Coronavirus fallout: China-controlled Penicillin G sees over 50% price rise

Coronavirus outbreak has led to a price rise of generic drugs in India. The price of Penicillin G, a key raw material imported from China by some of the Indian antibiotic makers, has also increased.

"We have been told that from March 10 onwards they will start dispatches from China but then the prices have increased for Penicillin G. Around November-December, it was quoted $6 per BOU (Billion Oxford Unit - a measure used for antibiotics) and currently it is $9.5 per BOU," says M Narayana Reddy, the founder of Virchow group of companies in Hyderabad and the president (emeritus) of the Bulk Drug Manufacturers Association.

Roughly, 1.6 BOU is equivalent to 1 kilogram. Reddy adds that the Penicillin G is a major raw material for many of the antibiotics. He further states that even the Chinese are helpless in addressing the situation because their plants are also not running at full capacity.

"Almost all antibiotics manufacturers in India buy Penicillin G, including us," Reddy says adding that his company is the biggest buyer from India and purchases around 300 metric tonnes per month. He enunciates that although his company is able to manage the situation at the moment, as he has enough inventory but the new stock that could arrive in a month from now may cost higher at $9 per BOU.

Reddy says that his company uses Penicillin G to make drug intermediary GCLE, some of whose stock is in turn exported to China and the rest is sold in the domestic market. He also highlights that his company will have to proportionately increase the price of GCLE because of basic economics that guides price changes in the inputs reflecting in the output price.

"Afterall, I can buy at a higher price only when I can also sell at a higher price. Even if I cannot make a proportionate increase in the GCLE price, it will have to be to the extent of at least 80 to 90 per cent of the cost increases," Reddy says.  

However, Penicillin G, where China commands global dominance, is not the only antibiotic that has seen a price increase. People in the Indian pharma industry talk of select drug ingredients that have started witnessing price increases in the range of 30-70%, although estimates are varied and are product specific.

Typically, antibiotics such as Penicillin G (and other products based on it such as amoxicillin and ampicillin), tetracyclines and some vitamins like vitamin C are based on the fermentation-based process for development and this is an area where China has achieved global dominance.

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