Both India and China are fast growing markets in active pharma ingredient (API ) industry and are poised to play a greater role in the global arena. While The API market in India is set to grow at a CAGR of 24.07 per cent from 2008 to 2020 , China is expected to grow at a CAGR of 32.15 per cent same period. Compared to the single digit global growth rate,the growth rates of these two countries are tremendous , opine analysts.
Globally, pharma companies being faced with growing challenges in major markets, demands from customers and growing pressures from competitors, are adopting a range of strategies designed to reduce costs and maximize efficiency.
Owing to weak purchasing power worldwide,the global pharma players are looking at sourcing cheaper APIs. This is because of patent expiry of the blockbuster drugs, cut in medical costs in developed world and rise in R&D spending. It has provided ample the opportunities for low cost producers in India and China.
Several factors make India an attractive alternative for sourcing active ingredients. The low-cost innovations and manufacturing coupled with skilled manpower and cutting-edge R&D has helped in the growth of Indian API market. Moreover Indian firms are able to tackle complex synthesis in relatively shorter periods with cost-efficiency.
The factors that favours India’s pharma industry in general include stability of supply, high quality of products and firm governmental policies.
An emerging trend in the Indian API industry is that the companies which earlier had highlighted low cost manufacturing and R&D facilities as their strength are now focusing on quality of research, development and production to move over to value- generation mode.
The Indian companies can manufacture bulk drugs in-house at 40 per cent to 50 per cent of cost. Also the focus in strictly regulated markets has also posed a new set of challenges for the Indian companies. The fast growing generics market, with the increase in number of drugs going off patent till 2012 in the US, has generated huge competition between the Indian and overseas generic companies. The fall in process of API products is also a issue to cope. Therefore unit are chalking plans to face these hurdles.
The API industry in India meets around 70 per cent of the country's demand for bulk drugs, drug intermediates & chemicals. The sector is ranked third after China and Italy. Given the expertise in the production of APIs ,India is expected to over take Italy and reach the second place in the world market.
“The sector is registering a growth of around 18-19 per cent annually. The main revenues are coming in from the exports and we would be able to overtake Italy going by the number of drug master files (DMFs) being submitted,” said Anjan K Roy, managing director, RL Fine Chem and president, Karnataka Drugs & Pharmaceuticals Manufacturers Association(KDPMA).
The scientific capability together with the advanced processes and state-of-the-art manufacturing plants have led companies to file DMFs. In the field of contract research too, Indian pharma is known to support customers with DMFs for their dosage form approvals / Abbreviated New Drug Application (ANDA) filings.
The size of the pharma chemicals industry is estimated to be around Rs 35000 crore, of the total Rs 78,000 crore Indian pharma industry turnover. Out of the total API business, around Rs 18000 crore comes from exports, according to the Bulk Drug Manufacturers Association (BDMA),
There are around 600 API manufacturing companies out of which almost 500 are members of the BDMA.
Currently, over 60 per cent APIs production are exported and this has led to mandatory filing of DMFs. The increasing number of Drug Master Files is a success indicator of the sector, according to industry sources.
According to Ms. Kiran Mazumdar-Shaw, chairman and managing director, Biocon Ltd, “the efforts of Indian companies to file and receive Abbreviated New Drug Applications (ANDAs) approvals only proves the research capability and the competence to succeed in the global markets. This further indicates the strategy of domestic pharma firms wanting to strengthen their product pipeline for the lucrative US market.”
There is growing production orders for the domestic pharma industry and companies are also looking for increased international business. The semi - regulated markets account for a majority of bulk drugs exports with a 60 per cent share. The major Indian companies which are pursuing the regulated market as a large number of products have started losing their patent protection in these countries. Therefore these companies are aggressively filing DMFs with the drug regulators in the US and Europe.
According to the Ernst & Young , the share of Indian companies in total DMF filed with the US FDA increased to 50 per cent in 2007 from 14 per cent in 2000. The official figures indicate that of the 6,300 active drug master files (regulatory applications for receiving marketing approvals in the US), 26 per cent or 1,700 are from the Indian companies, reveals the study.
The E&Y report identifies Ahmedabad Ankleshwar, Vapi and Vadodara in Gujarat, Mumbai, Tarapur, Aurangabad and Pune in Maharashtra, Hyderabad and Vishakhapatnam in Andhra Pradesh as major API clusters in the country. Besides this Chennai , Puducherry, Bangalore and Panaji are the other centres where API manufacturing and research companies are based.
API majors like Dr. Reddy’s Ranbaxy Laboratories Ltd, Aurobindo Pharma, Cadila Healthcare Ltd, Cadila Pharmaceuticals Ltd, Sun Pharmaceuticals Industries Ltd, Cipla Ltd, Dishman Pharmaceuticals & Chemicals Ltd, Divi's Laboratories Ltd, Hikal Ltd, Orchid Chemicals & Pharmaceuticals Ltd and Torrent Pharmaceuticals Ltd looking to increase their share of business in the international markets.
Even though the API units are doing well, they are looking for assistance from the government in terms of environmental protection norms. Because of the strict environmental laws they are dependent on imports of intermediates from China for formulations manufacturing.
The manufacturing of intermediates requires large-scale chemical activities which goes against the current environment norms. At present India relies on China for almost 60 to 70 per cent of its intermediate needs despite the competition between the two countries in API sector.
Since the last 15-20 years that China has fast emerged as a viable source for supply of key pharmaceutical intermediates and actives. Though India is ahead of China in terms of FDA approved plants today, China by building up huge capacities has outperformed many countries who were active ingredients suppliers in the global market.
Moreover factors such as growth in the generics sector, government’s plan to develop multi-level insurance system and the development in biotech drugs has given a fillip to the local API market in China. Chinese companies are gearing up to supply pharmaceutical ingredients to the regulated markets of the west. The number of companies offering APIs to regulated market has steadily increased over the past five years.
As per some estimates,countries like Japan, Europe and the US have curtailed their production and some have already closed their facilities in contrast to China which has seen an increase of 70-75 per cent of market share.
The Chinese have historically been strong in high volume and commodity chemicals. The lower cost base and the continued government support has led its leadership in fields like fermentation-based and prostaglandin and steroidal-based APIs.
Although China has the capital and the hard capabilities, its capabilities in soft skills and supply of the dossiers and other technical documents required as supporting data to file Drug Master File (DMF) have certain short comings. India, on the other hand is way ahead of its competitors in DMF filings.
Despite the fact India has a long way to go, it is sure to emerge a substantial player provided the nation adapts appropriate measures. Despite India’s current advantage it is predicted that China is likely to overtake India after 2015 as they have fewer growth resistors.
Though some high-profile quality-control problems hurt demand for Chinese-made active pharmaceutical ingredients in 2009,the demand is expected to grow again now, according to a study.
The market for Chinese APIs was worth $31 billion in 2009, a drop of three per cent, the study said. API exports dropped even more--by about eight per cent to roughly $16 billion. The demand fell in part because of the economic downturn, but also because global pharma has been concerned about quality problems with Chinese APIs--such as the widely publicized contamination of the heparin supply in 2008.
But those quality problems may end up helping China's API producers. The shortfalls have prompted some API-makers to beef up quality controls and change processes to be more like the good manufacturing practices mandated in Europe and the US.
According to some analysts, new, highly-efficient and low-cost API manufacturers can emerge by the collaboration between Indian process chemists and Chinese manufacturers making it a choice either to compete on cost or provide an extremely high level of custom synthesis capabilities.
However at present Chinese are reluctant to accept Indian APIs. The lacuna is in the implementation of policies at the ground level in India. Owing to the spiralling costs and the ever increasing overheads in the country,the Indian manufacturers are not able to produce and deliver economically. It is still possible to overcome all the roadblocks and be in China given the perseverance of Indian enterprises,said Dr. KN. Subbaswami, CEO, Resonance Laboratories Pvt. Ltd.
According to Archana Dubey Mitra, Associate Vice President, Bal Pharma Ltd, Indian API manufacturers have the potential to succeed in China primarily because of the inherent chemistry expertise. However, China is strong on intermediates. The inflow of APIs from China into India have eroded profits of many pharma companies. This is where the government of India should step in aggressively by enforcing right regulations and empowering Indian pharma industry to pose a stiff competition to the Chinese suppliers.
Although India is the second largest API player globally after Italy, given the country's strength in chemistry, low cost and high quality production capabilities, adherence to timelines ,Indian companies would definitely be able to attract global pharma majors. These are factors which will drive the business in the international arena, says Anjan K Roy, president, Karnataka Pharmaceutical Manufacturers Association and managing director, RL Fine Chem.
According to analysts,in order to be more effective in the global API market, India and China have to work closely for mutual benefits through partnerships and collaborative approaches.