The High-Potency Active Pharmaceutical Ingredients (HPAPI ) market is driving the active pharmaceutical ingredient (API )market growth globally at a fast rate. As these compounds are very effective in the treatment of cancers, respiratory disorders, and hormonal imbalances, the HPAPIs market is mostly driven by the growth in the oncology therapeutics market worldwide, according to a report.
At present the majority of HPAPIs are anti-cancer products (cytotoxics and cytostatics). However, other HPAPIs include therapeutics such as hormones, narcotics and retinoids. While we initially think of HPAPIs as chemically derived products, biological therapeutics – such as monoclonal antibodies – are also HPAPIs by their very nature, points out an expert.
The area of oncology is likely to dominate the types of HPAPI molecules coming through clinical trials to market launch. Not only is oncology the largest therapeutic area by far in terms of revenue generation for pharma, it is also one of the fastest growing, estimated at over seven per cent growth year on year for the next six years, he adds..
During the last decade, the demand for HPAPIs has grown rapidly, mainly as a result of advances in clinical pharmacology and oncology research. Compared with the overall growth in the pharmaceutical market of about seven per cent per year, HPAPIs are estimated to have an annual growth of 12 per cent. They account for about 12 per cent of the total pharmaceutical market, and this share is set to rise strongly. As the number of potent compounds in pharmaceutical development continues to increase, so will the opportunities for HPAPI manufacturers, especially for companies with capabilities in growing niche areas such as HPAPI–antibody conjugation.
The major players in the market include Teva Pharmaceuticals Ltd (Israel), Sandoz (Switzerland) (Generic Subsidiary of Novartis), Lonza Group AG (Switzerland), DSM (The Netherlands), Dr. Reddy’s Lab Ltd (India), and Boehringer Ingelheim GmbH (Germany).
At the same time the API market is facing a period of unprecedented growth as market dynamics have undergone a major change with the expiration of patents pertaining to global best-seller drugs in the U.S. The consequences of the economic crisis has hit the innovative drugs market hard, with less budgets allocated by the major players for the R&D of Innovative drugs. This has led to drying up of pipelines for new drugs, and therefore the market for generic drugs is quickly growing. Thus, the patent expiry factor is slated to drive the API market for the coming years. At the same time, the governments of developed countries are promoting the use of generics as it reduces the total healthcare expenditure of the respective country.
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 34 per cent by the year 2016.
China remains the largest API supplier with 18 per cent of the global market, valued at more than US $80 billion. India is one of the leading players in the global market for APIs with a value share of approximately 13 per cent, preceded only by China and ahead of former leaders Italy and Mexico.
The API industry which is worth over Rs 55000 crore forms an integral segment growing Indian pharmaceutical industry. Due to the global drug off-patent cliff,the Indian API industry, is set to scale higher peaks by 2015. The opportunity for supplying India-made APIs to generic drug manufacturers coupled with increased outsourcing of bulk drugs by MNCs has made the API business lucrative.
It is estimated that India is the third largest API producers in the world after China and Italy. However, by end 2015, India is expected to be the second largest producer after China. In general, India has larger export exposure to regulated markets such as US, UK, etc as its quality standards are considered to be high. And to consolidate its global position, India will have to maintain its quality standards.
Owing to the increasing presence in synthesis, manufacture of late stage intermediates and APIs, the recent years have witnessed an evolution in the role of Indian API manufacturers in the global pharma supply chain . The DMF filings by India are currently more than China and domestic API manufacturing companies have also been increasingly participating in the supply of late stage intermediaries to innovator companies globally.
However there has been a decline in contribution of API to sales and Indian companies are increasingly using their API capacities for captive consumption and to file their own finished products.
Increase in the imports of API from China to India is being seen as a major cause of concern among the Indian API manufacturers. Chinese APIs are approximately 15-20 per cent cheaper compared to Indian APIs . APIs worth US$4.6 billion were imported by India from China in 2012. This was a 58 per cent increase from imports of US$2.9 billion in 2011. Indian formulation manufacturers are consequently forced to depend on low-cost imports from China due to the increase in production costs and mounting pressures on margins.
The Chinese competition in the API pertains to bulk vitamins and fermentation products where there are few Indian manufacturers. Most of the commodity APIs are imported from China.
Chinese companies have an edge over Indian API manufacturers due to the economy of scale and incentives from the Chinese government. Many of the Indian API players have moved to high-end niche products where competition is limited and margins are high.
The Indian pharmaceutical industry has also faced a fair amount of negative media coverage brought on by a few non -compliance incidents. These are likely to impact the credibility of “Brand India” threatening the export potential.
Hence according to some of the experts, there is a need for Indian players to reduce their dependence on import of APIs brought on by increasing margin pressures. The only solution that remains to overcome this challenge is that the domestic API manufacturers focus more on value addition and high-potency products. Backward integration can also reduce the dependence on import of raw materials by domestic firms.
Limited government intervention may also act as speed breakers in curtailing the API proposition, India has to offer. There is a need for the government to foster the industrial infrastructure for API production. Setting up of dedicated API industry zones may prove to be beneficial in this regard. Channelizing financial assistance towards domestic companies to help them expand may also help.
More over there is an urgent need for the Indian API manufacturers to invest in branding and thereby make made-in-India drugs globally acceptable. In light of the new requirements from Europe and the increasing global scrutiny, the need to focus on quality and collaboration amongst stakeholders has become more necessary than ever.
As quality standards are becoming more stringent Indian API manufacturers should look at business for the long-term instead of spot business. Also, going forward, customers in the international market will focus more on EHS so Indian pharma should use this opportunity to distinguish itself from Chinese pharma by investing in green technologies and bolstering safety practices. As there will always be Chinese manufacturers who are willing to undercut the competition on price,Indian pharma needs to focus on other ways to add value to the customer beyond price.
If Indian pharma industry wants to be a leader in APIs ,the plants should meet not only Schedule M standard, but should also meet WHO- GMP standard. For this, assured funding at low rate of interest and easy repayment schemes are necessary for upgradation or setting up new units. The support by Central Government for the development of the API industry should be in co-ordination with state financial institutions.
Indian API manufacturers can emerge as one of the leading exporters of APIs and intermediates, and recover lost ground to other competitors provided they are adhere to right quality and economies-of-scale. Industry has been urging government for extending support to create and increase capacities of APIs and basic chemicals to maintain its exports and affordability in domestic health care.
If the industry has to survive and grow against the onslaught of China, a national direction for attaining world leadership needs to be urgently put in place involving all aspects like policy, regulatory issues, market dynamics etc.