Image courtesy of Exeltis

India’s active pharmaceutical ingredients (API) industry has come a long way since the 1980s when the pharma industry was heavily reliant on API exports from Europe. The domestic consumption market for APIs is expected to have a CAGR of 10% between 2015 and 2022, with the industry expected to reach a size of US$18.8 billion by FY2022, according to RNCOS. In 2016, India’s global generic API merchant market share was 7.2%, the third-largest when the last record was taken, according to the IBEF. Since then, India’s share has significantly increased as a result of the country becoming a major exporter to all key markets, including China.  “Three years ago, India was importing APIs from China and now, Indian companies are exporting to China,” underlined Girish Chovatia, chairman and managing director of Ami Life Sciences – a generic API manufacturer. “One of the reasons for this reversed scenario the number of knowledgeable scientists and pharmacists in India. Furthermore, Chinese manufacturers have curtailed mass production due to environmental issues. With standardized and stringent global regulatory requirements, the same norms apply to all the producers in the world. In China, the pharmaceutical and chemical industry contributes 3% to its GDP, but accounts for 37% of overall pollution levels. Because of this, the Chinese government is focusing more on the engineering and digital industries. But in India, the pharmaceutical and chemical industry is focused on talent, raw material availability and the capacity to deliver.”

Is China’s Loss India’s Gain?

Radical environmental policies have been implemented under Xi Jinping, the Chinese president, over the past five years, in an attempt to curb high levels of pollution in China. Thousands of manufacturing facilities across a number of industries have been shut down as a result of failing the required high environmental standards. This has left a vacuum of global supply given the reliance of so many countries on Chinese products. “Due to current environmental issues in China, the intermediates and even bulk drugs supply situation is completely disrupted,” underlined Ravindra Jagtap, managing director at Aastrid Life Sciences. “To mitigate the risk of depending on China, a number of domestic as well as international manufacturers of pharmaceuticals are now looking for supplies from reliable Indian companies.”

China’s current situation has opened the door for India’s API manufacturers to take a greater share of the global market and export to China. However, Indian pharma companies are still reliant on certain Chinese firms for APIs and the 25% to 30% increase in prices for Chinese APIs due to the reduction of supply has been felt by the industry.

India’s Department of Pharmaceuticals (DoP) has tried to increase local supply and reduce the reliance on imports. A policy proposal released in August 2019 outlined plans for price controls and procurement programs that favor locally-made APIs so as to reduce a reliance on imported ingredients and intermediates. This also included a proposal for products made by local firms to be exempt from price caps for five years. The DoP’s policy proposal, in line with the ‘Make in India’ initiative – which has prioritized the manufacturing of products within India – is another encouraging sign for an industry that has previously been so reliant on imports.

Apart from the aforementioned opportunities, India is also seeing an increase of API exports to neighboring countries like Pakistan and Bangladesh. Although both countries have fledgling pharmaceutical industries, they lack the adequate API manufacturers. “These neighboring countries have recently set up formulations companies, but they continue to lack API manufacturers and thus they rely on India as a first destination to purchase APIs,” remarked Yogin Majmudar, managing director at Bakul Group.

A lack of a substantial capital investment or subsidies for manufacturers has held India’s pharma industry back in previous years. With allocated special economic zones (SEZs) to support manufacturers and procurement programs in place to favor local firms, there should be added incentive for the local API industry to take full advantage of the window of opportunity being presented by the events happening in China.

A Move to Specialty and Green API Production

As India aims to increase its global share of the API market, manufacturers find themselves with an opportunity to add value to their portfolios. A core focus has been the shift to embrace green chemistry. R&D in the API space has seen the creation of novel synthetic routes to the creation of more efficient and environmentally friendly alternatives. The concepts of ‘flow chemistry’ and ‘green chemistry’ have also gained more significance as more sustainable approaches are being demanded by both market and regulations. “We are constantly working on our process developments with an angle on environmental safety, and we impose a strict control on our effluents,” highlighted Arun Doshi, chairman and managing director at Surya Lifesciences. “The government of India takes a very strict stance on environmental grounds and we embrace this strictness because it is motivating us to undertake actions to create new technologies and to operate an effective R&D that is recognized by the DISR (Department of Scientific and Industrial Research).”

There are ample opportunities presenting themselves in the API markets as manufacturers look to add value from green or specialized products. There has also been a trend of formulation companies venturing into API production and vice versa, which is set to ensure greater security across the industry. This move will most likely create more value within India’s pharmaceutical sector and add to its vision of becoming a more specialized and customized industry.

India’s Excipient Market Share Growing Exponentially

The continued growth of India’s API sector, especially through increased exports, is set to benefit the country’s producers of excipients and intermediates directly. India’s excipients market is currently growing at 10% to 12%, according to Beroe, twice as fast as the global average.

The reasons for both Indian and global excipient market growth include the advancement of functional excipients, increasing uptake of biologics and the rising adoption of orphan drugs. Many companies are focusing more on excipients to address issues such as segregation, low dissolution and poor bioavailability. Although the small global excipient market is dominated by the United States, Europe and Japan – contributing a combined 85% to the global market – India continues to be seen as increasingly attractive destination. Buoyed by the lower costs of raw materials and labor, domestic and global players have increased their footprint within the country through joint ventures and organic growth.

Price remains an important factor in choosing a supplier of excipients and India’s high excipient market growth rate can be put down to the fact that products are 5% to 7% cheaper than in the developed world. However, quality and product safety will always be paramount in a part of the industry that demands perfection. “Safe and multifunctional excipients are the need of the hour,” remarked Chitra Shah from Arihant Innochem. “With innovations in machine technology, excipients with superior performance to handle the rigors of the manufacturing process and delivering a robust formulation are sought after. This coupled with the rigorous demands to meet the safety and toxicology limits make working in the excipient innovation space very interesting. Newer applications for the same excipient, improved morphology, use of same excipient in a different route of administration are the flavor of the day. Hot melt extrusion, nanotechnology, implants and injectable deliveries are some areas where a lot of excipient based innovations are being explored and pulmonary delivery is another focus area along with nutraceuticals.”

With demand for excipients set to increase throughout the decade, Indian firms will need to keep on top of the increasingly stringent regulations being enforced by multiple regulatory bodies across key markets as well as the technological demands brought on by Pharma 4.0 to stay competitive on a global scale.

Reliance on Chinese Imports Hits Home

The intermediates segment has shown sustained growth in India with exports for intermediates in FY 2019 reaching double-digit growth as a result of the supply disruptions in China. However, as is similar with APIs, India remains reliant on imports of intermediates from China, which has raised costs for certain players in the Indian market. The Indian government needs to prioritize improvements to infrastructural facilities like the uninterrupted supply of water and electricity so a significant push to build more manufacturing facilities of intermediates in India can be expected.