Iran War Impact: How Rising API Costs Are Driving Paracetamol & Key Drug Prices In India

India's bulk drug industry is facing a sharp cost squeeze as prices of key raw materials and solvents surge amid supply disruptions linked to the ongoing West Asia conflict, according to a report by The Times of India (TOI).

The sudden spike in input costs has forced several manufacturers to scale down or temporarily halt production, raising concerns about the stability of the pharmaceutical supply chain.

One of the most striking examples of this stress is paracetamol, a widely used and essential medicine across the country. The price of its active pharmaceutical ingredient (API) has risen dramatically in recent weeks, climbing from around Rs 220-240 per kg to Rs 550-600 per kg. This steep increase reflects shortages of critical inputs and rising energy costs. "The new quote of paracetamol that I got yesterday (Monday) was Rs 550 per kg, up from Rs 240 earlier," said Kilitch Drugs wholetime director Bhavin Mehta.

Despite this surge, retail prices remain tightly controlled. The government has capped the price of a commonly used 650 mg paracetamol tablet at Rs 2.01 under the Drug Price Control Order (DPCO), leaving manufacturers to absorb much of the cost escalation.

Industry experts told the publication that the pressure is being felt most acutely at the API level, where producers are grappling with both domestic and international price hikes. "The API industry is facing a double crisis. While domestic suppliers have jacked up prices, many suppliers from China have also increased their raw material prices," said Yogin Majmudar, chairman of the Bulk Drug Committee at the Indian Drug Manufacturers Association (IDMA). He added that companies are raising prices amid the Gulf conflict, worsening the situation for drug makers.

The cost escalation extends beyond paracetamol. Prices of several essential chemicals and solvents used in drug manufacturing have surged between 30% and 100% within weeks. Inputs such as butyl ethanol, ammonia, naphtha, isopropyl alcohol, dimethylformamide and acetic anhydride have all become significantly more expensive, largely due to their dependence on crude oil and petrochemical feedstocks.

"The cost of many base chemicals for APIs that are linked to crude and petrochemical feedstocks have sky-rocketed due to the West Asia tension which is prompting many chemical companies to cut down or shut production," said Pratik Tholiya, director of Institutional Equity Research at Dolat Capital.

Specific price increases highlight the scale of the disruption. Isopropyl alcohol has risen from Rs 90 to Rs 120 per kg, while dimethylformamide has nearly doubled from Rs 68 to Rs 125 per kg. Dimethyl sulphate prices have increased from Rs 45 to Rs 62 per kg, and acetic anhydride from Rs 60 to Rs 95 per kg. Faced with such cost pressures, some manufacturers have opted to pause production until conditions stabilise.

Even as costs rise, companies continue to supply essential medicines without major disruptions so far. However, industry insiders warn that the situation could deteriorate if global logistics challenges persist. "The global pharma supply chain is intricately linked. The feedstock of the crude petroleum-based raw material is supplied by Gulf countries which is used by hundreds of raw material or API makers in India and China. If the conflict extends, there will be a shortage issue across countries," said an executive.

The crisis also echoes disruptions seen during the Covid-19 pandemic. "The situation is somewhat similar to the Covid times with high cost of raw material procurement and high freight charges. Larger companies can take the hit for some more time, but smaller API makers are not able to manage it," said a top CDMO executive.

Freight costs have compounded the challenge, with shipping rates from China doubling from $1,200 to $2,400 per container. Additional surcharges of $3,500-5,000 and reluctance among shipping lines to serve Gulf routes are further complicating supply chains, intensifying pressure on India's pharmaceutical sector.