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India is the largest provider of generic drugs globally. Indian pharmaceutical industry supplies over 50 per cent of global demand for various vaccines, 40 per cent of generic demand in the US and 25 per cent of all medicines in UK. The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach US $55 billion. India’s pharmaceutical exports stood at US $17.27 billion in 2017-18 and are expected to reach US $20 billion by 2020. By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and 6th largest market globally in absolute size.
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
The Indian active pharmaceutical ingredients manufacturing segment can be divided into two sectors such as innovative or branded and generic or unbranded. The global generic drugs market was valued at around US $244.5 billion in 2017, growing at a CAGR of around eight per cent during 2010-2017.
The global API market is poised to grow at a CAGR of around 6.6 per cent over the next decade to reach approximately US $238.8 billion by 2025. The prominent trends that the market is witnessing include, growing geriatric population, rapid growth in biopharmaceuticals sector and technological advancements in API manufacturing. (Source: markets and markets.com).
API is the largest segment of Indian Pharmaceutical Market. Depending on API type, the market is divided into biological API, synthetic chemical API and high potency active pharmaceutical ingredients (HPAPI). The biological API segment is further categorized into biotech and biosimilar. The synthetic chemical API segment is further divided into branded/ innovative and generic/non- branded.
The global API market is segmented based on synthesis, business type, therapeutic applications and geography. Depending on synthesis, the market is classified into synthetic API, biotech API and HPAPI. The synthetic API holds the maximum share in 2018 and is expected to grow at a high single digit CAGR from 2018 to 2025. The major factors driving the synthetic chemical API market are patent expiration of synthetic drugs (small molecule drugs), increasing number of small molecules in clinical trials, and increasing outsourcing by the pharmaceutical companies.
Biotech API held the second largest share in 2018 and is expected to grow at a high single digit CAGR from 2018 to 2025. Biotech API is further segmented into monoclonal antibodies, recombinant proteins, vaccines and others. Monoclonal antibodies accounted for the largest share in 2018, growing at double digit CAGR from 2018 to 2025. Increased investment in R&D by pharmaceutical companies for developing biologic drugs, adoption of biological therapies in disease management, increasing outsourcing are few factors driving the biotech API market.
The HPAPI segment is expected to grow at a high single digit CAGR from 2018 to 2025. Rapid growth in oncology market, low toxicity and lower side effects, technological advancements in HPAPI, increasing outsourcing, increasing incidence of chronic and age related diseases are a few factors driving the HPAPI market growth.
The region wise API market is segmented into North America, Europe, Asia-Pacific and Rest of the world regions. North American region tops the global API market and is expected to grow at a high single digit CAGR from 2018 to 2025. Patent expiration of the major drugs, rising demand for biotech APIs from government and private companies, market entry of biosimilars, increasing scope of high potent drugs and increase in the prevalence of chronic diseases such as cancer, musculoskeletal disorder, cardiac disease are some of the major factors that are driving the market growth.
Asia pacific market is expected to grow at a double digit CAGR from 2018 to 2025. Low labour cost, abundant availability of raw materials, infrastructure facility, rise in generic drugs demand, increased production capabilities, the presence of a large number of domestic and international players, and concentration of CMO companies are some of the factors that are driving the market growth.
India will become the second largest global generic API merchant market by 2020, beating Italy with an eight per cent market share. The Indian pharmaceutical industry which accounts for the second largest number of Abbreviated New Drug Applications (ANDAs), is the world’s leader in Drug Master Files (DMFs) applications with the US.
Over 60,000 generic brands across 60 therapeutic categories in India manufacture more than 500 different APIs. Among these, branded prescription drugs are the most profitable segment, promising to generate revenue of US$164,481.9 million by the end of 2023. On the other hand, the generic prescription drugs segment is expected to grow at the highest rate among all counterparts in the forecast period of 2017 to 2023.
With the rising cost of healthcare, governments and payers are pushing for increasing generics consumption over branded drugs, thus driving the growth of generic APIs market. Additionally, several major pharmaceutical companies are also focusing on generic drugs along with branded drugs due to eroding product pipeline and patent expirations.
There are over 2700 API manufacturers in the country, of which majority are small unorganized manufacturers. Though API market in India happens to be highly fragmented, it is actually expected to become consolidated in the coming years due to increasing competition and foreign investment.
The API market of India held a share of around eight per cent in the global API market in the financial year 2016-17. The ongoing global drug patent cliff is slated to further boost the revenues of API market in India. Moreover, the Indian API industry has gained recognition worldwide due to its high quality . India API market is expected to grow at CAGR 10 per cent between the years 2016-2022.
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.
Top API manufacturers
TAPI
Teva Active Pharmaceutical Ingredients is the leading manufacturer of APIs in the world today with over 75 years of experience and around US $750 million in third party sales. The company currently holds the industry’s largest portfolio of over 300 APIs.
TAPI employs over 5,000 professionals worldwide with its headquarters located in Israel next to Tel Aviv. Production facilities are located in Italy, Hungary, the Czech Republic, Croatia, Israel, India, China, Mexico, Puerto Rico and the United States.
The company’s research & development unit currently comprises over 750 scientists who specialize in the fields of chemical synthesis, fermentation, high potency APIs, plant extraction, synthetic peptides, vitamin D derivatives and prostaglandins.
Dr. Reddy’s Laboratories Ltd
Dr. Reddy’s is another leading manufacturer of APIs with over 60 APIs that are used for drug manufacture, diagnostic kits, critical care and biotechnology products. By 2006, Dr. Reddy’s Laboratories reached over US $500 million in revenue of which 75 per cent came from their APIs and branded formulations.
By 2007, Dr. Reddy’s had six FDA plants producing active pharmaceutical ingredients in India alone. Currently, Dr. Reddy’s deals with and manages all the processes from the development and manufacture of the API to the submission of the finished dosage dossiers to the regulatory agencies.
Aurobindo
Aurobindo is a fully integrated global pharmaceutical company. The API business is fully supported by technologically advanced API research and development infrastructure that develops new products and is involved with them right up until their delivery to market.
Aurobindo has a product list of over 200 APIs with five of their manufacturing facilities inspected by reputed regulatory agencies such as the FDA and MHRA.
Cipla
Cipla was one of the first companies to fully develop and manufacture APIs and in this way helped lay the foundations down for the pharmaceutical industry in India.
Today they manufacture over 200 generic APIs covering a wide range of therapeutic categories, reaching out to more than 170 countries worldwide. Cipla have three manufacturing facilities located in India that are approved by reputable regulatory agencies.
Sandoz
Sandoz is a subsidiary of Novartis, a multinational pharmaceutical company. As of 2011, Sandoz was the world’s second largest generic drug company with a total revenue of nearly US $11 billion. Sandoz offer around 20 API products.
Ranbaxy
Ranbaxy is a leading pharmaceutical company that supplies APIs to leading innovators and generic companies in more than 65 countries. They currently have four API manufacturing facilities across India where they produce just over 100 API products.
Sun Pharma
Sun Pharma’s API program began in 1995. Today they manufacture APIs at nine different plants including locations such as Hungary, Israel and the U.S. They have expanded their API manufacturing and currently produce over 200 APIs including warfarn, carbamazepine and clorazepate.
Conclusion
Indian API market holds huge potential not only to cater to the domestic market but also to export to all leading manufacturers of the world. The over-dependence on China is reducing due to rising cost of Chinese APIs and positive reforms by Indian government. The forecast points that Indian API market will grow at a CAGR 10.67 per cent in the next five years. However stringent regulations are one of the major challenges that the market faces. Such regulations are particularly well defined for the export of products to developed regions such as Western Europe and North America. The global API market is extremely competitive with a number of large and small manufacturers. Firms that engage in API manufacturing have to move from generic synthetic to high potency APIs, and biotech and bio similar APIs to retain competitive edge in world markets. u
(The author is associate professor, IILM University, Gurugram)
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