What is an API?
The acronym API stands for Active Pharmaceutical Ingredient. It is that chemical compound that creates the intended effect of the drug in the human body. Some drugs have multiple APIs to create a combination of effects to treat many symptoms. Otherwise, a single API that works in tandem with other APIs is also present.
Production of APIs has been traditionally been performed in the home countries of pharmaceutical companies. However, in recent years, more and more pharmaceutical companies are finding it profitable to send their manufacturing overseas to cut the manufacturing costs.
API in a drug is delivered to the body via an excipient. An excipient is usually a chemically stable, organic compound like lactose or mineral oil in the pill. They facilitate the transport of the API to the intended site of metabolism of the drug.
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Top API Manufacturers
TEVA Pharmaceuticals is the leading manufacturer of Active Pharmaceutical Ingredients. They hold the largest portfolio in the industry with over 300 Active Pharmaceutical Ingredients. Dr. Reddy’s an Indian-based company is another leading industry stalwart with over 60 APIs in use today.
A few other industry giants are Pfizer an American-based company, Novartis a Swiss pharmaceutical giant, Sanofi a french based pharmaceutical company. Most of them specialize in their respective API’s but a few of them offer generic versions of the drug too.
Where are APIs made?
Although major pharmaceutical players are headquartered in the United States and Western Europe; conversely manufacturing of APIs is in new and emerging economies like India, China, South Africa, and Brazil.
More companies are outsourcing the manufacturing of APIs to emerging economies as they are incentivized by the government in form of tax rebates and subsidies, there exists cheap and skilled labor and costs can be cut on equipment and infrastructure in these countries.
Consequently, this raises concerns about the quality of Active Pharmaceutical Ingredients produced overseas.
Impact of Covid-19
On March 11, 2020, the World Health Organisation categorized the Covid-19 outbreak as a global pandemic. The pandemic has put undue pressure on society and it was further magnified in the pharmaceutical industry.
China is the largest producer of active pharmaceutical ingredients; however, coincidentally China, the major manufacturing hubs for APIs was the same same as regions most affected by the viral outbreak. This includes Hubei and Zhejiang provinces. They are host to over more than 100 manufacturing and production sites.
This resulted in disruption of supply chains and backlogging and volatility as the markets were not being cleared due to exogenous factors as a result of the pandemic.
Latest Technologies in API Market
There are several emerging technologies in the API market. Primarily it is Quality by Design (QbD). Quality by Design facilitates the evaluation of process design and performance with meaningful insight on risk mitigation and understanding of the risk.
Greater operational reliability provided by Quality by Design technology ensures reducest regulatory risk and lowers cost.
The second is Particle Engineering technology in the API industry. Approved API used in solid oral dosage comprises of particles matching critical quality attributes which enable a patient to realize therapeutic effects of a formulated product. In cases where API doesn’t affect the intended change, formulators may look for modifications of APIs. For instance, micronizing the APIs to increase the surface area and dissolution rate is an example of the above.
Finally, it is Continous Process Engineering in API Manufacturing. The conventional approach to API manufacturing relies on batch operations mainly. However, manufacturers are finding it cost-effective and sustainable in the long run to employ continuous process engineering in the manufacturing of APIs.
Challenges Facing API Manufacturers
Several problems are facing the global API markets. Primarily, global API markets are observing an upward trend in the cost of crucial manufacturing inputs like energy, raw materials, and labour. It threatens small API manufacturers their livelihood and is facilitating a transition from a desirable perfect competition market structure to an oligopolistic market structure which may reduce the end consumer welfare.
Second, many producers have had to reduce their base costs to stay competitive which eat up their profit margin and also adversely affects their allocation for purposes like research and development.
Finally, inherent volatility in the industry is causing many firms to seek out tacit collusion with other firms so that they can weather the storm of price volatility. Hence they seek out strong and sustainable partners.
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