Though the  Indian API industry has a long history, it  actually went into growth mode  only in the 90’s and  gained momentum in the latter half with the API companies  exploiting the  US and  European market potentials.

 Generic companies have historically outsourced APIs from the European companies. But with the entry  of Indian and the Chinese API manufacturers offering low cost products, the focus started shifting to these regions  in the mid 90’s. During the period from mid 90’s to date, both India and China could play a dominant role in  the global API industry.

India focused not only on  technologically advanced products but also on  products with low volume high value and margins. It also did  not lose the focus on the high volume products catering more to the generic companies in the US and EU regions. At the  same time  China focused more on the high volume markets products, building huge capacities and playing more on volume sales serving the softer markets more.

However the trend is now changing with  Chinese companies successfully entering the regulated markets and the Indian companies facing the same problems that were experienced by the European companies in the 90’s. Comparing the  preparedness of the Indian API companies to European manufacturers, we feel that Indian companies are better prepared than what the European companies were in the 90’s . However to keep abreast of  the times , an action plan has to be put in place now before it’s too late. It has now become the fight of “survival of the fittest” and actions in  next few years  would determine where we want our selves to be…

Briefly touching on the figures, the Indian pharmaceutical industry currently tops the chart amongst India’s science - based industries with wide ranging capabilities in the complex field of drug manufacturing and technology. The Indian API manufacturing industry is currently the third largest in the world and is expected to generate sales of $ 4.9 billion by 2011 from $2 billion in 2005, at an average yearly growth rate of 12.3 per cent, according to a study conducted by Chemical Pharmaceutical Generic Association.

 It ranks high amongst all the third world countries in terms of technology, quality and the vast range of medicines that are manufactured. From sophisticated antibiotics and complex cardiac compounds, everything is now manufactured by the  Indian pharmaceutical industry. The US market remains the most lucrative market for the Indian companies  by its sheer market size and the intensity of blockbuster drugs going off patent. The Indian pharmaceutical industry is also getting increasingly USFDA compliant to harness the growth opportunities in areas of contract manufacturing and research.

Owing  to the large size of its population, the Chinese pharmaceutical market is one of the largest. As the basis of pharmaceutical industry, the API market offers great growth opportunities for manufacturers both in-house and overseas. The API segment makes up more than 50 per cent  of the export value of China's pharma trade. As a result, the Chinese market for APIs is rapidly growing and is estimated to witness a compound annual growth rate (CAGR) of 18 per cent  from 2010 to 2017.

 Ingredient suppliers in the Chinese API market will be keenly following the events in the pharma industry, which is in the midst of integration. Apart from the sustained and rapid growth of the pharma industry, the long-term use of multiple specialized drugs for an ageing population and the reforms in  the Chinese medical system have also given a shot in- the- arm to the Chinese API market.

Coming back to the  question on what Indian API should be doing to sustain in the  long term, the following measures are suggested

• Concentrate on innovative and economical technologies, value- added products.
• Product selection to eliminate competition at the basic stage; focus on “High value low volume products” with adequate capacities.
• More focus  on  biotech.
• Maximizing outputs with the existing capacities; do not overburden with capacity enhancements which only ends up reducing margins.
• Partnering with China for “Backward Intergration”, use their capacities.
• Ensure compliance with the “Regulatory Requirements” to avoid any fallout with the health authorities.
• Focus on R&D. Increase R&D expenditure.
• Vertical integration to increase captive consumption.
• Strategize “Domestic market”.
• Government policies to be revisited to take API India on growth path.
• Indian government should  facilitate the entry into the “emerging markets”. Focus specially on  Russia & Brazil.
• API companies should come together to built “Brand India”.
• Eliminate unhealthy competition.