The global outlook for the active pharmaceutical intermediates (API ) market is quite bright and the near - term prospects for markets in the US and other regions have strengthened according to industry cognoscenti.
The market for APIs across the globe is transcending from a price sensitive phase to a quality conscious one. Among the price conscious countries are Latin America and South East Asia. But the global slowdown has seen a huge interest from the Big Pharma of the West to look at quality conscious and price beneficial markets like India which has expertise as well as plants to meet the needs.
According to Krishna Prasad, managing director Granules India, the global API market has multiple drivers that will offer tremendous opportunities, particularly for the companies in India. First, over $100 billion of drugs are going off-patent in the next few years which offers proactive companies a chance to gain market share for highly complex, high-value drugs.
While several blockbuster brands had lost exclusivity during last couple of years and more are losing in the coming years. While this has helped in the overall growth in API operations , Indian players could successfully cash in on this opportunity. It is estimated that 40 per cent of the world's API requirement is met by India.
Secondly, due to rising healthcare costs, governments are looking to cut costs by procuring drugs from highly efficient manufacturing facilities in countries such as India.
The cost -cutting measures by the US and highly regulated countries in healthcare segment has pushed up the demand for low cost generics. As a part of cost cutting measures, many multinational players have started sourcing bulk drugs from cost competitive destinations during last few years. Such a shift has provided India with immense opportunity for growth and Indian companies have emerged as the preferred supplier for APIs the world over.
In addition, the rising middle class and proliferation of medical insurance is also increasing the demand for high-quality drugs, said Krishna Prasad.
India has very strong prospects in the global market. Demand is growing due to the increasing number of drugs going off-patent, the rising middle class and proliferation of medical insurance. All these factors demand highly efficient manufacturing units with top-tier quality, which leading Indian companies can offer. In addition, the quality perception of pharmaceuticals in India has improved and many companies are comfortable with Indian quality standards. In the past, people were hesitant to shift API manufacturing to India but now, with the proper partner, companies don’t hesitate, he added.
According to Dr Kannan Vishwanath, chairman, Aanjaneya Lifecare Ltd, India and China are set to post the highest growth rates in the API market. The ageing population and the increasing affordability of healthcare services are increasing the demand for APIs in these emerging countries. Lesser developed areas within these countries, especially rural and tier II and III cities, offer huge growth opportunities for the generics sector. This surging demand for generic drugs and the essential need for pharmaceuticals are favouring the rapid growth of the market in these countries.
India plays an important part in the global API market as it ranks fourth in the world in terms of API output. The API output value of India was $6.1 billion in 2009, with the CAGR as high as 18.81 per cent during 2007-2010. But intense competition in the domestic market, declining prices and the decreasing demand for APIs in the US market have forced the Indian producers to look for alternative opportunities to boost growth. The Japanese market, which has opened up its generic sector, offers good growth potential for the Indian producers. Also, the improved technological capabilities of these producers gives them a competitive-edge over the Chinese producers enabling them to make a successful entry into the market.
The Indian API manufacturing industry was estimated to be US$5.50 billion by 2009-10. Nearly 70 per cent of the bulk drugs manufactured were exported to more than 200 countries during 2009-10.
India currently has about 3,000 API factories and 5,000 reagent factories. It is a difficult time for API manufacturers as they continue to battle challenges such as growing competition from low-cost countries and overcapacity. Market participants will increasingly have to rely on strategies such as capability differentiation and consolidation to stay ahead of competition.
The Chinese have historically been strong in high volume and commodity chemicals. The lower cost base and the continual government support has led their leadership in certain fields like fermentation-based and prostaglandin and steroidal-based APIs. Although China has the capital and the capabilities, its expertise in soft skills and supply of the dossiers and other technical documents required as supporting data to file Drug Master Files (DMFs) have tremendous shortcomings. India, meanwhile, is way ahead of its competitors in DMF filings.
The slowdown in the US and European countries have the potential to show a significant impact on the growth prospects of the Indian API industry. In these developed regions, the number of uninsured people is growing by leaps and bounds. Many of them are postponing their surgeries and other medical treatments too. Therefore world over there will be greater push towards generic usage as individual healthcare budgets shrink and health insurance becomes more unaffordable. To take advantage of this, our government must first provide support to exporters by providing tax sops, by making provisions for exigency funds and encourage Indian banks to facilitate foreign currency loan repayments etc. to tackle the slowdown in demand from the US and Europe, he added.
The prospects of the API markets in India is quite high owing to the ever growing bulk drugs and formulation industry in the country. The Indian pharma industry growth has been fuelled by exports and its products are exported to almost all countries with a sizeable share in the advanced regulated markets of US and Western Europe.
The domestic pharma industry ranks fourth globally in terms of volume and 13 in terms of value. More so, the domestic companies are keeping abreast with the global developments and adopting new technologies in Good Manufacturing Practice (GMP) compliant facilities for manufacturing.
The API industry has come a long way in providing medicines to the masses at affordable prices. Now out of the current total production of above Rs. 67000 crore worth of bulk drugs and formulations in India, over 75 per cent are produced by the indigenous drug producers. Similarly the indigenous sector is responsible for most of the Indian pharmaceutical exports.
With India among the leading nations in the BRIC category , the companies in the region have enhanced their investments in to research and development which will help to offer wider portfolio of products in the space.
In fact the sector in India is recognized for its highest number of approvals in drug master filings (DMFs) in the US and Certificates of Suitability (CoS) in Europe. The country is also the third in the world for its ability to manufacture 500 different APIs after China and Italy and with the largest number of US FDA approved plants outside US.
India is fast emerging as an attractive choice for API outsourcing due to low development costs, complex synthesis capabilities, cGMP compliance and a large domestic market. With increased investments in R&D and focus on quality as well as cost, Indian companies could out-compete firms from many other nations and gain salience in the international market.