Drastic manufacturing cuts implemented by the pharma giants to in-house API production owing to poor cost viability and productivity issues coupled with other key parameters such as high end R&D costs and pricing issues on finished formulations have resulted in a thrust to outsource API production. Such outsourced manufacturing activities are carried out by low-cost vendors in the Asia Pacific region. Moreover a substantial upsurge in the demand for generic prescription drugs will also help to accelerate API production.
The highly profitable biological API segment is experiencing positive spikes in response to a concerted interest evinced by the Big Pharma. Oncology API comprising of High Potency Active Pharmaceutical Ingredients (HPAPIs) is an area of avid interest and is expected to be a major growth driver of API market worldwide.
Furthermore, the API scenario is anticipated to show further traction in response to the evolving regulations in the markets of North America and Europe. Consequently, the gear for growth opportunities in API manufacturing segment has shifted from local markets to the second in-line emerging markets of India and China. Given their overall dominance in intermediates and API manufacturing, Chinese players can pose a serious competitive threat to their Indian counterparts, much beyond the APIs for essential drugs, according to Shenaz Khaleeli, director, PharmaLeaf India Private Limited.
The increasing prevalence of diabetes, neurological disorders, and other chronic diseases are also some other major driving factors of the global API market, according to a report.
The global demand
The global demand for active pharmaceutical ingredient market was valued at US$148.22 billion in 2015, is expected to reach US$ 213.84 billion in 2021 and is anticipated to grow at a CAGR of 6.3 per cent between 2016 and 2021, according to a report by Zion Research .
The market for API is expected to have the highest growth rate in the forecast period. However, strict regulations are one of the major challenges faced by the global API market. Such regulations are predominantly well defined in developed regions such as North America and Europe. Vendors in this market space are supposed to obey the detailed procedures prior to product commercialization.
The branded drug segment accounted for the largest share in 2015. Different therapeutic application of the API market includes cardiology, oncology, anti-inflammatory, gastrointestinal and others. The oncology segment is anticipated to grow at the highest growth rate in coming years due to increasing prevalence of cancer worldwide.
North America is leading market for API and acquired the largest share in 2015. Asia-Pacific region is expected to emerge as fastest growing region due to low operation costs and high investments in medical research. Furthermore, the high cost of trained labour and energy are the most important factors that enforced European market to move their base to develop countries such as India and China.
The US & European markets
The API market in the U.S. displays a high level of competition, with mergers and collaborations between various key players such as Teva Pharmaceutical Industries Ltd., Sandoz (Novartis AG), Mylan, Inc., and Allergen plc. Additionally, demand for biological APIs is high in the region, as technological developments in the pharmaceutical industry are paving the way for newer biotechnology drugs. These expansion strategies intensify the competition between the global players, which is a result of expected high growth in the API market.
In Europe, pharmacists are offered incentives for substituting branded drugs with generic versions, which contributes to the growth of the API market in the region. Regulations also play a vital role in the API market, as the law disallows development of generic APIs in Europe until patent expiry. However, the governments of various countries in Europe have started supporting the manufacture of generic drugs post the financial crisis. Patent expirations of major blockbuster drugs in Europe during the forecast period would fuel the growth of the API market in the near future.
Demand for generic drugs is increasing not only in developed countries but also in developing and underdeveloped countries in South America and Africa. Brazil’s health authority Agência Nacional de Vigilância Sanitária (ANVISA) allows the procurement or manufacturing of APIs only for companies registered with ANVISA. Moreover, foreign companies find it difficult to enter the generics market in Brazil, as nearly 80 per cent of the market is controlled by the four local companies namely, EMS, Medley, Eurofarma and Ache/Biosintetica.
Regulatory outlook
From a global perspective the majority of medicinal products manufactured in Europe and the North America contain APIs and excipients manufactured in Asia.
In response to this external input the regulators of North America, Europe and Japan have adopted the "International Conference on Harmonisation (ICH) Q7 Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients," based on endemic regulations that substantiate and even extend the WHO requirements in several areas of compliance.
European manufacturing authorization holders are obliged to ensure compliance to Good Manufacturing Practice (GMP) of their medicinal products as per Article 46f of "Directive 2001/83 /EC", which have since been made into legislation within the European member states.
Within the European Union, the ICH Q7 regulations have been established as "EU GMP Guideline Part II," with (nearly) identical terminology. Other countries such as Canada, Australia and Singapore have also adopted the ICH regulations - the latter via the "Pharmaceutical Inspection Co-operation Scheme" (PIC/S).
As is evident GMP regulations vary worldwide. The World Health Organization (WHO) has created a globally consistent basis for quality standards with the compendium "Quality Assurance of Pharmaceuticals." Chapter two describes the GMP requirements for "APIs (bulk drug substances)".Hence holders of GMP certificates provided by competent national authorities, be it the Chinese State Food and Drug Administration (SFDA) or CDSCO in India continue to attract API audits.
China, India to witness significant growth
Asia Pacific ranks second due to the factors such as availability of low-cost production facilities and cheap labour in countries such as India and China. The cost difference ranges from 30 to 60 per cent if the drugs are manufactured in China or India compared to other countries. Hence, China and India are expected to witness significant growth in the near future due to increasing in production capacities and presence of a large number of global and domestic players… Thus, Asia-Pacific is the most competitive market in API and the competition is expected to intensify between India and China, as these are the most attractive destinations for pharmaceutical manufacturing.
The end of the year 2016 china is projected be the largest API mercantile market and beat the US which will be the second largest global market. India will stay as the third largest mercantile market for generic APIs with a projected 7.2 per cent by 2016.
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. More generally, Indian APIs and pharmaceutical companies have been filling approximately 39 per cent of the global market. Indian API firms are aggressively strengthening their credibility in regulated markets by obtaining approval for their products, therapeutic applications, and manufacturing facilities.
From a global perspective, the API capability of India cannot be ignored. We account for the highest number of USFDA facilities pegged at 546 and EMA approved units besides other global regulatory agencies from Japan and Australia which enables it to take a big leap in terms of grabbing opportunity. Even though the country’s volume of production is lower compared to China, the global recognition on quality and variety of API products creates an opportunity to either partner with global players for marketing the APIs. It could also garner its revenues from being a preferred source of supply for global pharma bigwigs,”said GG Gurudatta, CEO, Estima Pharma.