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Russia-Ukraine war can impact India's pharma sector, experts warn

Russia-Ukraine war can impact India's pharma sector, experts warn

While the geopolitical crisis seems to deepen after Russia’s all out invasion into Ukraine on Thursday, Indian pharmaceutical industry is closely monitoring the situation.

Pharmaceutical products constitute one of the main exports from India to Ukraine. Pharmaceutical products constitute one of the main exports from India to Ukraine.

Indian pharmaceutical industry may experience a ripple effect of the ongoing Russia-Ukraine crisis as majority of domestic players have a strong presence in both the countries. While the geopolitical crisis seems to deepen after Russia’s all out invasion into Ukraine on Thursday, Indian pharmaceutical industry is closely monitoring the situation.

Pharmaceutical products constitute one of the main exports from India to Ukraine. India is in fact the third-largest exporter of pharmaceuticals to Ukraine, followed by Germany and France. Indian pharmaceutical majors like Dr Reddy’s Laboratories and Sun Pharma have a strong presence in Ukraine and Russia.

According to the Dr Reddy’s Laboratories' consolidated financial results for the quarter and the nine months ended December 31, 2021, revenues from Russia were at Rs 4.7 billion. Year-on-year growth of 5 per cent was driven by revenues from new products launched, a favorable forex rate and increase in prices of some of its products, offset partially by a reduction in sales volumes in its base business.

“We have had a strong presence in the region for over three decades. Ensuring the well-being of our staff is the first and foremost priority, along with meeting patient needs and business continuity. We have been monitoring developments closely and preparing accordingly, and continue to do so,” Dr Reddy's spokesperson told BT.

According to Pharmaceuticals Export Promotion Council of India (Pharmexcil), a body under the Department of Commerce, India exported over $181 million worth of pharmaceutical goods to Ukraine in FY21, nearly 44 per cent growth over the previous year, while Russia contributed nearly $591 million last fiscal with a growth of 6.95 per cent in comparison to the previous year.

According to Dr Reddy's annual report, growth of branded generic markets in Russia was hindered due to an overall market slowdown. The pharma major also has the distribution rights of Sputnik V and Sputnik Light in India which is developed by Gamaleya Research Institute and backed by Russian Direct Investment Fund (RDIF), Russia's sovereign wealth fund. The company has, however, said that the vaccine supplies shouldn’t be impacted. “On Sputnik supplies, we have manufacturing capabilities in India. Drug substance is not imported and hence there is no impact,” the spokesperson said.

Similarly, Sun Pharma also has a strong presence in Russia. The Mumbai-based firm along with pharma major Ranbaxy had entered the Russian market way back in 1993, almost simultaneously. Today, Sun Pharma is represented in more than 50 cities of Russia.

“We are monitoring the situation in Russia and Ukraine and are hoping for the best outcome. We are in constant touch with our employees in both countries and they are safe,” a Sun Pharma spokesperson told BT.

Industry watchers also argue that that the impact of the geopolitical crisis on several other industries such as oil and gas may also have an indirect impact on the pharmaceutical industry in India.

“Russia and Commonwealth of Independent States (CIS) are very important export markets from a pharma perspective. Some Indian companies like Dr Reddy, Glenmark etc. have very strong presence in the region. The industry also depends on commodities like crude oil, natural gas, etc. which directly impact transportation costs making Indian exports less competitive. Soya and sunflower oil supplies will also be affected. Freight rates for containerized goods, oil, grains and coal could increase,” said Salil Kallianpur, a noted pharmaceutical analyst.