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For many years, raw materials have always occupied the highest proportion in China's international trade exports of pharmaceutical products. The Chinese raw material pharmaceutical 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 article summarizes the changes in the global pattern and future development trends of the raw material pharmaceutical industry, and puts forward suggestions for the development of China's raw material pharmaceutical industry.

The global pharmaceutical industry pattern is gradually shifting towards China and India

Before the 1990s, Europe and the United States were the world's main raw material drug production regions, with large industrial scales and advanced technological levels; Subsequently, due to factors such as production costs and environmental pressures, the production and supply of raw materials in Europe and America gradually shifted to the Asia Pacific region. Currently, global production of chemical raw materials is mainly concentrated in five major regions: Western Europe, North America, Japan, China, and India. Among them, Europe and the United States are gradually reducing their raw material drug production capacity, especially in the United States, where most generic drug companies do not have their own raw material drug production workshops and mainly rely on imports. Emerging international trade markets, represented by China and India, have rapidly emerged as major raw material drug production and export countries. According to relevant data, the global proportion of raw material drug supply from China and India has increased from 16.7% in 2008 to 47% in 2019.

From a regional perspective, in Europe, except for France, the Netherlands, Germany, Switzerland, Spain, Italy, Ireland, Russia, and individual countries in Eastern Europe that have a few API factories, most countries have already abandoned API production. In the Americas, the United States, Mexico, Brazil, and Cuba also have some API factories, but the number is not large, with some countries showing a decreasing trend in API companies. 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. The raw material pharmaceutical industry in Africa is almost zero.

From a variety perspective, developed countries and regions such as the United States and Europe, with their advantages in research and development, production processes, and intellectual property protection, occupy a dominant position in the field of high value-added patent drug raw materials; China mainly relies on bulk raw materials; India is using the generic pharmaceutical industry to drive the production of characteristic raw materials.

China and India occupy an important position in the raw material drug market based on cost advantages. As developing country characteristic raw material drug manufacturers such as China and India continue to increase research and development investment, improve production technology, improve process level, and invest in improving production equipment to form specialized production lines, Chinese and Indian raw material drug companies are also gradually extending towards the high-end value chain of raw material drugs.

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 increasing demand for international raw materials, resulting in significant growth in the raw materials industry. Compared to the other three production regions, the future development prospects of the raw material pharmaceutical industry in China and India are generally optimistic. Meanwhile, due to the similarities between the Indian pharmaceutical industry and China, the Indian raw material pharmaceutical industry has formed a climate and is expected to continue to compete fiercely with Chinese raw material pharmaceutical companies for a considerable period of time in the future.

Deep participation of Chinese raw materials in the global pharmaceutical industry chain

China is the world's largest producer and consumer of chemical products. In 2020, the production of dozens of bulk chemical products remained the top in the world. The Chinese raw material pharmaceutical industry has a complete upstream base of chemical raw materials, relying on the advantages of the industrial chain supply chain. After years of continuous development, it has become an active participant in the global raw material pharmaceutical industry. Especially since 2010, China has become the world's largest raw material drug production base, which not only effectively meets domestic demand, but also sells a large amount to the international market. Raw material drugs are exported to nearly 200 countries and regions around the world, with international trade exports ranking first in the world for many years and beginning to occupy an extremely important position in the global pharmaceutical industry chain.

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

According to data from the China Chamber of Commerce for Import and Export of Medical and Health Products, except for 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 ten million tons and there are dozens of products with export amounts exceeding one billion US dollars. According to data, Chinese produced raw materials have accounted for about one-third of the global market for raw materials, making it a well-deserved global leader in raw materials. In recent years, the number of Chinese enterprises applying for the EU CEP (European Pharmacopoeia Applicability Certificate) 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 companies have a total of 899 valid CEP certificates, and about 900 varieties of raw materials are sold in the European market, making them the largest source of raw materials in Europe.

The epidemic highlights the position of China's raw material drug 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. India announced a halt to the export of 26 active pharmaceutical ingredients (APIs) and related drugs during the epidemic to ensure self use.

The above situation highlights the importance of China in the global pharmaceutical industry chain. Data shows that the APIs and drugs restricted by the Indian government for export are mainly antibiotics, vitamins, antiviral, antipyretic, and analgesic products. The vast majority of these drugs are needed to fight the epidemic. The raw materials or core intermediates of these drugs mainly come from China, and even local enterprises in Hubei occupy a leading global 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 international trade such as Anakin has increased by over 20% year-on-year.

Currently, Pfizer's Paxlovid and MSD's Molnupiravir have been approved and commercialized in multiple countries and regions, respectively. Several Chinese companies have become important intermediate raw material drug suppliers for Pfizer and MSD mentioned above. 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 has been delayed, affecting Indian pharmaceutical companies that are most closely connected to China's upstream and downstream drug supply chains, thereby 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 raw material pharmaceutical industry chain may develop towards diversification, localization, and regionalization, but this will be a long process.

At the Right Time for the Upgrading and Iteration of China's API Industry

The division of labor pattern in the global pharmaceutical industry chain supply chain in the past was based on the resource endowments and comparative advantages of each country, which 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 China's advantages in the raw material pharmaceutical industry in the reshaping of the global pharmaceutical industry chain is of crucial strategic significance for the future international trade development of China's pharmaceutical industry.

At present, the raw material pharmaceutical industry in China has shown a trend of a hundred flowers blooming and a hundred schools of thought competing. The implementation of pharmaceutical reform policies such as the evaluation of the quality and efficacy consistency of generic drugs, centralized procurement of drugs, and the registration system for raw materials is accelerating the development of the raw materials industry towards high-quality direction.

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