Indian active pharmaceutical ingredient (API) industry is now in an enviable position, striking while the iron is hot and is all set to corner $ 60 billion windfalls coming from the patent expiry of drugs. The companies are also looking to garner substantial gains from the regulated markets of the US and EU which are facing increasing pricing pressures due to presence of low cost providers in developing markets, spare capacity for large pharma companies and backward integration by certain generic companies.
From early 2013, a slew of new regulations were introduced in the API industry. They include the USFDA recent norms on Regulatory Classification of Pharmaceutical Co-Crystals, the EMA guidelines on exposure limits for production of varied medicinal products in shared facilities and the Central Drugs Standard Control Organisation (CDSCO) guidance document for the issue of Written Confirmation (WC) certificate for active substances exported to the European Union (EU) for medicinal products for human use, in accordance with Article 46(2)(b) of EU Directives No. 2001/83/EC.
For the Rs. 112,000 crore Indian pharma market, in 2012-13, API constitutes over Rs. 55,000 crore. These include Ranbaxy, Dr. Reddy’s, Granules, Hikal, Lupin, Cipla, Indoco Remedies, Glenmark, Wockhardt, Lake Chemicals Pvt. Ltd., Shilpa Medicare, Torrent, Indoco Remedies, Orchid, Aurobindo Pharma, Sequent, Biocon, Aarti Industries, IndSwift Pharma, Micro Labs, Bal Pharma, RL Fine Chem, Apotex, Bairy Chemicals, Juggat Pharma and Resonance Labs.
According to D&B Research, the Indian pharmaceutical industry is fragmented with more than 10,000 manufacturers in the organized and unorganized segments. While 77 per cent of these are engaged in production of formulations, the remaining 23 per cent are in the active pharmaceutical ingredient space. Overall growth outlook for the Indian drugs and pharmaceutical industry appears to be positive.
API manufacturers are likely to benefit as market dynamics have undergone a major change. The patent expiry provides a significant opportunity for supply of APIs to manufacturers of generic drugs. There are also increased opportunities in outsourcing of bulk drugs by multinational pharmaceutical companies. These opportunities have led the Indian API industry to focus on core competencies and access to novel technologies, stated an ICRA report.
The API sector in India stands to gain from the research-based processes, low cost operations and availability of skilled manpower. The global economic slowdown has increased the growth possibilities particularly for API from the emerging economies such as India and China The recession has restricted the growth of innovative sector in developed economies such as the US and Europe, which has helped to fuel the growth in these markets, said Anjan K Roy, managing director, RL Fine Chem.
“The role of Indian API manufacturers in the global pharmaceutical supply chain is gradually evolving with increasing presence in synthesis and manufacture of late stage intermediates and APIs. Traditionally, innovators have frequently opted to perform final stages of API synthesis in-house or partner with specialized European suppliers while outsourcing early stage intermediates to Indian manufacturers. However, in recent times, the reputed track record of Indian companies in supplying quality products coupled with complex synthesis capabilities has enabled increasing participation in supply of late stage intermediates to innovator companies, adds the ICRA report.
The API market is in a period of exceptional growth because of the patent expiry factor which is slated to drive the revenues, said GG Gurudatta, CEO, Estima Pharma
According to Deloitte report on Life Sciences Outlook ‘Optimism tempered by reality in a new normal’, the companies are altering their business models as they increasingly source APIs from low-cost locations globally. However, monitoring the quality of these APIs is difficult and, thus, a cause for concern.
With the slew of new regulations coming in, the USFDA, European Union and MHRA and with the Drugs Control General of India also ensuring that active pharmaceutical ingredients quality is maintained , Indian pharma is confident to take on the global markets with more vigour, said members of the Karnataka Drugs & Pharmaceutical Manufacturers Association.
API industry raring to scale higher peaks
The API industry is now gearing up to scale higher peaks of growth. There are efforts to develop novel APIs. Recently Biocon developed a US Food and Drug Administration (FDA) grade API Cymgal which provides an edge for the company in the post-transplant antiviral agent market. In fact the company is the only player in the country with a USFDA API in this segment other than the drug innovator Roche.
Hikal’s manufacturing site in Gujarat and Jigani in Bengaluru received US FDA approval for its pharmaceutical intermediates and API.
Tyche Industries unit situated at Kakinada in Andhra Pradesh received EU-GMP approval from German Regulatory Authority for 11 API's.
Visible trends
In order to reach out to newer horizons, Indian API industry is now opting for environmentally- friendly production processes. There are several efforts to go green, reduce carbon footprint and reduce electricity consumption and water. The companies have also measures in place to decrease hazardous waste they produce. Research is on for improving the processes, bring down waste from API synthesis by going in for fewer chemical reactions, disposing off solvents and look for efficient means to improve to save and protect the environment.
Global focus on centralized control
Leading API manufacturers globally such as Merck, AstraZeneca and GlaxoSmithKline are also moving away from multi-functional plants and instead of opting for specific activities at particular sites.
“However, there are serious concerns as to how any centralized control could function. An API is often manufactured by a company in one country while the excipient may be manufactured by another company in another country, then packaged and distributed by yet another company. This altogether makes the route rather difficult to monitor or control,” according to a report.
There is also increased focus on the development of High Potency Active Pharmaceutical Ingredient (HPAPI). During this phase of an economic recession, there has been a paradigm shift in the use of low-cost API drugs especially in innovative drugs which could further fuel the overall growth of the API market.
In order to keep abreast with the changes, API manufacturers are using various novel technologies to reduce the processing time as well as to yield more production. The HPAPI compounds are highly effective due to the targeted therapy. Hence, its application for cancers is a major driver. The market of North America is the largest and accounts for major share followed by Europe. At the same time Asia is growing at a higher CAGR compared to North America & Europe.
Future of Indian APIs
Indian pharma industry sees that there is an opportunity for outsourcing going by the global scenario. Since India is known for its economical pricing and expertise supported by the large plants which have global regulatory compliance, there is no doubt that we would be producing for the world markets, said officials from KDPMA.
In order to ensure that there is some relief in the rationalization of the excise duty on APIs, early this year, the Organization of Pharmaceutical Producers of India (OPPI) have been insisting for a slash in tax from 12 per cent to six per cent during the Union Budget 2013. However the government did not heed to it.
Despite the fact the government did not give any relief , the industry is still going in for new technologies, investment in advanced facilities and ensure adherence to the new global regulatory guidelines, said Jatish N Seth, vice chairman, Confederation of Indian Pharmaceutical Industry (CIPI), member of KDPMA and director, Srushti Pharmaceuticals.