How Israel-Hamas war will impact Indian pharma exports
A Closer Look at the Implications of the Israel-Hamas Conflict on the Indian Pharmaceutical Industry
In recent times, the escalating conflict between Israel and Hamas has generated substantial concerns and opportunities for the Indian pharmaceutical industry. The implications of this ongoing turmoil are not confined to the immediate region; they reverberate across international trade routes, causing stakeholders to assess the possible impact on drug shortages and export dynamics. In this comprehensive article, we delve into the multifaceted facets of this conflict and how it might shape the future of Indian pharma exports.
The Israeli-Hamas conflict has set off alarm bells within the Indian pharmaceutical sector. While trade relations between India and Israel have traditionally been harmonious, the recent escalation in hostilities has raised questions about the resilience of this partnership. As a result, stakeholders are now exploring the potential repercussions on the pharmaceutical industry.
Salil Kallianpur, an expert in the field, highlights the impending consequences, with a specific focus on countries like the UAE, Bahrain, Oman, Qatar, Egypt, and Saudi Arabia, all of which could potentially feel the ripples of this geopolitical conflict. In this article, we will take a closer look at how the Indian pharmaceutical industry is navigating these uncharted waters.
The Geopolitical Landscape
At the heart of this issue is the geographical location of Israel and its economic ties with neighboring nations. Israel has developed a self-sufficient pharmaceutical industry with a significant presence of strong generic drug manufacturers. However, when we extend our focus to the rest of the Middle East and the Commonwealth of Independent States (CIS) region, a different picture emerges.
The pharmaceutical markets in these regions are intricately connected to Indian exports. The Indian pharmaceutical industry has long served as a key supplier of essential drugs to countries in these regions. The duration and scale of the Israel-Hamas conflict, coupled with its impact on air and sea trade routes, could disrupt the flow of pharmaceutical products, potentially leading to shortages of vital medications.
Notably, Sun Pharma, through its Israeli subsidiary Taro Pharmaceutical Industries Ltd, is among the Indian companies that could be directly affected by the turmoil. Other prominent pharmaceutical giants, such as Dr. Reddy’s, Lupin, Torrent, Divi’s Labs, and Taj Pharmaceuticals, may also face challenges if the conflict extends its reach.
While some experts, like Shantanu Kumar Singh, foresee potential disruptions in trade, others offer a contrasting view. Abhishek Singh, the CEO of Taj Pharma Group, a leading generic drug manufacturing firm, suggests that Indian companies might seize opportunities in the U.S. and European markets to fill any gaps caused by the conflict.
Rajesh Pherwani, founder of Valcreate Investment Managers, aligns with this perspective, emphasizing the minimal impact of the conflict on Indian pharmaceutical companies. He points out that only facilities related to FDA manufacturing could potentially be impacted. Pherwani also 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.
The Role of Sun Pharma
Sun Pharma, which has a presence in Israel through its subsidiary Taro Pharmaceutical Industries Ltd, remains a central figure in this complex scenario. Taro is listed on the NYSE, and as such, Sun Pharma refrains from commenting on behalf of Taro, the company said in a statement.
However, it is undeniable that the ties between Sun Pharma and the Israeli market are crucial. Any shifts in the dynamics of this relationship could significantly affect the pharmaceutical landscape.
An Optimistic Perspective
R. Uday Bhaskar, Director-General of the Pharmaceuticals Export Promotion Council (Pharmexcil), provides an optimistic outlook. He states that the ongoing conflict between Israel and Palestine is unlikely to negatively impact Indian pharmaceutical exports. In fact, the fiscal year 2022-23 witnessed a substantial surge in pharmaceutical exports to Israel, with a remarkable 40% growth that propelled the total to $92 million, compared to the previous year’s $60 million.
This robust performance is not an anomaly; it reflects a consistent trend in the Indian pharmaceutical industry. The compound annual growth rate (CAGR) has averaged 22% over the past five years, showcasing the sector’s resilience and growth.
The Composition of Exports
The exports to Israel encompass two primary categories. The first category includes bulk drugs and intermediaries, which play a pivotal role in the pharmaceutical supply chain. The second category involves drug formulations and biologicals. The momentum continued during the April-August period of the fiscal year 2023-24, with Indian pharmaceutical exports to Israel exhibiting a 9% increase, reaching $57 million. This marks a significant upswing from the $53 million recorded during the corresponding period in the previous year.
The data provided by Pharmexcil also highlights the growing demand for pharmaceutical products in the Palestinian territories. Despite relatively lower figures, exports to Palestine have 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.
Navigating Uncertain Waters
The Indian pharmaceutical industry finds itself in a state of vigilance as the Israel conflict unfolds. While concerns about trade disruptions exist, pharmaceutical companies also 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, well-regulated, and has shown tremendous resilience during previous conflicts too,” said Abhishek Singh, CEO of Taj Pharmaceuticals.
In fact, the current war situation could lead to an increased demand for essential pharmaceutical goods in Israel, further boosting pharmaceutical ties between the two countries. On the other hand, there could also be a huge increase in medicine demand from the Palestinian territories, a demand that India could help fulfill.
The India-Israel pharmaceutical relationship is standing at a crucial juncture. The ongoing Israel-Hamas conflict has undoubtedly raised concerns and opportunities for the Indian pharmaceutical industry. While some foresee potential disruptions in trade, others remain optimistic about the sector’s growth and adaptability.
As the situation unfolds, the pharmaceutical industry must navigate these uncertain waters, exploring new avenues while upholding their commitment to providing essential medications to regions in need. The resilience and adaptability of the Indian pharmaceutical sector shine through during times of adversity, reinforcing its position as a vital player on the global healthcare stage.
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1. How will the Israel-Hamas conflict impact Indian pharmaceutical exports?
- The ongoing conflict could potentially disrupt trade routes and lead to shortages of essential drugs in the Middle East and CIS region, affecting Indian pharmaceutical exports.
2. Which Indian pharmaceutical companies may be directly affected by the conflict?
- Companies like Sun Pharma, Dr. Reddy’s, Lupin, Torrent, Divi’s Labs, and Taj Pharmaceuticals may face challenges if the conflict spreads to the broader region.
3. Could the conflict create opportunities for Indian pharmaceutical companies?
- Yes, some experts believe that Indian companies might seize opportunities in the U.S. and European markets to fill gaps caused by the conflict.
4. How has the conflict impacted pharmaceutical exports to Israel and Palestine in recent years?
- Despite the conflict, pharmaceutical exports to Israel have shown significant growth, with a 40% increase in the fiscal year 2022-23. Exports to Palestine have also surged by 41%.
5. What is the outlook for the Indian pharmaceutical industry amid the conflict?
- While concerns exist, the industry remains optimistic about its resilience and adaptability, with potential opportunities for growth in alternative markets.