China is the global leader for the export of pharma ingredients, active pharmaceutical ingredients (APIs) and excipients. Since it has a cost advantage over its rivals, the market continues to expand for China.
The active pharmaceutical market in China is on an ascending curve. The country holds 22 per cent world market share registering an annual growth rates 15 to16 per cent . It is pegged as the world's largest API manufacturer and exporter with an annual production output of 800,000 tonnes. Its government is drawing up a plan that would invest $761 million in API manufacturers with the goal of raising the country’s export value of products by $ four billion annually
The market in China is highly fragmented. Around 90 per cent are small or medium-sized companies, and the 10 largest companies account for only 13 per cent of the industry’s overall revenues. The remaining are revenues are generated from exports.
Almost half of the top 10 pharmaceutical companies in China are multinational firms, but no one firm controls more than 2.5 per cent of the market, according to a recent KPMG analysis.
Leading APIs from China are antibiotics, antipyretics and analgesics among others. Some of these are Sucralfate, Pantoprazole, Ibuprofen, Menthol, Fluoroquinolones and Vitamin C besides a slew of antibiotics.
By 2016, China is likely to account for 27.7 per cent of the global generic API merchant market, making it the largest market and surpassing the US, which will be the second largest global market with an 18.2 per cent share. India may remain as the third largest merchant market for generic APIs with a projected 7.2 per cent after Italy by 2016, according to the CPA report. Ten emerging markets are projected to experience double-digit growth of 10 to 14 per cent in the generic API market. These countries are Brazil, China, Egypt, India, Jordan, Pakistan, South Africa, Thailand, Turkey and Vietnam.
Indian formulation industry has been almost totally dependent on Chinese suppliers for their API requirements for several years as they have been offering these products at very low prices. And most of the formulation companies have been sourcing the Chinese bulk drugs although quality of a good number of these products was not of standard. Many of the antibiotics, cholesterol drugs, cardiovascular drugs, TB drugs, analgesics, etc. thus used to be dumped in the Indian market at the manufacturing cost or even below the cost.
Indian API producers have not been able to offer APIs at the rates China was selling to the Indian formulators. Continued dependence on China for bulk drugs has thus gradually forced many of the Indian API units to either cut down the production or totally stop the manufacture over the years. Many industry experts cautioned Indian formulators and the government that a situation like this could ultimately end up in dictating of prices of APIs by the Chinese suppliers in the long run. And that is what has started happening now. Chinese suppliers have jacked up prices of folic acid and paracetamol recently with no worthwhile reason. The folic acid price got pushed up by 1333 per cent and that of paracetamol by 32.5 per cent. Both these drugs are being regularly imported from China and the demand for these drugs has been steadily rising.
Hefty price hikes by Chinese suppliers leave not much option especially to the medium and small scale formulators. The key advantage China has is its huge scale of operations and they supply even to the US and European markets too. Many of these APIs are not produced by the European and American companies and even if they do, prices will not be affordable to Indian companies.
The emerging scenario for the Indian pharmaceutical industry is indeed disturbing as the net result of this trend will be sharp price hikes of most of the essential and life saving medicines. The government of India knew that India’s excessive dependence on China for its APIs could lead to a crisis but no effective steps were taken to counter this problem.
The new government at the centre, is understood to be taking some steps to encourage bulk drug manufacture in India. The government is examining the recommendations of an inter-ministerial committee report submitted recently to boost manufacturing APIs by setting up of pharma clusters in the country. It is also planning to come out with some specific incentives to motivate potential bulk drug producers. Some of the industry experts feel that there has to be some amount of urgency for execution of this plans and programmes as the country is under the threat of sharp price hikes of most of the APIs.
In the meanwhile according to a new study, India, China and Japan are expected to be the fastest-growing markets for pharmaceutical excipients in Asia, Due to increasing investments by many excipients manufacturing companies in the region, the pharmaceutical excipients market in Asia is expected to show high growth rates in the next five years. In addition, low manufacturing and labour costs also propelled the growth of the pharmaceutical excipients market in Asia, the study adds.
China has launched more than 500 types of pharmaceutical excipients, far less than 1,500 types of the United States and 3,000 types of Europe. By market size, gelatin capsules, sucrose, starch, film-coated powder, 1,2-propylene glycol, polyvinylpyrrolidone (PVP), hydroxypropyl methyl cellulose (HPMC), microcrystalline cellulose, hydroxypropyl cellulose (HPC) and lactose rank as the top 10 pharmaceutical excipients in China.
Among them, the traditional pharmaceutical excipients --gelatin capsules are involved with adequate supply and large export volume. In H1 2014, China's gelatin capsule export volume amounted to 1,427.5 tons and the export value hit US$32.408 million. However, China still relies on the import of film-coated powder, polyvinylpyrrolidone (PVP) and other new-type high-end pharmaceutical excipients.
Currently, pharmaceutical excipients account for about two to three per cent of China's total output value of pharmaceutical preparations. Chinese pharmaceutical excipients market size reached about RMB26.35 billion in 2013 and is expected to be RMB54.83 billion in 2017.
China Food and Drug Administration the erstwhile SFDA has now insist that excipients used in drug manufacturing must meet requirement for pharmaceutical application.
Therefore drug manufacturers must strengthen the audit on excipients suppliers. Excipients manufacturers need strictly implement a dedicated excipients GMP.