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For many years, the bulk drug has occupied the highest proportion in the international trade export of China's pharmaceutical products. China's API industry also occupies an important position in the global pharmaceutical industry chain. Affected by the COVID-19, the safety of the pharmaceutical industry chain and the supply of APIs has received unprecedented attention. This paper combs the pattern change and future development trend of the global API industry, and puts forward suggestions for the development of China's API industry.

The global pattern of API industry is gradually shifting to China and India

Before the 1990s, Europe and the United States were the world's most important raw material drug production areas, with large industrial scale and advanced technology; Later, the production and supply of raw materials in Europe and the United States gradually shifted to the Asia-Pacific region due to production costs and environmental pressure. At present, the global production of chemical raw materials is mainly concentrated in five regions: Western Europe, North America, Japan, China and India. Among them, Europe and the United States have gradually reduced the production capacity of API, especially in the United States. Most generic drug companies do not have their own API production workshops, mainly relying on imports. Emerging markets in international trade, represented by China and India, have risen rapidly and become major producers and exporters of raw materials. According to relevant data, the global share of crude drug supply in China and India increased from 16.7% in 2008 to 47% in 2019.

Geographically, in Europe, most countries have already abandoned the production of APIs, except France, the Netherlands, Germany, Switzerland, Spain, Italy, Ireland, Russia and a few other countries in Eastern Europe. In the Americas, the United States, Mexico, Brazil and Cuba also have some API factories, but the number is also small, and the API enterprises in some countries are also on the decline. In Asia, in addition to China and India, Israel, Japan and South Korea also have a certain number of API and intermediate factories, but the number is relatively limited. Africa's API industry is almost zero.

In terms of varieties, the United States, Europe and other developed countries and regions, relying on their advantages in research and development, production technology and intellectual property protection, occupy a leading position in the field of patent drug raw materials with high added value; China is dominated by bulk raw materials; India is using the generic pharmaceutical industry to drive the production of characteristic raw materials.

China and India play an important role in the market of crude drugs by relying on cost advantages. As China, India and other developing country characteristic API manufacturers continue to increase R&D investment, improve production technology, improve process level, and invest in improving production equipment to form specialized production lines, Chinese and Indian API enterprises are also gradually extending to the high-end value chain of API.

Before the outbreak of the COVID-19, the five major API production regions had been in a situation of ebb and flow. China and India have benefited from the rapid development of their own pharmaceutical industry and the increase of international demand for raw materials, and the growth of the raw materials industry has been considerable. Compared with the other three production regions, the future development prospects of the API industry in China and India are generally optimistic. At the same time, due to the fact that India's pharmaceutical industry has much in common with China's, the Indian API industry has formed a climate, and it is expected that it will continue to compete with Chinese API enterprises in a long time in the future.

China's API has deeply participated in the global pharmaceutical industry chain

China is the largest producer and consumer of chemical products in the world. In 2020, the output of dozens of bulk chemicals ranked first in the world. China's API industry has complete basic chemical raw materials in the upstream and relies on the advantages of the industrial chain supply chain. After years of continuous development, it has become an active participant in the global API industry. Especially since 2010, China has become the world's largest production base of crude drugs, which can not only effectively meet domestic demand, but also sell a large number of crude drugs to the international market. The crude drugs are exported to nearly 200 countries and regions around the world. The export volume of international trade has been the first in the world for many years, and has begun to occupy an extremely important position in the global pharmaceutical industry chain.

According to Clarivate data, China can produce about 1650 varieties of APIs with a capacity of about 30% of the world. Its comparative advantages are reflected in fermentation products, cost control level and international standards. Among them, a large number of APIs and intermediates have a considerable share in the global market and have certain bargaining power. For example, China's antibiotic production level is internationally advanced, and antibiotic raw materials account for 30% of the international market; The production of antipyretic and analgesic drugs such as paracetamol, aspirin and analgin is relatively high, and the production of paracetamol accounts for 50% of the world's total production; Most of the vitamin raw materials, except for a few varieties, have the highest output in the world; The market share of corticosteroids is leading in the world. In addition, China is also the largest supplier of effective ingredients of some important drugs, even the only supplier in the world, such as the antibiotic vancomycin. China also dominates the global supply of heparin.

According to the data of the China Chamber of Commerce for the Import and Export of Pharmaceutical and Health Products, in addition to a slight decline of 1% to 2% in 2015 and 2016, the export scale of China's chemical raw materials has continued to grow over the years, with the export volume increasing from 15.98 billion US dollars in 2010 to 41.77 billion US dollars in 2021. The export volume has exceeded 10 million tons, and there are dozens of products with export value of more than 100 million US dollars. According to data, Chinese crude drugs have accounted for about one third of the global crude drug market, and are worthy of being the leading global crude drug market. In recent years, the number of Chinese enterprises applying for the EU CEP (European Pharmacopoeia Certificate of Applicability) and the US DMF (Drug Master Document Certificate) has shown a rapid growth trend. Taking the European market as an example, as of July 11, 2022, Chinese enterprises had 899 valid CEP certificates, and about 900 varieties of API were sold in the European market, making it the largest source of API in Europe.

The epidemic situation highlights the status of China's API center

Since the outbreak of COVID-19, the global supply chain of APIs has been affected to some extent, and India, the United States and other countries have experienced drug shortages to varying degrees, especially epidemic related drugs. At the beginning of the outbreak of COVID-19 in February 2020, the World Health Organization immediately sent a list of priority products to the Chinese Chamber of Commerce for Import and Export of Medicines and Health Products, including 35 varieties of APIs for the production of antibiotics, antiviral drugs, and drugs for the treatment of hypertension, which need to be monitored due to the interruption of the supply of Chinese APIs and intermediates. During the epidemic, India announced that it would stop the export of 26 active pharmaceutical ingredients (APIs) and related drugs to ensure its own use.

The above situation highlights the importance of China in the global pharmaceutical industry chain. According to the data, the API and drugs restricted by the Indian government for export are mainly antibiotics, vitamins, antiviral, antipyretic and analgesic products. The vast majority of them are drugs needed to fight the epidemic. The raw materials or core intermediates of these drugs are mainly from China, and even local enterprises in Hubei occupy the world's leading share. At the G20 Special Summit on COVID-19 held in March 2020, China proposed that "China will increase its efforts to supply products such as APIs, daily necessities and epidemic prevention materials to the international market", highlighting China's responsibility and responsibility as the world's largest producer and exporter of APIs in the context of the global epidemic of COVID-19. During the COVID-19, the export amount of anti infective, vitamins, hormones, antipyretic and analgesic drugs, some antibiotics and other anti epidemic related raw materials in China has increased to varying degrees, and some varieties have grown rapidly, such as dexamethasone, lamivudine, vitamin C, vitamin E, and paracetamol The export volume of Anakin and other international trade increased by more than 20% year on year.

At present, Pfizer's Paxlovid and MSD's Molnupiravir have been approved and commercialized in several countries and regions respectively. A number of Chinese enterprises have become important intermediate API suppliers for Pfizer and MSD. According to relevant announcements, three domestic manufacturers, namely Carlislein, WuXi AppTec, and Boten, have received orders from Pfizer Palovide worth more than 14 billion yuan - Chinese enterprises have deeply participated in the global industrial chain and supply chain of small molecule drugs for COVID-19.

The COVID-19 has also further recognized the importance of the global pharmaceutical industry chain. Any problem in any link of the industry chain will bring a chain reaction to downstream industries. After the outbreak of the epidemic, the export of Chinese pharmaceutical products was delayed, affecting the Indian pharmaceutical enterprises that are most closely connected with China's upstream and downstream drug supply chain, and thus affecting the normal production and global supply of downstream enterprises.

It can be said that the COVID-19 further highlights the position of Chinese APIs in the global pharmaceutical industry, but it also makes countries around the world begin to pay more attention to the safety and stability of their own API supply, and more and more European and American pharmaceutical enterprises begin to consider the return of API production. In the future, the global API industry chain may develop towards diversification, localization and regionalization, but this will be a long process.

The upgrading and iteration of China's API industry is at the right time

In the past, the division of labor in the supply chain of the global pharmaceutical industry chain was based on the resource endowments and comparative advantages of countries, and was the result of free market choice. Countries considered cost priority and efficiency priority. However, the continuation of the COVID-19, combined with trade protectionism and geopolitical conflicts, may become a catalyst for reshaping the industrial pattern. How to continue to maintain the advantages of China's API industry in the reshaping of the global pharmaceutical industry chain is of great strategic significance for the future development of China's pharmaceutical industry in international trade.

At present, China's API industry has shown the trend of a hundred flowers blooming and a hundred schools of thought contending. The implementation of pharmaceutical reform policies, such as the evaluation of the quality and efficacy consistency of generic drugs, the centralized purchase of drugs with volume, and the filing system of crude drugs, is accelerating the development of the crude drug industry towards high quality.

In the future, on the one hand, Chinese API enterprises should strive to explore the existing advantageous varieties and bulk varieties, continuously improve and upgrade the technology and process, actively upgrade and iterate to green, intelligent and digital production, and use advanced technology platforms such as synthetic biology, enzyme catalysis, continuous flow to empower the industry, firmly stabilize the basic plate of the API industry; On the other hand, China's API industry should also continue to expand its incremental space. In the future, the opportunities for the API industry will come more from the increase in the variety of characteristic APIs, the development of standardized markets and the extension to the contract customization production business (CDMO). It should actively develop into the field of characteristic APIs and complex APIs at the high end of the value chain. At the same time, with the rapid development of CDMO, Chinese API enterprises are developing from the primary and intermediate competitors of the global API CDMO to the advanced competitors. In the future, they will also have the opportunity to participate in the research, development and production of global blockbuster innovative drugs. This will also bring new business opportunities to Chinese API enterprises, which will accelerate the growth of the API industry to a certain extent.