The Indian pharmaceutical industry ranks among the top five countries based on the production volume and accounts for about 8.5 per cent of global production and the turnover has increased from about US$ 0.3 billion in 1980 to about US$ 18 billion last year whereas, the estimated world market value of US$ 53 billion. Low cost of skilled manpower and innovation are some of the main factors supporting this growth. India is the third largest active pharmaceutical ingredient (API) market in the Asia-Pacific region and China is its main competitor.

The API industries in India include domestic and in-house consumption as well as exports. API manufacturers in India are trying to strengthen their marketing in regulated markets by different means viz., by focusing on the improvement of production yields; especially of critical products, through process modification, by  increasing the productivity of high volume products through capacity re-balancing, by increasing sales in international market etc. Manufacturing standards in India are compliant with many international regulations. In addition, improvements in the technological capabilities of the country have enabled many manufacturers to venture into the highly regulated markets of the US and Europe.

The current status
The Indian active pharmaceutical ingredients manufacturing segment can be divided into two sectors 1) innovative or branded and 2) generic or unbranded. In 2009, the global generic drug market was estimated at US$ 84 billion, of which the market share of US was about 42 per cent.

The last year, India’s generic drug industry was estimated to US$ 19 billion and it ranks third globally, which contributes about 10 per cent to global pharmaceutical production. In India, pharmaceutical manufacturing units are largely concentrated in two states viz Maharashtra and Gujarat, which account for about 45 per cent of the total number of pharmaceutical manufacturing units in India.

The generic APIs market is expected to continue to rise faster than the branded or innovative APIs, by 7.7 per cent per year and is expected to reach $30.3 billion in 2016. Asia-Pacific is expected to show the fastest growth rates of 10.8 per cent per year. The 24 fastest growing markets will include 11 in Asia-Pacific, seven in Eastern Europe and CIS, four in Africa-Middle East and two in Latin America.

According to a report, the market share held by Indian API manufacturers in the global API market (generic APIs and branded/innovator APIs) was 6.5 per cent in 2005, which has been increased at the rate of  12.0 per cent till 2010, and is expected to increase to at the rate of 22 per cent by 2015. India’s share of the global generic API merchant market has increased from 13.5 per cent in 2005 to 22.1 per cent in 2010 and is expected to increase to 33.3 per cent by 2015. Export sales of generic APIs from India increased at an average of rate of 18.9 per cent during 2005–2010.

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 from $255 million in 2008 to $1.12 billion in 2012 at an average annual rate of 44 per cent. 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.

The major players
In the global active pharmaceutical ingredients market, India plays an important role and  a dominant role in the US generic pharmaceutical industries, which is about the half of the certified dossiers filed globally for active pharmaceutical ingredients.  Significant active pharmaceutical ingredient manufacturers are located around Asia, specifically in India and China.

Presently, there are more than 1600 active pharmaceutical ingredient manufacturers operating in these two countries. Some of the leading active pharmaceutical ingredient manufacturers in India are GlaxoSmithKline, Teva Active Pharmaceutical Ingredients (TAPI), Dr. Reddy's Laboratories, Aurobindo Pharma, Lupin, 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. 75 per cent of API products are exported in regulated markets like the USA, 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. 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.

The future trends
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.

The sales of finished APIs are 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 per cent per 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 active pharmaceutical ingredient 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 the global market.

 Indian active pharmaceutical ingredient 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 active pharmaceutical ingredients, with several manufacturing facilities approved by the regulatory authorities of developed countries.

Conclusion
China and India are driving the market growth through their cost advantages and have emerged as manufacturing hubs for the APIs. With government support, improving IP systems and manufacturing standards in China and India, the generic as well as innovator APIs market in Asia-Pacific is expected to grow steadily in the coming years. In the near future India may beat China in global active pharmaceutical ingredients market.