Indian manufacturers produce nearly US $ 2 billion worth active pharmaceutical ingredients today, it is estimated. And the country is among the top 5 manufacturers of APIs in the world. Annual growth rate of the industry is clocked at the level of 8 to 10 per cent and almost 70% of the total domestic production is exported.

Currently, India supplies APIs to about 50 countries worldwide. These figures go on increasing year by year as demands for Indian APIs go up with more and more international companies looking towards India to meet their supply needs.

Apart from the quality, the unique feature of Indian APIs is their comparatively lower costs. How do the companies offer such high quality APIs that too at a far lower rates? The answer is simple. Indian manufacturers, traditionally, nurture their strengths in cost-effective technologies. This is enabled, primarily, by competent skills in process chemistry and organic synthesis.

Before stepping on to the product patent era at the beginning of the year 2005, the pharmaceutical industry in the country was thriving on generics. A stiff competition, both from domestic and overseas, over the last three decades transformed it into a powerhouse of low-cost production.

Today, the country files the largest number of DMFs (drug master files) with USFDA and triumphs in having the highest number of API production facilities bearing the drug regulator's stamp of approval outside the US.

DMFs are generic dossiers filed with the FDA in order to allow the API to appear in marketed drugs. The number of DMF filings by Indian companies are also increasing year on year. They have already submitted more than 70 Drug Master Files during the quarter ended March 2005. The cumulative total of DMF filed in the regulated market worked out to more than 200.

Most of the leading Indian players have API business with a number of them including Dr Reddy's Laboratories, Ranbaxy, Nicholas Piramal, Wockhardt, Cipla, Sun, Lupin, Shasun etc focusing API exports as a growth area, in the post patent regime.

The major therapeutic areas driving the API market are antibiotics and anti-infectives, cardiovascular system, central nervous system drugs (CNS), respiratory drugs, anti-inflammatory drugs, and anti-diabetes.

However, Indian APIs face a major competition from their Chinese counterparts in the pricing front. While India still has more established companies than China, the latter saw a bigger increase.

Some reports suggest that this is only a perceived threat. They point out that although the API industry in China is continuing to develop rapidly, it still lags behind India. Today, China continues to be mostly a supplier of older, off-patent molecules, while Indian API manufacturers often focus on newer, still-patented molecules. With the introduction of product patents, there will be an increased interest in older molecules by Indian API manufacturers, though the full impact of this change is difficult to determine at this time.

A number of the fast-growing Indian generic companies and API manufacturers have continued to forge alliances with generics in the US, with an increasing number of the Indians focusing on supplying the finished dosage form as opposed to just the active ingredient.

For example, Strides Arcolab has recently joined forces with both KV Pharmaceutical and Akorn. There ware also more acquisitions of U.S. companies by Indian companies. For instance, in April 2005, Indian company Jubilant Organosys announced that it had signed a memorandum of understanding to acquire 75% stake in an undisclosed US generics company.

And in May 2005, Chennai-based Malladi Drugs announced the acquisition of Novus Fine Chemicals, which is believed to be the first such cross-border acquisition by an Indian pharmaceutical company in the API segment.

There is also much activity in the reverse direction, with U.S. and Western European generics continuing to acquire or take ownership stakes in Indian manufacturers. Recently, Teva and Mylan have created a lot of industry buzz by eyeing a stake in Hyderabad-based Aurobindo Pharma.

Evidently, there is ample indication that where is API industry heading for. While the product patent era is set to boost the potential for APIs in domestic industry, the export market is expected to witness an explosive growth in the coming years due to imminent patent expiries and pro generic initiatives across the US & Europe.