The Indian Active Pharmaceutical Ingredient (API) Industry is fast developing though many challenges exist as it comprises a large number of small and medium-sized manufacturers and suppliers. The industry holds great potential to become a leader in API-production as well in niche markets of high potency active pharmaceutical ingredients (HPAPIs).

Over the years, India has emerged as a preferred supplier of APIs to many global companies for considerations beyond costs. India is the third largest API manufacturer in the world after China and Italy. Major Indian pharmaceutical companies dealing with APIs are Ranbaxy Laboratories, Lupin, Shasun Chemicals, Orchid Chemicals, Aurobindo Pharma, Sun Pharmaceuticals. Other companies such as Ipca Laboratories, USV, and Sharon Bio-Medicine have significantly scaled up their R&D spending in the last few years.

Recently, Satish Khanna, Group President, API, Lupin Laboratories speaking on the challenges and opportunities for the Indian pharmaceutical industry at a meet organized by the Society of Chemical Industry placed the market opportunity for API by 2015 at $20 billion, including $10 billion in the Indian market alone. The API market size is around $2 billion currently with the potential to grow up to $12 billion by 2015.

HPAPIs are attractive on the one hand because the plants required to manufacture them are small-scale. On the other hand, containment buildings required for manufacturing HPAPIs are costly to install and manage.

However, in view of the opportunities existing in the high value, niche API segment, Indian pharmaceutical companies are fast-equipping themselves to grab the same. The major companies, which have a reputation of quality APIs and manufacturing facilities, are planning to enter into the segment working out their expertise to handle ingredients with higher inherent toxicity, pharmacological potency and occupational exposure limits (OELs).

At least 10 to 12 major players including Piramal Healthcare, Matrix Laboratories, Dr Reddy's Laboratories, Dabur Pharma - which has been acquired by the Germany-based Fresenius Kabi in April 2008 - and Hikal Ltd already have their operations in the (HPAPIs) segment. Along with these companies, various medium scale players with strong API manufacturing capacities are also offering contract manufacturing services for HPAPIs.

The high potency of the ingredient and higher level of toxicity make the HPAPls more complex to handle. The cytotoxic drugs, prostaglandins, certain hormones and opiates are the major drugs containing potent compounds. In therapeutic segment, the cancer drugs are known for their high potency nature.

According to a recent IMS Health study, the global oncology market is growing at a compounded annual rate of 12 to 15 percent reaching $ 75 to 80 billion by 2012. While many of the companies are looking forward for new molecules to occupy the market space, the contract manufacturers in India are looking for the opportunities in manufacturing generic HPAPls. Reports suggest that the oncology drugs worth over $10 billion will lose market exclusivity in the US alone by 2011.

Similarly, the prostaglandins market, which is estimated to be worth one billion dollars also offers a good opportunity for Indian companies in this segment. The companies such as Piramal Healthcare, Dishman Pharma are installing more facilities to grab the opportunities existing in HPAPls.

Challenges

The huge capital investment required for the installation of HPAPI facility is one of the major challenges for more Indian companies to foray into this sector.

The potential entrants have to setup separate facilities for manufacturing Cytolosic drugs, prostaglandins and steroids with utmost Care to control OELs.

A major challenge that Indian API manufacturers would face in the near future is that of rising input costs. At present, India's cost structure is competitive. However, the low operating cost environment significantly enhances Chinese players' ability to compete.

Some API producers are migrating to niche segments where relatively greater scope for differentiation exists. Also, the lack of common regulations across continents imposes additional costs on API manufacturers.

Overall, Indian API-manufactures are in a position to play an important role in the global market and initiate strategic and sustainable partnerships.