The Asian Active Pharmaceutical Ingredients (API) is increasing with a significant growth rates, while the US and European pharmaceutical industry faces little or no growth. In 2006, Italy's Chemical Pharmaceutical Generic Association (CPA) has reported that the growth rates of the API market over the next five years are expected in Asia/Pacific, with an average yearly increase of 13.7 per cent in global demand. India in particular is well positioned in Global API market. Globally the Indian pharmaceutical industry ranks 4th in terms of volume (with an 8 per cent share in global sales) and 13th in terms of value (with a share of 1 per cent in global sales). With sales of $2 bn (€1.56 bn) in 2005, the Indian API manufacturing industry is the third largest in the world and is expected to make sales of $4.8 bn by 2010, an average yearly growth rate of 19.3 per cent. Italy, on the other hand, is in stagnation, with API sales of $3.2 bn in 2005 projected to barely rise to $3.3 bn by 2010, whereas India has projected grow to $4.8 billion in 2010.
All the leading Indian pharmaceutical industries are equipped with multi-ton and state-of-the-art facilities for the manufacturing of varieties of APIs. The produced active pharmaceutical ingredients are exported worldwide, which include both emerging as well as developed markets. Principal markets in this business segment include the USA, Canada, Europe and Middle East. The domestic demands also partially fulfilled. The expected growth rate is 12% over the next three years. Innovation (particularly NDDS, combinations and new formulations), geographic reach and alignment of the product portfolio towards the high-growth chronic segment look set to be key growth drivers. Key participants in the domestic Indian pharmaceuticals market include Ranbaxy, Cipla, GlaxoSmithKline, Nicholas Piramal, and Sun Pharmaceutical. Ranbaxy is investing abroad to access technology and knowledge by setting up their own R&D facilities in countries such as China and the USA.
India has more than 20,000 registered API manufacturers. It is mainly retail-based branded generic market with 80% of dispensing via pharmacy outlets. Typical of an emerging economy, acute therapy dominates, with 75% of the market. The Indian pharmaceutical industry has had a CAGR of 9.5% in the past five years, but in the past two years growth has accelerated to 14%. New product introduction has been, and continues to be, a major contributor to growth. On the basis of the pharmaceutical customer base, the Indian API-manufacturing can be divided into two sectors: innovative or branded sector and the generic or unbranded sector. The innovative segment accounts for more than half of the total API market in India followed by generic segment. API manufacturers for the innovative sector are struggling to identify more outsourcing opportunities while API manufacturing for the generic sector is drawing all the attention. However, the laws in European countries forbid the development of APIs for generics until patent expiry, which is different from the situation in the United States where the development process starts even when patents are still in effect.
Chinese pharmaceutical companies are primarily oriented towards supplying their own domestic market. Thus, they tend to place less emphasis on external GMP compliance. Indian API manufacturers, on the other hand, are focussed on export sales to highly regulated global markets. They have thus developed considerable expertise in complying with global GMP and supplying documentation to foreign regulatory agencies for drug master files.
In Japan, the mature small molecule manufacturing industry faces challenges similar to US and European manufacturers. Blockbusters developed in a different decade have started to come off patent. The drug development pipeline has struggled to keep up with expectations. As a result, some large pharmaceutical companies have trimmed their small molecule API capacity. In Singapore, API manufacturing industry is dominated by leading global pharmaceutical companies that have chosen the country as a manufacturing base. Indeed, it is hard to see how Europe can compete with Asia just by stringent cost cutting; the average wage of an employee working in a typical API manufacturer in the EU is ten times more than in China and India, environmental costs are much higher, while building a manufacturing plant complying with international regulatory issues in Asian countries typically costs a 25 to 30 per cent of the amount needed in Western Europe.
Twenty leading players in the sector has recorded an impressive 29% growth in the quarter ended March 31, 2006, according to a study by Cygnus Research, Hyderabad. APIs have also made a good show on the export front as well with an 8% growth compared to last year, demonstrating its potential as a sustainable business model.
Conclusion
Indian pharmaceutical companies are now the world's lowest-cost producers of small molecule APIs. With the tremendous pressure to reduce global healthcare costs, there is no doubt that Indian API manufacturers will play a significant role in the global market. However, Indian producers face challenges such as rising labour costs. A variety of technologies can be applied to improve the efficiency, quality, environmental impact, and safety of API production. Manufacturers, technology companies, research institutes, and regulators must work closely together to ensure that a confident, vibrant, innovative, and profitable Indian API manufacturing industry moves forward into the 21st century to meet the world's need for high quality products at competitive prices.
(The author is expert in chemicals and pharmaceuticals based in Mumbai)