Indian Active Pharmaceutical Ingredient (or API) Industry – An Overview

  • Market Overview

According to World Health Organization, Active Pharmaceutical Ingredient (or API) is any substance or combination of substances used in a finished pharmaceutical product (or FPP) intended to furnish pharmacological activity or to otherwise have direct effect in the diagnosis, cure, mitigation, treatment or prevention of disease, or to have an immediate impact in restoring, correcting or modifying physiological functions in human beings.

Presently, India imports around 68% of API in value terms from China – the most significant player worldwide. The latter is also a sole seller for many of the critical intermediaries and APIs. These include cardiovascular diseases (Digoxin and Losartan), diabetes (Metformin and Glimepiride), and tuberculosis (Isoniazid and Streptomycin). High dependency of intermediates and APIs on China is a cause of concern from India's health security perspective. Covid-19 pandemic disrupted the supply of Key Starting Material (or KSM), intermediates, and APIs, and it resulted in supply chain disruptions and ultimately increased the cost of India's imports. As a result, the Government of India has plans to revive the inactive API manufacturing industry to reduce over-dependence on China.

The Indian API Industry

Although the Indian API industry has grown well in the past, it needs to come out of its shell. The industry's growth trajectory has been reasonably well over the last several years. It has fulfilled 20% of the global generics market's demand in volume terms making India the largest provider of generic medicines worldwide. At present, our country has the highest number of USFDA-approved plants outside of the USA and 44% of Global Abbreviated New Drug Applications (ANDA). India's bulk drug industry's 9% CAGR (2016-20) placed it in the third spot globally. The industry's projected CAGR during 2021–2026 is 9.6%. It underlines the future potential and rising global significance.

However, you should also note that during 2010-20, our nation witnessed higher dependency on imports of several KSMs, APIs, and intermediates. APIs import grew at an 8.3% CAGR from 2012 to 2019. Bulk drug import, too, touched Rs 249 billion ($3.43 billion) in 2019. The abundant supply of low-cost API imports from outside India led to a higher dependency on imports. It is indeed a matter of concern as we have witnessed supply-side disruption during China's 'Blue Skies' policy implementation in 2018 and the Covid-19 pandemic in 2020.

Competitive Advantages of Indian API Industry

We have a robust API domestic market, with many Indian companies having multiple advantages over Western competitors. Our country is on equal footing with Western nations on parameters such as process efficiency and technological capabilities. An evolved chemical industry and skilled workforce coupled with stringent quality and manufacturing standards are an added advantage. The manufacturing costs are only 2/5th of setting up and operating a modern plant in the West. You must be aware that in China, wages have increased considerably higher than those in India since 2007. Our nation's employee costs are lower than China's at present. The trend is anticipated to continue going forward. Labor costs in China more than doubled, whereas the same has declined from 6.1% to 5% in India.

Supply chain disruptions in China led various major pharmaceutical countries to reshuffle their API import sources. Countries in the Middle East, Latin America, and Africa are inclined towards local formulations and generics. We have a tremendous opportunity to position ourselves as one of the largest API suppliers globally in this background.

Government of India's Initiative

In mid-2020, the Union Cabinet approved the Production Linked Incentive (or PLI) scheme of up to Rs 6,940 crore ($955 million). The plan covers the promotion of domestic manufacturing of KSMs, Drug Intermediates, and APIs. It proposed financial incentives to qualifying manufacturers of identified 41 eligible products covering 53 APIs for six years, taking 2019-20 as a base. Apart from it, the Government's measures for the pharmaceutical industry included increasing the FDI limit and formulation of a new intellectual property rights strategy to push innovation.

In March 2020, Government announced a Rs 9,940 crore package ($1.4 billion) for the bulk drugs industry. Aiming to encourage domestic production and exports, the Cabinet also okayed Rs 3,000 crore ($413 million) outlay over the next five years to boost bulk drug parks and fund standard infrastructure provisions. These steps should result in developing a required ecosystem and enhancing domestic manufacturers' competitiveness.

Competition Scenario in API Market

Major companies in the global API market consist of Midas Pharma, TAPI, Centrient, AMRI, Lonza, Livnoz Pharma, Zhejiang Jiuzhou Pharma, Wuxi Apptec, Huadong, Nanjing King-friend, and others. In comparison, notable players in the Indian API market include Neuland, Solara Active Pharma Sciences, Granules India, Aarti Drugs, Divi's Labs, Suven, Dishman, Jubilant, Laurus Labs, Shilpa Medicare, and others. The Indian API market is highly fragmented, with ~1,500 API manufacturing plants. The top 14-16 API companies made up a mere 16%-17% of the total market share at the end of FY2017.

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  • Vishnu VV @Vishnu VV
    Top players in the industry amount to less than 15% of the market share. This share was of 2017. What is the latest as there is significant shift in dependency on China across industries including APIs.
    Like 2
  • Gangadhar B @Gangadhar B
    profits declined for API pharma industries in AMERICA. Be careful. Dr.Reddy labs announced this matter
    Like 0

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