The active pharmaceutical ingredients (API) industry in India stands at the threshold of a transformation with backward integration and reduced import dependence, growth in high-value, niche APIs, improved regulatory compliance and quality focus, sustainability & Green API manufacturing, digital & virtual API supply chain models, opine experts.
The API industry in the country is at a watershed moment, impacted by global supply chain dynamics, shifting regulatory landscapes, and the desire for self-reliance. Traditionally reliant on imports, especially from China, India has made significant strides in boosting its domestic API manufacturing capabilities.
The PLI (production linked incentive) scheme has spurred investments in critical APIs and key starting materials (KSMs), reducing our dependence on imports. This is a very strategic initiative because APIs are the lifeline of the pharma sector, and India supplies nearly 20 per cent of the global API needs.
However, even as there are advancement, raw material costs, environmental laws, and compliance are a few of the significant impediments. Companies that embrace newer process technologies, sustainability, and high-value API segments will be well positioned to succeed
To combat supply chain risks, Indian API manufacturers are investing in the domestic production of intermediates and KSMs. This will reduce the reliance on imports and ensure a cost-competitive, stable supply chain. Some of the larger pharma players are establishing greenfield API plants to enable this transition.
The market is moving away from commodity APIs to niche, high-margin segments like orphan & rare disease APIs with a growing focus on personalized medicine. Even peptides and biosimilars of high value, complex segments are gaining traction. Besides, oncology APIs are growing in demand. Investment in these APIs with high barrier to entry can compensate investors with strong pricing power and longer-term growth.
As the USFDA, EMA, and WHO tighten regulatory oversight, compliance has become a differentiator. Indian API firms that focus on automation, digitalized quality management systems (QMS), and data integrity will be at an advantage. Adherence to Good Manufacturing Practices (GMPs) and excellent documentation will be crucial to achieve global market share. Working on Quality by Design (QbM) is going to be any area manufacturers should prioritize.
With increasing concern for the environment, API manufacturers must adopt concepts of green chemistry with a focus on friendly solvents and catalysts, reduce effluent generation and opt for low energy processes. It is here sustainable manufacturing investment will be rewarded with regulatory incentives and cost savings in the long run for industry players.
The traditional API business model is evolving. Virtual API companies, through technology-enabled sourcing, regulatory expertise, and global supply chain networks, are revolutionizing traditional manufacturing via reduced capital investment and enhanced efficiency.
Phase of transformation
Initiatives to encourage domestic API production by the government which include other than the PLI scheme are the bulk drug parks which offer the infrastructure and financial assistance. It is reducing regulatory burdens, making it easier for approvals for new drugs and API manufacturing. Further there is encouragement to Public–Private Partnership (PPP) to promote a synergy between the government and private industry to increase R&D and manufacturing, said industry officials.
Indian APIs are filling around 39 per cent of the global market. Most companies are strengthening their credibility in regulated markets by obtaining approval for their products, therapeutic applications and manufacturing facilities. Here Manoj Palrecha, former president, Karnataka Drugs and Pharmaceutical Manufacturers Association and managing director, Lake Chemicals, in an earlier interaction with Chronicle Pharmabiz noted that India accounts for 50 per cent of the production of these substances which are formulated alongside the active ingredients by companies. The remaining 50 per cent are sourced from China and Europe.
According to Palrecha, India has already taken several positive steps to strengthen the API sector. However, to accelerate growth and achieve global leadership, a few strategic interventions are necessary. There are seven aspects that need to be taken into consideration.
One is to fast-track approvals for new Greenfield API projects through a single-window clearance system; simplify and digitize environmental clearance procedures, especially for projects adopting green chemistry or continuous manufacturing.
Second is to establish API-focused skill development programs in partnership with universities, IITs, and pharma institutes. It is important to encourage joint R&D centres for process innovation, green synthesis, and biopharmaceutical APIs.
Third is to shift from batch processes to continuous manufacturing to reduce production cost, improve efficiency, consistency and lower environmental pollution load.
Fourth is to create a national list of critical APIs where India is heavily dependent on imports. There is also a need to prioritize domestic production of these APIs through incentives and strategic procurement support.
Fifth is the development of pharma parks at state level with Common Effluent Treatment Plants (CETPs), shared utilities, warehousing, testing labs, and logistics support etc.
Sixth is to have a global competitiveness, align Indian API standards with USFDA, EMA, and WHO GMP requirements.
Seventh is to promote India as a ‘Global API Hub’ through trade agreements and branding initiatives, said Palrecha.
India must train more pharma graduates and expand R&D-focused education to boost API production. Encouraging young professionals in research will enhance domestic API quality, ensuring self-sufficiency and surplus for export, further strengthening India’s global pharma leadership.
The growing global health concerns, increasing API production, and government policies will continue to support the pharma industry. Focusing on innovation, process development, and manufacturing capability for APIs within India will cement India’s role globally. Accelerating access to essential medicines forms the backbone of a resilient national health infrastructure. This translates into lucrative prospects for economic development through increased exports and partnerships with global players.
India at pole position in APIs
According to Hari Kiran Chereddi, managing director & CEO, HRV Pharma & New Horizon Global Pharma, India has solidified its position as one of the global leaders in generic drugs. The API and excipient business have been the twin pillars of its success. However, a reliance almost entirely on imports of such inputs – almost 70 per cent of India’s API and excipient needs come from abroad, mainly from China – is a strategic issue. This dependence is inducing movement to boost domestic supply capacity and quality, in an effort to secure supply chains and enhance export competitiveness.
Meanwhile, new dynamics have been introduced by recent US tariffs. While, pharmaceutical products have so far been spared in the tariff war, but the protectionist climate introduces a lot of uncertainty. Even more so, if Chinese pharma ingredients become more expensive due to tariffs, US buyers might switch to Indian providers – a chance for India’s API producers to command more demand. This shift can accelerate growth of India’s API sector and contain import dependency. Or, China’s loss can mean a flood of cheaper Chinese APIs into India, squeezing margins for domestic players. These hybrid outcomes are making Indian pharma agile on prices and regulation needs, leveraging global headwinds as a catalyst to growth and resilience, added Chereddi.
During this time, India is also rebalancing its relationship with China. The recent Chinese visit of Prime Minister Modi brought assurance of further Chinese market access for Indian drugs. To find new partners amidst the trade war, Beijing has even lowered import duties on 28 medicines (including cancer therapy) to facilitate Indian exports, noted Chereddi.
Since China is the world’s second-largest pharma market but so far has only one per cent of it coming from India’s pharmaceutical exports, the window of opportunity is substantial. Both nations certainly realize that increased pharmaceutical trade collaboration will be beneficial to both nations. Indian businesses are already finding faster regulatory approvals and joint ventures in China, accessing other export markets beyond the West. This renewed optimism also supports the rupee by improving trade balance prospects and reinforcing currency stability, pointed out Chereddi.
Overall, even in the midst of global trade uncertainty, the future for India’s API and excipient industry is bright. With a bet on self-reliance and a wise deployment of shifting geopolitics, India has the potential to turn challenges into opportunities. Companies that manage to offset supply risks while ensuring quality will emerge winners in the new world pharma supply chain, cementing India’s position as a resilient and important source of APIs and excipients for the world, stated Chereddi.
Govt initiatives to check imports from China
At the same time some of the experts are of the view that the Make in India initiative and the PLI scheme would help limit imports from China.
According to Rakesh Reddy, managing director, Aparna Pharmaceuticals, in an earlier interaction with Chronicle Pharmabiz said that the implementation of the PLI scheme, coupled with a strategic industry perspective aimed at decreasing reliance on China, is motivating Indian API companies to localize production of intermediates and key starting materials (KSMs) while enhancing their competitive edge in the foreseeable future. Overall, this scheme encourages innovation and collaboration.
The current landscape of the Indian API market is characterized by a significant degree of fragmentation. Within this space, numerous manufacturers are diligently working towards broadening their market presence through the implementation of diverse business tactics including alliances, facility enhancements, and regulatory approvals, he added.
To bolster the domestic market in accordance with its Make in India appeal, the government introduced initiatives aimed at boosting the domestics manufacturing of APIs as well as other critical drugs which have since favorably impacted market expansion, he noted.
To this end, the government has allocated over Rs. 20,000 crore and a key component of the Budget 2024 too was the provision of PLI to companies that commit to investing in the domestic manufacturing of crucial KSMs necessary to produce APIs used in medications for diabetes, tuberculosis, steroids, and antibiotics. This strategic effort is anticipated to drive market expansion in the foreseeable future, Reddy said.
The increasing prevalence of infectious diseases, genetic disorders, and chronic conditions are envisaged as a primary catalyst to drive market expansion. In the case of diabetes, it is estimated that by 2030, over 90 million people in India are projected to have this lifestyle disorder. Now this has underscored the importance of intensifying efforts towards the development of advanced pharmaceuticals necessitating a significant volume of APIs. Additional growth drivers seen are the expanding elderly demographic and the increased domestic manufacture of generic drugs, noted Reddy.
The global crisis following the Covid-19 pandemic had far-reaching impact on the pharmaceutical supply chain, resulting in disruptions for distribution of APIs coming in from China. It resulted in shortage of vital raw materials sourced from China for the production of medicines for HIV, cancer, epilepsy, and malaria, as well as antibiotics and vitamin supplements. Consequently, there was a noticeable shortfall of essential medicines across India, particularly in the cardiovascular and antibiotic categories. This led to a rise in the cost of numerous prescription medications, said the Aparna Pharmaceuticals chief.
Further, there is also a growing emphasis from the government to uphold quality standards within the domestic market. This shift is anticipated to promote greater consolidation and increased market share for key players who prioritize quality, said Reddy. |