During the last 30 years the chemical manufacture of active pharmaceutical ingredients (APIs) have undergone a major transition. The Increased R&D costs, unsatisfactory R&D productivity, pressure to reduce global healthcare costs and genericization have forced global pharmaceutical industry resort to sourcing APIs from cost - competitive destinations.
The global API market in 2006 was estimated at $33.6 billion and also has been the hotbed of outsourcing. From 2006 to 2013, the size of the market is expected to increase from $ 382 million to $2.9704 billion , at an annual compound growth rate of 34%, and in this period of time, raw materials are expected to continue to be a contract to promote the production of one of the main development of the market forces. A major element of the API development and manufacturing environment in recent years has been the emergence of contract manufacturing organizations and contract research organizations in Asia and Eastern Europe. Asian pharmaceutical companies are now the world's lowest-cost producers of small-molecule APIs. The Asian API is increasing with a significant growth rates, while the US and European pharmaceutical industry faces little or no growth. In 2006, Italy's Chemical Pharmaceutical Generic Association (CPA) has reported that the growth rates of the API market over the next five years are expected in Asia/Pacific, with an average yearly increase of 13.7 per cent in global demand.
The Indian pharmaceuticals sector has come a long way, being almost non-existent during 1970, to a prominent provider of health care products, meeting almost 95% of country's pharmaceutical needs. India has emerged as an important hub for API sourcing, placing it prominently in the global API market map. India exports full basket of pharmaceutical products comprising intermediates, APIs, Finished Dosage Combinations (FDCs), biopharmaceuticals, vaccines, clinical services etc to various parts of the world. Globally the Indian pharmaceutical industry ranks fourth in terms of volume (with an 8 per cent share in global sales) and 13th in terms of value (with a share of 1 per cent in global sales). With sales of $2 billion (€1.56 billion) in 2005, the Indian API manufacturing industry is the third largest in the world and is expected to make sales of $4.8 billion by 2010, an average yearly growth rate of 19.3 per cent. India (third largest producer after China and Italy) is all set to become the second largest producer of APIs globally, superseding Italy from its second position.
According to some estimates, India currently has about 3000 API factories and 5,000 reagent factories; apart from pure play API producers, formulators such as Ranbaxy, DRL, Cipla etc. The India API sector is not only satisfying over 90 per cent of Indian domestic demand but also catering to the global demand. "Strong cost competition and a well-developed local industry base, combined with a large pool of technical talent pool of English speaking manpower, has necessitated the inclusion of India as a part of all global sourcing initiatives across global pharmaceutical businesses," said Dr. Hasit B. Joshipura, chairman, GlaxoSmithKline Pharmaceuticals Ltd., India. India has highest number of US FDA approved facilities outside the Unites States. These facilities are continuously getting approvals from the US, Europe and other international authorities. The aggressive market exploration of Indian companies in overseas countries, especially in the semi-regulated and regulated markets are a major reason for the fast growth of the API industry. The major Indian companies which are pursuing the regulated market are aggressively filing drug master files with the drug regulators in the US and Europe (Chart 1).
Contract manufacturing (CM) activity in India is also looking forward for a big leap, as an increasing number of pharma majors begin to value outsourcing more of a strategic imperative than a mere cost-cutting option. Though CM for APIs which is outsourced to India is mainly for generic formulations, as market matures it will come for new chemical entities also. The proven proficiency of manufacturers in meeting with the Federal Drug Authority (FDA) standards, current good manufacturing practices regulatory guidelines and the strict enforcement of intellectual property rights (IP) in India with the product patent regime coming into existence is a major confidence booster for companies that are looking to outsource and protect their products.
At present, India produces 60% of medicines used as raw materials for export, while the proportion of China's approximately is 50%. Raw material market in Western Europe, India and China together accounts for more than 60% share. It is estimated that by 2010, this proportion will rise to 67%. Compared with India, Chinese pharmaceutical companies are primarily oriented towards supplying their own domestic market. Thus, they tend to place less emphasis on external GMP compliance. Indian API manufacturers, on the other hand, are focused on export sales to highly regulated global markets. They have thus developed considerable expertise in complying with global GMP and supplying documentation to foreign regulatory agencies for drug master files.
In Japan, the mature small molecule manufacturing industry faces challenges similar to the US and European manufacturers. Blockbusters developed in a different decade have started to come off patent. The drug development pipeline has struggled to keep up with expectations. As a result, some large pharmaceutical companies have trimmed their small molecule API capacity. In Singapore, API manufacturing industry is dominated by leading global pharmaceutical companies that have chosen the country as a manufacturing base. Indeed, it is hard to see how Europe can compete with Asia just by stringent cost cutting.
Indian pharmaceutical companies are acquiring various strategies (continuous cost management, new product launches, improvement of process efficiency) to overcome the new set of challenges posed by entering into strictly regulated markets. The bulk drug majors including Dr Reddy's Laboratories, Ranbaxy Laboratories Ltd, Aurobindo Pharma, Cadila Healthcare Ltd, Cadila Pharmaceuticals Ltd, Sun Pharmaceuticals Industries Ltd, Cipla Ltd, Dishman Pharmaceuticals & Chemicals Ltd, Divi's Laboratories Ltd, Hikal Ltd, Orchid Chemicals & Pharmaceuticals Ltd and Torrent Pharmaceuticals Ltd are keen on leveraging the potential of the global bulk drug industry. Aurobindo Pharma has recently signed a series of agreements with the global pharma leader Pfizer for marketing its 39 products to be sold in the US and Europe.
There is no doubt that Indian API manufacturers will play a significant role in the global market. However, Indian producers face challenges such as rising labour costs, increase FDA inspections (could sometimes lead to unfavourable results, e.g.: Ranbaxy) and meeting cGMP standards. Manufacturers, technology companies, research institutes, and regulators must work closely together to ensure that a vibrant, innovative and profitable Indian API manufacturing industry moves forward into the 21st century to meet the world's need for high quality products at competitive prices.
Mrunali R. Patel is faculty Indukaka Ipcowala College of Pharmacy, New Vallabh Vidyanagar, Gujarat. Rashmin B. Patel, Jolly R. Parikh and Bharat G. Patel are faculty, A. R. College of Pharmacy and G. H. Patel Institute of Pharmacy, Vallabh Vidyanagar, Gujarat.