The increasing prevalence of diabetes, neurological disorders, and other chronic diseases are the major driving factor of the global active pharmaceutical ingredient (API ) market, according to report by Zion Market Research.
According to the report, global demand for active pharmaceutical ingredient market which was valued at US$ 148.22 billion in 2015, is expected to reach US$ 213.84 billion in 2021 and is anticipated to grow at a CAGR of 6.3 per cent between 2016 and 2021.The market for API is expected to have the highest growth rate in the forecast period.
The increasing awareness towards generic drugs and the growing government initiatives are also expected to boost the growth of the API market during the forecast period.
One of the key drivers of the API market is an increase in the outsourcing of ingredients manufactured by pharmaceutical companies which are done to reduce both manufacturing and infrastructure costs. Such outsourced manufacturing activities are carried out by low-cost vendors in the Asia Pacific region.
Drastic manufacturing cuts implemented by the pharma giants to in-house API production , attributed by poor cost viability and increased productivity issues coupled with other key parameters such as high end R&D costs and pricing issues on finished formulations have resulted in a thrust to outsource API production. Moreover, the amplified growth in API segments projected is based on a substantial global upsurge in the demand for generic prescription drugs.
The highly profitable biological API segment is experiencing positive spikes in response to a concerted interest evinced by the Big Pharma. Oncology API comprising of High Potency Active Pharmaceutical Ingredients (HPAPIs) is an area of avid interest and is expected to be a major growth driver of API market worldwide.
The branded drug segment accounted for the largest share in 2015. Different therapeutic application of the API market includes cardiology, oncology, anti-inflammatory, gastrointestinal and others. The oncology segment is anticipated to grow at the highest growth rate in coming years due to increasing prevalence of cancer worldwide.
However, strict regulations are one of the major challenges faced by the global API market. Such regulations are predominantly well defined in developed regions such as North America and Europe. Vendors in this market space are supposed to obey the detailed procedures prior to product commercialization.
According an earlier report by Scalar Market Research, the global API market is poised to reach US$ 224.63 billion by 2022.The rapid advancements in biologics are one of the major driving factors for the global API market, the report had said.
Apart from that, the rising local manufacturing and the growth in the number of ageing population are also expected to drive the global API market during the forecast period.
Emerging markets
North America is leading market for API and acquired the largest share in 2015. Asia-Pacific region is expected to emerge as fastest growing region due to low operation costs and high investments in medical research. Furthermore, the high cost of trained labour and energy are the most important factors that enforced European market to move their base to develop countries such as India and China.
The API scenario is anticipated to show further traction in response to the evolving regulations in the markets of North America and Europe. Consequently, the gear for growth opportunity in API manufacturing segment is shifted from local markets to the second in-line emerging markets of India and China. Given their overall dominance in intermediates and API manufacturing, Chinese players can pose a serious competitive threat to their Indian counterparts, much beyond the APIs for essential drugs, according to Shenaz Khaleeli, director, PharmaLeaf India Private Limited.
"From a global perspective, the API capability of India cannot be ignored. We account for the highest number of USFDA facilities pegged at 546 and EMA approved units besides other global regulatory agencies from Japan and Australia which enables it to take a big leap in terms of grabbing opportunity. Even though the country’s volume of production is lower compared to China, the global recognition on quality and variety of API products creates an opportunity to either partner with global players for marketing the APIs. It could also garner its revenues from being a preferred source of supply for global pharma bigwigs,”said GG Gurudatta, CEO, Estima Pharma.
From a global perspective the majority of medicinal products manufactured in Europe and the North America contain APIs and excipients manufactured in Asia.
In response to this external input the regulators of North America, Europe and Japan have adopted the "International Conference on Harmonisation (ICH) Q7 Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients," based on endemic regulations that substantiate and even extend the WHO requirements in several areas of compliance.
European manufacturing authorization holders are obliged to ensure compliance to Good Manufacturing Practice (GMP) of their medicinal products as per Article 46f of "Directive 2001/83/EC", which have since been made into legislation within the European member states.
Within the European Union, the ICH Q7 regulations have been established as "EU GMP Guideline Part II," with (nearly) identical terminology. Other countries such as Canada, Australia and Singapore have also adopted the ICH regulations - the latter via the "Pharmaceutical Inspection Co-operation Scheme" (PIC/S).
As is evident GMP regulations vary worldwide. The World Health Organization (WHO) has created a globally consistent basis for quality standards with the compendium "Quality Assurance of Pharmaceuticals." Chapter two describes the GMP requirements for "APIs (bulk drug substances)".
Hence holders of GMP certificates provided by competent national authorities, be it the Chinese State Food and Drug Administration (SFDA) or CDSCO in India continue to attract API audits.
Therefore, all Indian API manufacturers exporting to regulated markets should be prepared to face GMP audits of their quality systems and manufacturing processes. These audits are conducted by qualified individuals or through contracted third-party auditors.
European APIs
Europe conventionally has a very strong API manufacturing base with technical competence of high level and skilled and experienced manpower. Active support and promotion of European APIs on the global platform by adopting certain measures would help the sector achieve desired growth in the near future.
Europe maintains its position as the third-largest market for APIs by revenue globally supported by a healthy demand from generic and biotech API sectors.
The quality of the European APIs is assured by strict application of Good Manufacturing Practices (GMPs). As a result, APIs majorly used in most developed
pharmaceutical markets like the US are sourced from Europe. Also, the European API manufacturers are increasingly integrated into the supply chain.
Irrespective of the long-standing tradition in Europe and the best quality APIs, Asian countries currently hold the lion’s share of APIs market in Europe while European suppliers dominate developed markets like the US and Japan.
In Europe, Italy, the United Kingdom, Germany, France and Switzerland are the major hubs for API manufacturers. Italy has become one of the major bases for generic API manufacturers due to its advantageous patent regime.
Due to the European manufacturers’ investment in R&D, ecological treatments and safety, the pharmaceutical manufacturers worldwide are coming back to European countries for sourcing the APIs. The various drug ingredient needs in European countries would also be fulfilled by high level of quality and reliability of the APIs produced here.
Outlook positive
The outlook for APIs in the European countries is positive due to the ever increasing market size in terms of volume coupled with higher demand for value-added products and focus of European manufacturers on innovative and viable products.
Through M&A activities, new API manufacturers are emerging in the European countries. Also, European API manufacturers are expanding market growth by increasing their selling activities in Brazil, India and China.
The offering of incentives to European pharmacists for substituting branded drugs with generic versions has contributed to the growth of APIs within the region.
The expiration of patents of major blockbuster drugs in Europe has also fuelled the growth of the European API market and would continue to do so in the near future.
The Falsified Medicines Directive (FMD), which came into effect as a law in 2013 has brought about considerable and dramatic change in the API development. The FMD has allowed companies to gain new customers who look for reliable, long-term suppliers, thus driving the growth of the API market in European countries.
Additionally, factors to the likes of expiry of patented drugs and the shift towards the use of lower cost API drugs due to economic recession are driving growth in the European API market. Also, the rising use of highly potent actives in targeted therapies is boosting growth.
The European API manufacturers are struggling to differentiate their capabilities due to increasing competition, similar production methodologies and technology portfolios and equally efficient chemical processes. As a result there is little scope for differentiation in terms of service. It is thus, important for European API manufacturers to concentrate on establishing a strong relationship with their pharmaceutical customers for securing continuous and steady business from them. The manufacturers also need to improve their portfolios, enhance capabilities and achieve competitive advantage over other players in the market.
The supplier base in European API sector is faced with the problem of overcapacity and reducing profitability due to the diminished outsourcing of API manufacturing. Faced with this threat, European API manufacturers are looking at new growth opportunities in niche areas along with biopharmaceuticals. The European API industry can explore the introduction of novel products with better quality and affordability by increasing its focus on R&D.
European API manufacturers are facing their biggest hurdle from low cost API manufacturers from Asia. Countries like India and China are having a high impact on global API manufacturing outsourcing trends and this is going to affect the European API market for the next three to four years.
API companies in Europe are facing a threat from significantly lower costs of production in Asia as well as continuous price cuts of active ingredients and other chemicals.
The European APIs market also faces challenges of transparency, increased market fragmentation, expensive labour and environmental controls.
Improving competitiveness
According to experts, for European APIs sector to succeed and maintain sustainable growth, it is important to improve competitiveness as well as facilitate its better access to other geographical areas.
The authorities should adopt strong regulatory measures that promote the use of European APIs within the region thus promoting the traditional high-value added industry and high-skilled employment. The authorities should also implement measures that allow for mandatory inspections of non-European production sites whose APIs are sold within Europe.
European R&D should be promoted and in a way used effectively to underpin the growth of the European APIs sector. The focus should be on niche products like high potency, peptides, controlled substances and biopharmaceuticals.
By supporting and encouraging the elimination of barriers like regulatory or tariff-based hurdles, the concerned authorities should promote the entry of European APIs in higher growth foreign markets.
The sector should have an increased focus on global production facilities and strategic relationships with other geographies.
It is also important for European authorities to improve and enhance their association with US FDA to work towards a common joint regulatory system and a mutual inspection system for manufacturing sites. This measure would facilitate the entry of European APIs into the US pharmaceutical sector, which is the largest and fastest growing pharmaceutical sector globally, they point out.
Thus, the growth in the European APIs sector can be achieved and sustained by levelling the global playing field while supporting and promoting this high technology sector with high added value, they opine.