Stiff competition, limited pricing power , low profitability, patent and regulatory  issues  are now impacting the Indian active pharma ingredients (APIs)  manufacturers.

There are also a new set of regulations from  European Commission (EC) update  of  stability testing guidance along with the revision of Good Manufacturing Practices (GMP)  regulation for APIs and excipients and the  USFDA draft guidance to Industry for  Tablet Scoring: Nomenclature, Labelling & Data Evaluation, which the  industry in India and globally will now have to adhere to the new set of guidelines. But  the  Indian  regulations for API and excipients remain the same

The role of Indian API or bulk drug 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, said N R Munjal Vice Chairman and Managing Director Ind Swift Laboratories Ltd.

The threat from China with low cost and poor quality products is hampering the growth of the sector, said Anjan K Roy, managing director, RL Fine Chem.

In categories like  analgesic-antipyretic drug (paracetamol), antibiotics (penicillin), anti fungal (Metronidazole) and vitamins, China has captured a substantial part of the Indian market, said API industry heads of  companies like Micro Labs and Bal Pharma.

Continuous availability of raw materials especially those which are presently imported from China are the main challenges for  companies in the space, said Munjal.

The primary challenge for quality-oriented active pharma ingredients (APIs)  manufacturers is the pricing pressure. Quality standards become more stringent every year which increases costs but customers expect prices to decrease. In addition the continued increase in  raw material costs  is tough to pass onto customers.

API manufacturers can face  these challenges in two ways. Firstly, leading companies should  constantly monitor their processes to see how they can increase productivity. Granules has an Operational Excellence (OE) team, who inspects each step of a process to see how they can increase yields and decrease effluents, which increases profitability. Secondly API manufacturers must continuously find ways to add value that customers are willing to pay for, said Krishna Prasad, managing director, Granules India.

The recession fears in the US and Euro Zone will  help Indian manufacturers because more customers will look to increase their return on capital by shifting manufacturing to India. However, the benefit will not be widely felt because only the upper echelon of Indian API companies can offer high-quality material on a constant basis., said Prasad.

In the meanwhile according to a study, the increasing cost of crucial manufacturing input factors, such as energy, raw materials and labour, have been a severe threat to less competitive producers in the West. Many producers  had to reduce their base costs and increase their prices, which has made the market even more competitive. The increasingly volatile business environment has also led pharma companies to seek strong and sustainable partners.

In the rapid upswing following the financial crisis, many producers were unable to scale up their production fast enough to cope with the sudden growth in demand. Pharma companies have expressed strategic interest in building their positions in emerging markets.

During the financial crisis, the dip in the emerging markets was much lower than that in the more established regions, and they were also the first ones back on the growth track.

API manufacturing is moving from established Western markets to more emerging regions, particularly India and China, the study points out. Fluctuating prices of raw materials in these countries is a cause for concern for many API producers, as when material costs are high, profit margins are eroded – a factor which could influence growth in the Asia-Pacific API market.