Health & Beauty

Over the years, APIs have occupied the highest proportion in China's international trade exports of 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 API industry pattern is gradually transferred to China and India

Before the 1990s, Europe and the United States were the world's major API production areas, with large industrial scale and advanced technology; Later, under the influence of production costs, environmental pressures and other factors, the production and supply of APIs in Europe and the United States gradually shifted to the Asia Pacific region. At present, the global production of chemical APIs is mainly concentrated in five regions: Western Europe, North America, Japan, China and India. Among them, Europe and the United States have gradually reduced their API production capacity, especially in the United States, where most generic drug companies do not have their own API production workshops and mainly rely on imports. Emerging markets of international trade, represented by China and India, have risen rapidly and become major producers and exporters of APIs. Relevant data show that the total share of the world's supply of APIs from China and India rose from 16.7% in 2008 to 47% in 2019.

Geographically, in Europe, except France, the Netherlands, Germany, Switzerland, Spain, Italy, Ireland, Russia and some countries in Eastern Europe, which have a small number of API plants, 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, and the number of API enterprises in some countries is still decreasing. In Asia, besides China and India, Israel, Japan and South Korea also have a certain number of API and intermediate plants, but the number is relatively limited. The API industry in Africa is almost zero.

In terms of varieties, developed countries and regions such as the United States and Europe, with their advantages in research and development, production technology, intellectual property protection and other aspects, occupy a dominant position in the field of patented drug substances with high added value; China is dominated by bulk APIs; In India, the production of characteristic APIs is driven by the generic pharmaceutical industry.

China and India occupy an important position in the API market relying on their cost advantages. With China, India and other developing country characteristic API manufacturers increasing R&D investment, improving production technology, improving process level, and investing 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 benefit from the rapid development of their own pharmaceutical industry and the increase of international demand for APIs, and the growth of the API industry is very considerable. Compared with the other three production regions, the future development prospects of China and India's API industry are generally optimistic. At the same time, due to the similarities between India's pharmaceutical industry and China's, India's API industry has formed a climate. It is expected that in the future, it will continue to compete fiercely with China's API enterprises.

China's API deeply participates 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 will rank first in the world. With complete upstream basic chemical raw materials, China's API industry has become an active participant in the global API industry after years of continuous development relying on the advantages of the industrial chain supply chain. In particular, since 2010, China has become the world's largest production base of bulk drugs, which can not only effectively meet domestic demand, but also be sold to the international market in large quantities. Bulk drugs are exported to nearly 200 countries and regions in the world. The export volume of international trade has ranked first in the world for many years, and has begun to occupy an extremely important position in the global pharmaceutical industry chain.

According to Clarifate data, China can produce about 1650 varieties of APIs with a production capacity accounting for about 30% of the world's total. 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, the production level of antibiotics in China is leading in the world, and antibiotic APIs account for 30% of the international market; The output of antipyretic and analgesic drugs, such as paracetamol, aspirin and metamizole, is high, of which paracetamol is 50% of the world's total output; In the vitamin raw materials, except for a few varieties, most of the output ranks among the world's top; The market share of corticosteroids is leading in the world. In addition, China is also the largest supplier of some important active ingredients of drugs, or even the only supplier in the world, such as vancomycin. China also dominates the global supply of heparin.

According to the data of China Chamber of Commerce for the Import and Export of Medicines and Health Products, except for a slight decline of 1% to 2% in 2015 and 2016, the export scale of China's chemical APIs has continued to grow over the years, with the export volume growing from US $15.98 billion in 2010 to US $41.77 billion in 2021. The export volume has exceeded 10 million tons, and there are dozens of products with the export amount exceeding US $100 million. According to some data, China's API has accounted for about one-third of the global API market, which is a well deserved leader in the global API market. In recent years, the number of Chinese enterprises applying for EU CEP (Certificate of Applicability of European Pharmacopoeia for Active Pharmaceutical Ingredients) and US DMF (Certificate of Drug Master Document) has shown a rapid growth trend. Taking the European market as an example, by July 11, 2022, Chinese enterprises had 899 valid CEP certificates, and about 900 varieties of APIs were sold in the European market, making them the largest source of APIs 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 to stop the export of 26 active pharmaceutical ingredients (APIs) and related drugs to ensure self 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 are mainly antibiotics, vitamins, antivirals, antipyretic and analgesic products. The vast majority of them are drugs needed to fight the epidemic. The bulk drugs or core intermediates of these drugs are mainly from China, and even local enterprises in Hubei occupy the leading share in the world. 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 analgin 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. Many Chinese enterprises have become important intermediate API suppliers of 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, which affected Indian pharmaceutical enterprises with the closest upstream and downstream drug supply chains in China, and further affected the normal production of downstream enterprises and global supply.

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 it will be a long process.

It is time for China's API industry to upgrade and iterate

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 China's superiority in the API industry in the reshaping of the global pharmaceutical industry chain is of great strategic significance for the future international trade development of China's pharmaceutical industry.

At present, China's API industry has shown a trend of letting a hundred flowers blossom and a hundred schools of thought contend. The implementation of pharmaceutical reform policies, such as the consistency evaluation of generic drug quality and efficacy, centralized procurement of drugs in quantity, and the filing system of APIs, is accelerating the development of the API industry towards high-quality.

In the future, on the one hand, Chinese API enterprises should strive to tap into the existing superior varieties and bulk varieties, constantly improve the 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 enable the industry and 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, more opportunities for the API industry will come from the increase of featured API varieties, the development of standardized markets, and the extension to contract customized production (CDMO). It should actively develop into the high-end value chain of featured APIs and complex APIs. 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 senior competitors. In the future, they will also have the opportunity to participate in the research, development and production of the global blockbuster innovative drugs. This will also bring new business opportunities for China's API enterprises and, to a certain extent, accelerate the growth of the API industry.