India plays a significant role in the Global Active Pharmaceutical Ingredient (API) market, being fourth in terms of volume (with an eight per cent share in global sales) and 13th in terms of value (with a share of one per cent in global sales). With sales of $2bn (€1.56bn) in 2005, $4bn (€3.12bn) in 2007 and CAGR as high as 18.81 per cent during 2003-2007, the Indian API manufacturing industry is now the third largest in the world. India ranks fourth in the world in terms of API output. Sales are expected to cross more than $6.0bn by 2010, with an average yearly growth rate of 19.3 per cent. More than 27 per cent of Indian APIs manufacturers or bulk drug exports in the year 2008 were to European Union, according to the data released by Pharmaceuticals Exports Promotion Council of India (Pharmexcil) – the apex body under the Ministry of Commerce governing pharma exports in the country.
All the leading Indian pharmaceutical industries are well-equipped with multi-tonne and state-of-the-art facilities for the manufacturing a variety of APIs. Automated manufacturing processes and streamline production processes gives importance to the effective control and safety. Cross-contamination is avoided by design. Solids are handled in independent isolated loading bays that meet clean room standards. Final product packing is carried out in class 100,000 or better clean rooms, suitable for the finishing of injectable grade APIs. Indian APIs are exported worldwide, which include both emerging as well as developed markets. Principal markets in this business segment include the US, Canada, Europe and Middle East.
India has more than 20,000 registered API manufacturers. It is mainly retail-based branded generic market with 80 per cent of dispensing via pharmacy outlets.
Typical of an emerging economy, acute therapy dominates, with 75 per cent of the market. The Indian pharmaceutical industry has had a CAGR of 9.5 per cent in the past five years, but in the past two years growth has accelerated to 14 per cent. New product introduction continues to be a major contributor to growth. Major players in domestic sectors are Ranbaxy, Cipla, GlaxoSmithKline, Nicholas Piramal and Sun Pharmaceuticals. They are investing abroad to access technology and knowledge by setting up their own R&D facilities in countries such as China and the US..
Branded & unbranded sectors
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. The focus of innovative segment is to move old products from unregulated markets to regulated markets and optimize the new product opportunities in regulated markets on the expiry of their patents. During the year 2001, new markets were entered and the product specifications strengthened further with new products. Product specifications include compliance to latest pharmacopeias, residual solvents testing, particle size distribution and microbial tests etc. ICH Q7 standards are used by all API- manufacturers operating in regulated markets to implement Good Manufacturing Practices.
However, manufacturers of the innovative sector are struggling to identify more outsourcing opportunities, while the generic sector manufacturers are 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; on the other hand Indian API manufacturers are focused on exports to the global markets and have thus developed considerable expertise in complying with global GMP and supplying documentation to foreign regulatory agencies for drug master files. This year , many Chinese API manufacturers including Jilin Zixin Pharmaceutical Industrial, Beijing SL Pharmaceutical and Xizang Rhodiola Pharmaceutical, have announced impressive third-quarter results whereas, the major market players Double-Crane Pharmaceutical, Shanghai Pharmaceuticals, Tianjin Tianyao Pharmaceutical and Shandong Xinhua Medical Instrument, have disclosed third-quarter financial results, with net profits growing 32.7 per cent, 63.8 per cent, 65.4 per cent and 20.2 per cent, respectively. The Chinese pharmaceutical market has been growing at a rate of around 20 per cent in the past four years. Industry analysts expect the market to reach approx. US$57 billion by 2013, making it the third largest pharmaceutical market in the world.
In Japan, the mature small molecule manufacturing industry faces challenges similar to the 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. These companies include GlaxoSmithKline, Merck & Co., Schering-Plough Pfizer, and Sanofi Aventis. For this reason, Singapore's API manufacturers also tend to respond to the same trends driving the US and European pharmaceutical companies. 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 10 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.
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 a specialist in chemicals and pharmaceuticals based in Mumbai