India's pharma paradox: Why the medicine supply chain is crumbling under payment delays 

India’s pharmaceutical industry holds global stature as the 'Pharmacy of the World'. It ranks 3rd globally in drug production volume and exports medicines to nearly 200 countries, offering both affordability and quality. This international success is supported by a cost advantage and efficient manufacturing that is 30–35% cheaper than Western markets.

Yet, behind this robust export engine lies a fragile domestic reality. The credit systems underpinning India’s internal pharmaceutical distribution remain largely informal, lacking the financial discipline needed to match the sector’s global image. Despite a projected market size of $100 billion by 2025, the everyday flow of medicines across India is often delayed or disrupted because of unresolved payment cycles and outdated credit practices.

Unstructured lending chains

Across India’s distribution chain, from contract manufacturers and stockists to local chemists, transactions are commonly built on verbal credit rather than verified financial data. This culture of informal lending allows retailers and small pharmacies to access stock without upfront payments, but it also traps the system in an unstructured cycle. Distributors grant credit based on familiarity, only to face defaults or delayed payments when cash flow tightens at the retail end. Smaller cities and rural districts suffer the most. When working capital is locked up due to unpaid dues, medicine shelves remain empty, not because of supply shortages but because distributors cannot afford to rotate stock.

Global momentum, domestic lag

This gap becomes even more stark considering India’s rising global importance as a pharmaceutical hub. With multinational companies moving away from China, India now stands as the 2nd-largest contract manufacturing player for small molecules globally. This China plus one dynamic has expanded India’s role in international supply chains, but internal systems have not kept pace. While international buyers operate through structured agreements backed by clear financial terms, Indian distributors and retailers continue to rely on trust and assumptions rather than structured credit assessments. This disconnect between global structure and domestic informality creates a hidden inefficiency. It undermines India’s potential to build a truly resilient pharmaceutical economy where both exports and domestic supply chains function with equal reliability.

Toward credit discipline

Addressing this issue requires more than increasing public funding or expanding manufacturing capacity. It calls for embedding financial discipline directly into the supply chain through technology and better governance. Payment delays can no longer be seen as business-as-usual when they affect medicine availability for millions. What fintech achieved for consumer finance, bringing in verified credit scoring and transaction-level risk assessment, now needs to happen within pharmaceutical distribution. Real-time credit evaluations, automated alerts on payment defaults, and secure system integration tools can replace guesswork with accountability. Importantly, these systems must work not just for large manufacturers but also for smaller chemists and distributors who form the backbone of India’s medicine network.

Fixing the foundation

India’s pharmaceutical growth is both an economic story and a healthcare story. While Union Budget allocations for the Department of Pharmaceuticals have increased to ₹5,268.72 crore ($602.90 million) for FY 2025–26, up 28.8% from ₹4,089.95 crore ($468.01 million) in FY 2025, financial resilience cannot depend solely on policy support. It must be baked into how business is conducted at every tier of the supply chain. The real challenge is not the absence of opportunity or talent but the persistence of outdated credit models that ignore financial risk until it becomes a crisis. Unless India aligns its internal credit systems with the scale of its pharmaceutical ambitions, payment delays will continue to weaken the very foundation of its medicine supply chain.

Mannuri Vamshi Krishna is Founder & CEO of MedScore

The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.

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