Mumbai: Rising tensions in West Asia are not only affecting crude oil prices but could also impact the cost and supply of medicines. Common drugs like paracetamol, ibuprofen and diabetes medicine metformin are made using petrochemical-based raw materials derived from oil. Any disruption in energy supply chains can affect the global pharmaceutical industry.
Medicines Linked Closely to Oil
A large part of the pharma supply chain depends on petrochemicals. Industry estimates suggest that around 90–99% of raw materials used in pharma are linked to oil-based chemicals. This means any sharp rise in oil prices or supply disruption can directly impact drug production costs.
For example, paracetamol and ibuprofen are widely used painkillers, while metformin is one of the most prescribed diabetes drugs globally. Millions of people depend on these medicines every day.
India’s Key Role in Global Pharma
India is a major hub in the global pharma supply chain. It supplies around 20% of the world’s generic medicines and nearly 40–50% of generic drugs used in the US. However, India depends heavily on imports for raw materials.
In FY25, India imported APIs and intermediates worth ₹39,214 crore, with about 74% coming from China. This dependency increases risk during global disruptions.
Energy Supply Risks Remain High
India imports about 40% of its crude oil through the Strait of Hormuz. Any conflict or blockage in this region can impact oil prices and the availability of petrochemical inputs used in drug manufacturing.
No Immediate Shortage, But Costs Rising
Industry experts say there is no immediate risk of medicine shortages. Pharma companies usually maintain 2–3 months of raw material stock and 3–6 months of finished drug inventory.
However, costs are rising. Air freight rates to the US have increased by 15–30%, shipping delays have extended by 10–20 days, and container costs have surged up to three times. Energy costs make up 20–25% of API production expenses.
Early Signs of Raw Material Shortage
There are early signs of shortage in some materials like Isobutylbenzene (IBB), which is used to make ibuprofen. This chemical is derived from LPG-based feedstock, making it sensitive to energy supply disruptions.
What Happens If Crisis Continues?
Experts say if disruptions continue for a longer time, the impact will be gradual. First, pharma companies’ margins will come under pressure. Then, medicine prices may rise. Finally, supply delays may occur, especially for high-demand generic drugs.
For now, the situation is stable, but it remains a key area to watch in the coming months.
