The Asian markets of India and China that have been able to provide quality active pharmaceutical ingredients (APIs) at lower prices are set to play a greater role in global API scene in future although Western European countries have held the lion's share of the global market till recently. India in particular is fairly well poised to achieve the number one slot in times to come according to some estimates.
While China and India are set to post the highest growth rates in the API markets in Asia Pacific,the scars of current global economic crisis have negatively affected the North , South, Central American and European API markets.
The surging demand for pharmaceuticals are fuelling the rapid growth of the market in China and India. The ageing population and the increasing affordability of the people to access healthcare facilities are increasing the demand for APIs in these countries. Lesser developed areas within these countries, especially rural and tier II and III cities, offer huge growth opportunities for the generics sector. While the API market in China is set to grow at a CAGR of 32.15 per cent, in India it is expected to grow at a CAGR of 24.07 per cent from 2008 to 2020 as per some studies.
The Indian API market was worth $2.0 billion in 2005, about 6.5% share of global merchant API market. This market share is likely to increase to 10.5% by 2010, taking the Indian merchant API market to $4.83 billion, with an average annual growth of 19.3%. It would make India one of the fastest growing API markets in the world.
The low cost of labour and basic chemicals as well as the innovative processes employed by Indian manufacturers make most of the APIs from India competitively priced compared to other countries. Moreover Government incentives have also helped in keeping prices low without affecting the profit margins of these manufacturers.
At present India is the third largest API producer in the world with Italy and China taking the top two positions. However India is all poised to take up the number one slot soon with the soaring exports to foreign countries, especially to well regulated markets while Chinese manufacturers are largely catering to their domestic needs. Also Indian API producers have good capability for producing high-tech generic APIs whereas Chinese manufacturers are not well-equipped in that area.
Moreover the Indian API manufacturers who are much better organised than their Chinese counterparts are usually better prepared with the necessary documentation related to drug master files (DMF), GMP compliance etc. India which holds the distinction of having the largest number of DMF submissions is home to the largest number of US FDA approved plants in the world and also has the highest number of ANDAs approved by the USFDA other than the US.
Indian producers are also making their presence increasingly felt in the Japanese API market. Intense competition in the domestic market, declining prices and the decreasing demand for APIs in the US market have forced the Indian API producers to look for alternative opportunities to boost their growth.
The Japanese market, which has opened up its generic sector, offers good growth potential for the Indian producers. France is set to lead the overall growth of the European API market at a rate higher than other Western European countries at a CAGR of 6.95 per cent from 2008 to 2020 primarily driven by the increased demand for APIs in the generic sector and the faster growth of the biotech API market. Historically, the generic sector of the synthetic API market in France has been underdeveloped as higher focus was laid upon the innovative sector.
However, in the wake of economic recession, the government's cost-cutting measures have given way for increased focus on the generic sector of the country. This is expected to drive the overall growth of the API market in the country. The innovative sector of the synthetic API market is the worst hit by the economic crisis in Europe. Western Europe has historically been dominated by the innovative sector in its API market. However, with the economic downturn, many of the countries are resorting to cost cutting measures in order to reduce the overall healthcare expenditure. This will stunt the growth of the innovative sector as these policies will lay emphasis on improving the growth of the generic sector. The economic recession has impacted the Italian API market which will be the slowest growing market in the European region and is expected to grow at a CAGR of five per cent during the period 2008-2020. The Italian pharmaceutical industry has been posting very slow growth rate for the past two years which is likely to be further worsened by the ongoing financial crisis.
Similarly the economic crisis has negatively affected the North American API market leading to a drastic reduction in its growth. The crisis has necessitated the need for the governments to reduce their expenditure even in the healthcare sector.
Apart from the global financial crisis ,another factor that is affecting the API manufacturers is the stringent regulatory requirements that have been placed in the form of the Supplementary Protection Certification (SPC) regulations in the EU countries which prohibit any manufacture of generic drugs in advance of its patent expiry. Hence most API manufacturers will have to move their plants out of the EU countries to ensure that they can manufacture generic drugs prior to patent expiry for the purpose of registration in other countries. This is also likely to increase the attractiveness of India and China as alternative destinations for manufacturing sites.