The supplier said the increased costs by up to 15 per cent were unavoidable because raw material prices are up as much as 40 per cent.
A series of poor harvests and hiked fuel costs – needed to process and transport maize, or corn, and sugar – have been blamed for the problem.
Evonik’s VP of pharma amino acids Thomas Hermann told in-PharmaTechnologist.com however that raw material costs were not the only reason for the price hikes.
He said: “The main reason for raw material price increase is that we are getting our amino acids from sugar and corn, yes. But in fact all of the variable costs have gone up driving productions costs significantly higher.”
Hermann listed the rising cost of production in China as a driver, due to a new minimum wage level and harsher punishment for wrongdoers.
“For instant a clamp down on waste water treatment means higher costs for them,” he told us. “It means they have significantly higher production costs and that is passed on to the customer.”
A stricter regulatory landscape over products that go into APIs (active pharmaceutical ingredients) has also been a strain on margins, he added.
A welcome change
However, despite the fact Evonik is the world’s third largest producer of amino acids – used in treatments such as high blood pressure and diabetes – Hermann believes the industry will not feel a hefty impact.
Of the lifted costs from the Chinese sector, he said the extra money is a small price to pay for better quality, adding that "costs for cleaner water and better environmental practice is something the market and the pharma industry can afford". He also said that climbing costs in China mean a more level playing field so that Western producers can compete.
Hermann did remark however that though Evonik has growth plans for China, “it depends on cost development long term. If increases in salaries go on the way they have, then sites in China will lose competitiveness with other cheaper destinations like Eastern Europe within the next 10 years.”
As for tightening regulatory policies worldwide, he was of the same view and told us: “It benefits us all – we are all consumers.”