Excipients Demand Forecasts with the COVID-19 Impact on Pharmaceutical Production

COVID-19 Impact on Pharmaceutical Excipients ProductionIntroduction

As the COVID-19 pandemic spreads worldwide, the number of reported cases has exceeded 4.4 million as of as of this writing and continues to increase. The magnitude of the economic downturn that will follow is still highly uncertain, but consequences are bound to be significant across the globe.

In response to the health crisis created by the virus, pharmaceuticals and med-tech companies have been serving patients and creating solutions to improve public health. Med-tech companies have been focused on creating ways to rapidly and accurately diagnose COVID-19 through the development of molecular tests. Pharmaceutical companies have been starting clinical trials to validate antiviral drugs for treating COVID-19 and working around the clock to develop a vaccine. While these steps have an immediate impact on the pharmaceutical industry worldwide, long-term impacts are also expected to be seen across regional pharmaceutical industries.

Governments worldwide implemented quarantine and travel restrictions to curb the spread of COVID-19; however, such measures jeopardize industrial operations, including those of pharmaceuticals. Along with temporary production shutdowns in some countries, the pharmaceutical industry also faces severe consequences of supply chain disruptions. The global supply chain of medicines is under pressure because of a deficit of raw materials such as Active Pharmaceutical Ingredients (APIs) and excipients.

The demand increase for antiviral medicines is predictable in the short term, but there is an expected reduction in demand for medicines for other ailments. Reasons include the reluctance of patients with other conditions to visit medical facilities and pharmacies for prescribed medicines, along with the postponement of non-urgent medical procedures.

Global supply chain disruption 

The global pharmaceutical industry is dependent on China’s exports, as the country is the largest producer of pharmaceutical ingredients. With the COVID-19 outbreak in China and lockdown impositions, followed by international transportation restrictions, the raw material supply for pharmaceutical drug production from China slowed. This issue has the potential to disrupt pharmaceutical manufacturing in many countries, such as India, the United States, and Europe. A large share of the medicines sold in the United States is produced in China and India, while almost 80% of the United States’ API demand is met by these two countries. As one of the world's largest producers of generic medicines (producing 20% of global generics supply), India imports almost 70% of its APIs from China; therefore, disruption in its supply chain could result in drug supply shortages.

In anticipation of the shortages, governments and regulatory agencies have adopted temporary export restrictions, such as in the United Kingdom, where parallel exports of three drugs used for COVID-19 treatment were banned. India restricted the exports of 26 key drugs and APIs in the beginning of March 2020. This can have a significant impact, especially in the global supply of medicines such as paracetamol, antibiotics, and vitamins.

Global forecast for specialty excipients

According to our analysis, in the likely and best-case scenarios, the effects of disruptions on pharmaceutical production—and consequently on excipients demand caused by lockdowns and travel and transport bans across various countries—will be relatively short term. However, in the worst-case scenario, the supply disruptions due to extended lockdowns in various countries can have a more substantial impact on OSDF drug manufacturing and, in turn, significantly impact the demand growth of excipients globally.

Global Demand Specialty Excipients for OSDF Pharmaceuticals Forecast, 2019 - 2024

OSFDs excipients demand through 2024

Regional forecasts vary widely depending on factors such as country level lockdown length, travel and transport bans, the extent of COVID-19’s economic impact, and dependence on imports. For example, in India, although imports of pharmaceutical raw material from China resumed in mid-March, the current lockdown situation in the country has disrupted pharmaceutical production, as the ban on public transportation is making it difficult for workers to reach manufacturing plants. This is also disrupting the supply of packaging materials, among other essentials supporting the pharmaceutical industry. It is essential to study each region’s market of pharmaceutical excipients individually to fully understand the repercussions and better equip the strategies for different excipient markets globally.

Kline’s report on Specialty Excipients for Oral Solid Doses: Impact of COVID-19 on the Global Market provides insights into market forecasts in different regional markets in different scenarios.

Future changes in the industry

While in the short term, the pharmaceutical industry is expected to recover as the supply chain resumes, there are bound to be some long-term lessons. Most pharmaceutical manufacturers in the past implemented the “just in time” methodology for their raw material supplies, rather than stockpiling, decreasing inventories but also increasing the possibility of shortages in the event of a supply disruption. This approach may change in favor of higher inventories across the industry, for not only pharmaceutical raw materials but also finished drugs.

Manufacturers may begin to diversify raw material sourcing or invest in spreading production across different markets rather than in concentrated geographic areas, such as China and India. Another longer-term effect is likely to be the reindustrialization of pharmaceuticals production in Europe and the United States to reduce dependency on drug imports. This will lead to an increase in the demand for excipients in these countries.

Shilpi Mehrotra is a project manager for Kline’s  Excipients Market portfolio, and has just accomplished  the new study Specialty Excipients for Oral Solid Dosage Forms: Impact of COVID-19 on the Global Market​. Request more info.

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