is unlikely to negatively impact Indian pharmaceutical exports or the industry. In the fiscal year 2022-23, there was a significant surge in pharmaceutical exports to Israel, with a 40% growth that propelled the total to $92 million, compared to the prior year's $60 million. This robust performance reflects a consistent trend, as the compound annual growth rate (CAGR) has averaged 22% over the past five years. 

These exports comprise two primary categories: bulk drugs and intermediaries, as well as drug formulations and biologicals. The momentum continued during the April-August period of the fiscal year 2023-24, as Indian pharmaceutical exports to Israel exhibited a 9% increase, reaching $57 million, up from $53 million during the corresponding period in the previous year. According to data provided by Pharmexcil, although exports to Palestine registered relatively lower figures, they experienced notable growth, surging by 41% to $2.36 million in the financial year ending in March 2023, compared to $1.94 million in the previous year. 

The Indian pharmaceutical industry remains vigilant as the Israel conflict unfolds. While concerns about trade disruptions exist, pharmaceutical companies see a silver lining in the form of opportunities in alternative markets.  

“Although there could be short-term disruptions in the supply chain, we don’t foresee any significant impact on the pharmaceutical trade between India and Israel. In 2022-23 pharmaceutical exports to Israel from India rose to $92 million, up $60 million from the previous year. The pharma sector in Israel is strong and well-regulated and has shown tremendous resilience during previous conflicts too,” said Nikkhil K. Masurkar, CEO, Entod Pharmaceuticals. 

“In fact, the current war situation could lead to an increased demand for essential pharmaceutical goods in Israel and further boost pharmaceutical ties between the two countries. On the other hand, there could also be a huge increase in medicine demand from the Palestinian territories too, which India could help fulfil,” he said. 

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