The active pharmaceutical ingredient (API) industry in India is on a growth trajectory, driven by key influencing factors. One significant element contributing to this expansion is the increased popularity of generic medications, which provide affordable alternatives to brand-name drugs, thereby enhancing API demand. Moreover, the burgeoning sector of biopharmaceuticals, comprising biologics and biosimilars, is fueling this market’s growth, as these complex medications necessitate advanced APIs.
APIs hold a crucial position within India’s pharmaceutical industry, accounting for approximately 35% of the sector. Projections indicate that the market, valued at US$ 13.64 billion in 2024, is anticipated to grow to US$ 20.32 billion by 2029, with a compound annual growth rate (CAGR) of 8.31% between 2024 and 2029.
Diverse factors are supporting the API sector’s expansion. The rising incidence of chronic illnesses like diabetes, cardiovascular disorders, and cancer is boosting the demand for both conventional and novel treatments. Technological advancements in drug development and production processes are spurring the generation of new APIs and optimizing production efficiency.
Another pivotal factor is the broadening access to healthcare in emerging markets, leading to a heightened demand for both generic and proprietary medications, thus increasing API consumption. Favorable regulatory settings globally encourage investment in API production and innovation, contributing to a growing, dynamic market that mirrors the continuous evolution within the API industry.
Half of the APIs are imported, predominantly from China, upon which India’s pharmaceutical sector heavily relies for vital compounds like penicillin G, levodopa, and others. Although domestically produced APIs make up 50% of the overall volume, the key starting materials (KSMs) for several pivotal APIs are primarily sourced from China. Close dependency on imports poses a supply risk, as pointed out by PwC.
The Indian government’s Production Linked Incentive (PLI) scheme has indeed accelerated the API industry’s growth. Announced in March 2021, a Rs 9,940 crore stimulus was introduced for the bulk drugs sector to bolster domestic manufacturing and exports, including Rs 6,940 crore under the PLI scheme aimed at fostering local production of critical KSMs, drug intermediates, and APIs.
Post-COVID, the industry has mobilized resources to reduce dependency on China, utilizing financing to invest in the necessary modern infrastructure supporting the “Make in India” initiative.
Key players steering this Indian market include notable companies such as Sun Pharma, Neuland, Viatris among others, with Telangana, notably Hyderabad, emerging as a pharma hub, substantially contributing to bulk drug production and exports.
India still requires a conducive holistic environment to exploit its API manufacturing capabilities fully, encompassing interventions both immediate and long-term, including expedited environmental approvals. The process could be reduced to two months, enhancing operational efficiency.
Globally, the API market encompasses key regions such as North America, Europe, Asia Pacific, Latin America, the Middle East, and Africa, with North America leading primarily due to the presence of significant pharmaceutical firms and advanced infrastructure. In contrast, Europe is recognized for its robust regulatory framework and substantial pharmaceutical industry. The Asia Pacific region, notably India and China, is positioned for significant growth owing to an increasing demand in pharmaceuticals and enhanced healthcare infrastructure.
Emerging trends in the API market, as highlighted in a Biospace report, include rising demand for biopharmaceuticals, a surge in API production outsourcing, stringent quality control and regulatory compliance, along with advancements in complex APIs and precision therapeutics methodologies. The expansion of biosimilar and generic APIs further catalyzes market growth, enhancing global access to essential medications.