Consistent rise in biotechnology and generic sectors will fuel the growth of the global active pharmaceutical ingredients (API) market. While the ongoing research and development of biosimilars and up- to- date innovations in biotechnology are likely to create a huge potential for the API market across the world, the expiry of patented drugs and shift towards the use of low cost API drugs due to economic recession will help to propel the growth of API market, according to a report.
Currently, the API market is dominated by synthetic chemicals API. The contribution of biopharmaceutical API towards the global API market is considerably lesser as compared to synthetic chemicals as these are a relatively new trend in the market. However, with the growth of the biotechnology industry worldwide, the use of biotech derived molecules is spurring growth in the API market.
The development in the High Potency Active Pharmaceutical Ingredient (HPAPI) and biogeneric drugs is also boosting the growth of the global API market. There has been a paradigm shift in the use of innovative drugs to that of low-cost API drugs after the economic recession, thereby causing a positive impact on the overall growth of the API market, the report adds.
The other major factors influencing the growth of the market are consistent growth in new medical technologies and the increased use of imported raw pharma ingredients from emerging economies. Overall API market is expected to growth at a CAGR of more than eight per cent from 2014 to 2019.
At the same time the challenges faced by the market include increased market fragmentation and reduction in the overall research and development expenses. In order to keep abreast with this change, API manufacturers are applying various novel technologies to reduce the processing time in order to yield more production.
A period of change
The API manufacturing industry is undergoing a period of rapid change due to multiple factors such as patent expiry of the top selling pharmaceuticals, the ever changing nature of the drugs being manufactured, and the surge in manufacturing from the emerging regions.
Globally most countries are regulating active pharmaceutical ingredients production because the quality of APIs in a drug always will have a direct effect on the safety, efficacy and stability of that drug. The drugs manufactured by bad quality and contaminated active pharmaceutical ingredients have always been associated with negative health effects like illness or deaths.
Globally North America accounts the largest share in the API market. Asia-Pacific is second largest followed by Europe. Asia is growing at a highest CAGR compared to North America followed by Europe.
North America accounts for the highest API Market; with share of 32 per cent in 2011; and is expected to decrease to 27 per cent by the year 2016. Europe accounts for 31 per cent of the total API market and is expected to decrease to 29 per cent by the year 2016. Moreover, Asia accounts for 26 per cent market share as of the year 2011 and is expected to grow to 34per cent by the year 2016.
The key players of Active Pharmaceutical Ingredient market are Sandoz-Lek-Biochemie (Switzerland), GlaxoSmithKline Pharmaceuticals Limited (India), AstraZeneca plc (U.K.), Novartis AG (Switzerland), Pfizer, Inc. (U.S.) and F. Hoffmann-La Roche Ltd. (Switzerland).
India, China to gain
According to pharmaceutical industry experts, India and the neighbouring country China will be the biggest gainers in the API sector owing to increasing demands for APIs from the developed nations
Globally about 7,000 APIs are functional with a market share of US$120 billion of which the US share is 45 per cent. India has over 2,000 API manufacturing units producing nearly 1,500 APIs, which is worth US$ nine billion. Out of this nearly 50 per cent is for exports.
India has an opportunity to grow this business and take more than its current global market share. Indian pharma is in the front rank of the science -based industry. The nation is strong in chemistry and have competent work force, technologically strong and self reliant, so it is possible to increase our presence in global API market, they point out.
India is strong in chemistry, manufacturing capabilities and information technology. The pharma Industry is highly organized sector. India has a competent and educated English speaking work force enabling technology-transfer and marketing in the regulated regions. These inherent strengths have led the developed countries to depend on India.
Problems impacting India
However the economic slowdown in Europe and the US had an impact on exports for Indian API sector. This is because APIs constituted 50 per cent of exports which primarily covered the US and Europe. The remaining is for captive consumption by our domestic formulation industry. A substantial portion of APIs are for the development of critical care formulations exported from India and this business continues to grow irrespective of the economic slowdown. Falling rupee against dollar during this period was an advantage for exports, but had an impact on import of inputs and other related items which increased the cost of production.
Over the years, there have been a strong decline in the number of API manufacturing units in the country, as the business environment has proved to be non conducive for them to grow. India's growing dependence on the Chinese raw materials which are sometimes of questionable quality is affecting the end product.
With a view to address these issues, the industry sources stress that there is an urgent need for government intervention. In order to meet the increasing challenges being faced by the industry in the domestic as well as in the international markets, bulk drug manufacturers and industry experts have demanded the government to provide level-playing field to the beleaguered bulk drug industry in the country .Some of the demands of the bulk drug industry include reduction in power tariff, bank interest rates, transportation charges etc.
Quality issues
The quality of imported bulk drugs has been a cause for concern for the manufacturers as drugs are imported merely on the basis of GMP certification on most of the cases as manpower and resource crunch at the DCGI's office hardly enables them to send officials to inspect foreign sites. Thus the industry has suggested that to cope with rising cost of the on sight inspection cost ,the government should raise the import registration fees as done by other importing countries like the US and China.
“Considering the deteriorating state of the domestic bulk drugs manufacturing business, it is high time for the government to adopt corrective measures that will discourage the unnecessary imports of APIs when the country has the resources to manufacture. All we need is a friendly environment that has a dedicated zone for bulk drug manufacturers, proper intervention from the government to address labour issues, escalating cost of land, labour and electricity etc. through support and incentives to keep up with the challenge,” pointed out Nipun Jain, chief executive officer of Pharmchem and who is also in the SME panel of Pharmexcil.
Need for level playing ground
There are only about 100 bulk drugs that are exported from India while large quantities of bulk drugs are being imported from countries like China, which show the huge disparity in initiatives taken to promote exports of APIs from India. Industry experts feel that the only way to deal with the growing challenge is by appealing to the government to provide export incentive schemes and specialised incentive schemes specifically for the small and medium scale enterprises of bulk drug manufactures to venture into overseas markets.
This, many feel will not only decrease the countries dependence on imports but will also encourage domestic manufacturers to explore new avenues.
They also want the government to take steps towards amending Chapter 29 which allows import of most of the bulk drugs for free, while they are also batting to increase the import registration fees in lines with their western counterparts and other countries like China, to ensure that there is a decent cap in imports.
It is understood that the registration charges in China for drug exports to that country are exorbitantly high compared to the charges levied by India on Chinese products. Since Chinese products are cheaper, to have a level playing filled, the registration charges by the Indian government should be made equal as those levied in China.
According to BDMA sources, power tariff, bank interest rates, transportation and other charges in the country are high compared to other countries like China. To have a level playing field, the government should lower the rates, including the bank interest rates for exports which is currently prevailing at 14 to 16 per cent per annum against international rates of around four per cent.
Need for industry friendly foreign trade policy
As per an estimate of Indian Pharma Alliance, a grouping of leading domestic drug makers, for the API of many common drugs, India is close to 90 per cent dependent on China for imports. There is a need to look at strengthening development of the bulk drug industry in India as the country offers tremendous potential in research and development, said Aradhana Johri, Secretary, Department of Pharmaceuticals, while addressing the 5th India Pharma Summit organised by Ficci.
"There is a need to look at strengthening the development of the bulk drug industry in India. There are various challenges being faced by the Indian pharmaceutical industry," she had pointed out
Thus industry experts want the government to have a focused approach while drafting the foreign trade policy for the APIs for developing and encouraging exports. This can be done only by incentivising the domestic API manufacturers with interesting schemes, while simultaneously making laws stringent for imports of APIs, they feel.
Sources point out that the Government's apathy towards the issues and concerns of the bulk drugs manufacturers have been the biggest reason behind the drop in domestic manufacturing and surge of imports. Industry insiders point out that just imposing restriction on imports would not address the issue, as steps should also be taken simultaneously ensure that there is no shortage of bulk drugs in the country.
However on a positive note its is understood that the Department of Pharmaceuticals (DoP) is keen to revive the prospects of the domestic bulk drug industry. India's API imports have grown at a CAGR of 18 per cent in the last decade from a base of $801 million in 2004 to $3.4 billion in 2013, according to EXIM (Export-Import) database.
Single authority for better governance
Pushing for improving the competitiveness of the Indian drug industry, pegged at over Rs 1,50,000 crore including exports, the pharma department is likely to make a case for helping small and medium scale firms upgrade their good manufacturing practices and encourage R&D in the sector. It would also seek a mechanism to institutionalise coordination of different ministries that deal with pharma and healthcare.
Another issue facing the bulk drug industry is that it has to approach different authorities for application for renewals. The licenses are given by the concerned departments for a period of one or two or three years and the industry has to again apply for renewals periodically. To save time and also to avoid frequent visits to the departments for renewals, the industry is demanding that the consents of different departments should be given for a period of five years so that work load to the department as well as to the industry is reduced.
The bulk drug manufacturers also wanted reimbursement of US FDA annual site registration fees under (MAI) Scheme as per Pharmexcil export promotion scheme.
Disturbing trends
While India was once a favoured destination for sourcing low-cost, good quality API for manufacturing pharmaceutical formulations, the global bulk drug market was globally taken over by China in the past few years by creating huge capacities. Also, the landed price of API from China in India is 15-20 per cent less than its production cost here, making it more viable for companies to import.
In the past few years, leading Indian drug makers such as Ranbaxy, Sun Pharma, Aurobindo Pharma, Lupin and others moved up the value chain making a shift from API to formulations. While most of these companies were earlier manufacturing both APIs and finished products, now API manufacturing is largely limited to captive usage.
The domestic API manufacturing industry, mostly based out of Hyderabad and Ahmedabad, currently accounts for 8-10 per cent of India's Rs 79,000-crore pharmaceutical market. The rest comprises formulations. In 2007, when the total domestic pharma market was around Rs 35,000 crore, APIs accounted for over 15-20 per cent.
Low margin in API business compared to formulations is one reason for Indian companies to shift their focus. There are other concerns such as environmental obstacles and lack of infrastructure to dissuade domestic manufacturers from the business, says a government official.
Challenges
On the issue of environmental pollution, the bulk drug industry says that by very nature, the production of bulk drugs is associated with environmental issues. However these issues are possible to handle effectively with proper and co-ordinated approach from regulator and industry. The industry has demanded that the government should promote dedicated industrial parks for production of bulk drugs with suitable buffer zones and shall not allow any residential areas in close proximity. These parks should have suitable provisions for environmental management and fire safety. As regards pollution, the regional pollution boards should be instructed to focus more on discharges and emissions rather than quantum of production.
Asking the government to take serious steps to eliminate the gap of the cost between India and other countries, the bulk drug industry wants priority allocation for coal and bio fuel natural gas, cheaper land to develop mega pharma and R&D sector, soft loan, rational use of provisions of anti-dumping duty Acts & Rules, constitution of a committee of various government departments to help the bulk drugs industries through single window and audit of plants, particularly in China.