Active Pharmaceutical Ingredients (APIs) play a significant role in the pharmaceutical industry as it constitute about 40-50 per cent of the total cost of a drug. Production of API is a highly sophisticated, demanding and challenging as per the good manufacturing process, which is followed in the global pharmaceutical industry. In the global API market, India plays an important role. India is playing a dominant role in the US generic pharmaceutical industries, which is about the half of the certified dossiers filed globally for active pharmaceutical ingredients.

A significant number of API manufacturers are located around Asia, specifically in India and China. Presently, there are more than 1600 API manufacturers operating in these two countries. Some of the leading API manufacturers in India are GlaxoSmithKline, Teva Active Pharmaceutical Ingredients (TAPI), Dr. Reddy's Laboratories, Aurobindo, Lupine, Ipca, Cipla, Divi's Laboratories, Sandoz, Ranbaxy, Matrix, Sun Pharma, BASF and  Pfizer.

Ipca has emerged as one of India's top exporters of API with nearly 25 per cent of the turnover coming from APIs. About 75 per cent of API products are  exported in regulated markets like the US, Canada, Europe and Australia. For over 20 years, Ipca has been playing a lead role in the Indian APIs market, both in the anti-malarial and anti-hypertensive therapeutic segments. It is the first manufacturer in India for APIs like Atenolol, Hydroxycholoquine Sulphate, Morantel Citrate, Pyrantel Pamoate and Zaltoprofen.

Domestic majors like Dr Reddy's Laboratories, Aurobindo Pharma, Ipca Laboratories, Alembic Pharmaceuticals, Glenmark Pharmaceuticals, Jubilant Life Sciences, and Shasun Pharmaceuticals have established strong presence in these markets and are set to capture future opportunities.

On a geographic basis, the highest growth rate for APIs between 2008 and 2012 was in Asia-Pacific (excluding Japan), which experienced average annual growth rate of 13.9 per cent, followed by the Middle East with 8.7 per cent average annual growth, and Eastern Europe and the Commonwealth of States (CIS) with 8.2 per cent average annual growth, according to a recent report. India’s supply to the US market increased at an average annual rate of 44 per cent from 2008 to 2012 (i.e., from $255 million in 2008 to $1.12 billion in 2012).

Asia Pacific accounted for 39.6 per cent of the global generic API merchant market in 2012. China is the largest consumer on a country basis of generic API in the merchant market, accounting for 23.7 per cent of the global total, surpassing the North American market as a whole (21.9 per cent) and the US (20.4 per cent). India exports generic APIs to developed countries and the exports account for 41.6 per cent of total sales in India as compared to 24.7 per cent in China. India is the second largest supplier of generic APIs to the US market with a 24.4 per cent share, according to the CPA report. India is also increasing its supply to Western Europe, accounting for 19.2 per cent of the supply to the region.

By the year 2016, China is expected to account for 27.7 per cent of the global generic API merchant market, making it the largest market and surpassing the US, which will be the second largest global market with an 18.2 per cent share. India will remain as the third largest merchant market for generic APIs with a projected 7.2 per cent by 2016, according to the CPA report. Ten emerging markets are projected to experience double-digit growth of 10 per cent to 14 per cent in the generic API market.

 These countries are Brazil, China, Egypt, India, Jordan, Pakistan, South Africa, Thailand, Turkey, and Vietnam. The generic APIs industry in India has reached to worth $4.7 billion in 2012 at an average growth rate 20 per cent per annum. Sales of finished APIs is     increasing at faster rate up to 40-45 per cent per year. This is due to the strategy of Indian companies to raise the added value of revenues. The growth has been driven by both domestic sales and exports, particularly to the US, where exports grew at an astonishing 44.8%/year to reach $1.12 billion in 2012, with a market share of 24.4 per cent, second behind Italy.

In Western Europe, Indian generic API companies increased their market share from 15.9 per cent in 2008 to 19.2 per cent in 2012. They are also penetrating the strictly regulated and wary Japanese market, albeit from a low base. More generally, Indian APIs and pharmaceutical companies have been filling approximately 39 per cent of global market. Indian API firms are aggressively strengthening their credibility in regulated markets by obtaining approval for their products, therapeutic applications, and manufacturing facilities. These companies, including those selling finished dosage forms, continue to outpace Chinese, Italian and other competitors in terms of DMFs, which are seen as a gradient of quality. Higher quality, coupled with cost-containment, makes an India increasingly attractive for API outsourcing. In fact India has been recognized as one of the leading global players with the filing of large number of DMFs and dossier registrations for APIs, with several manufacturing facilities approved by the regulatory authorities of developed countries.

Taiwan and Korea are two other Asian countries are also emerging as API suppliers. The Taiwanese API industry is characterized by a high percentage of manufacturing sites inspected and approved by international health authorities. Taiwan also agreed to issue API manufacturers with written confirmation about quality standards required by the EU.

Drug companies from India filed 51 per cent of the overall global applications, also called drug master filings (DMF), in the US market during calendar year 2011. DMFs are essentially approvals to supply complex raw materials to all generic manufacturers servicing the US market, which is the most lucrative of all global markets. Over the last three years, there has been a sustained increase in the trend of such applications from India. Of the global DMF filings in the US, India accounted for 45 per cent in 2009, which increased to 49 per cent in 2010 and 51 per cent in 2012. With a large number of patents which  expired in the developed countries  like the US and Europe, Indian companies, with skills to develop and manufacture low-cost generic drugs, see a much more lucrative opportunity there than utilizing their capacities for manufacturing APIs. Outside the US, India has the largest number of manufacturing facilities approved by the US Food and Drugs Administration.