The patent expiry factor is slated to drive the API market for the coming years

Gurpreet Sandhu

APIs forms the most vital part of every formulated end product, and of the whole pharma industry. The overall API market was valued at $101.08 billion in 2010, and is expected to grow at a CAGR of 7.9 per cent from 2011 to 2016. The development in the High Potency Active Pharmaceutical Ingredient (HPAPI) and Biogeneric drugs is boosting the growth of the Active Pharmaceutical Ingredient (API) market in India. There has been a paradigm shift in the use of innovative drugs to that of low-cost API drugs after the economic recession, thereby causing a positive impact on the overall growth of the API market in India and China.

Patent expiry and the API boom

In order to keep abreast with this change, API manufacturers are applying various novel technologies to reduce the processing time in order to yield more production. There has been an increase in influence of API players from India after the economic recession. The recession restricted the growth of innovative sector in developed economies such as the US and Europe, as the innovative sector requires huge investments. This has helped fuel the growth of generics market in Asian countries such as India and China. The API market is facing a period of unprecedented growth as market dynamics have undergone a major change with the expiration of patents pertaining to global blockbuster drugs in the US. The consequences of the economic crisis has hit the innovative drugs market hard, with less budgets allocated by the major players for the R&D of innovative drugs. This has led to drying up of pipelines for new drugs, and therefore the market for generic drugs is quickly growing. Thus, the patent expiry factor is slated to drive the API market for the coming years.

Asia-Pacific excluding Japan growing fast

European countries such as the UK, France and Germany are promoting the use of generics by providing incentives to the doctors for writing prescriptions relating to generic drugs and also to the pharmacists if they offer the generic equivalent of prescribed drugs. Thus, generic API market is expected to grow till 2016 as compared to the innovative API Market. 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 the CPA report. The developed markets in Western Europe, North America, and Japan had slower annual growth rate. Western Europe’s API market had the lowest annual average growth rate, 2.5 per cent followed by Japan at 3.4 per cent and North America at 3.8 per cent.

On an absolute basis, however, North America is still the largest API market (including both captive and merchant markets) followed by Asia Pacific although Asia Pacific is gaining ground. The North America share of the global API market declined three percentage points between 2008 and 2012 as the share of Asia Pacific increased. North America’s share was 43 per cent in 2012, down from 46 per cent in 2008. Asia Pacific’s share was 28.3 per cent in 2012, up from 24.2 per cent in 2008, according to the market report. The US remains the largest global market on a country basis, accounting for 39.7 per cent of the global API market in 2012.

– Gurpreet Sandhu, Managing Director, Reva Pharmchem