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The global active pharmaceutical ingredient market size was USD 159.35 billion in 2020. The market is projected to grow from USD 174.17 billion in 2021 to USD 272.44 billion in 2028 at a CAGR of 6.6% in the 2021-2028 period. The global impact of COVID-19 has been unprecedented and staggering, with active pharmaceutical ingredients witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the global market witnessed a huge decline of -6.9% in 2020. The sudden rise in CAGR is attributable to this market’s demand and growth returning to pre-pandemic levels once the pandemic is over.
An Active Pharmaceutical Ingredient is used in any drug to produce intended results. These are also known as bulk drugs. These are manufactured either through a chemical or biological process. The market is likely to display a positive outlook with the growing trend towards advancements and innovations of therapeutic drugs by various pharmaceutical and biotechnology companies. The growing prevalence of chronic disorders and the growing demand for personalized medicine, along with the emergence of novel drug delivery devices are some of the factors expected to play a vital role in boosting the Active Pharmaceutical Ingredient market growth during the forecast period.
However, in recent years the various pharmaceutical and biotech companies have opted to cut their costs by establishing their manufacturing facilities overseas. This initiative led to various changes in regulatory guidelines for production and manufacturing. Such trends are further anticipated to drive the growth of the global market in the forecast period.
COVID-19-Induced Supply Chain Disruptions to Impact Market Growth
This market has witnessed negative impact of COVID-10 owing to the closure of a number of factories in key countries of China due to pandemic. Furthermore, the shortage of raw materials has also led to the closure of factories in China. Also, the decrease in demand for pharmaceuticals for certain elective procedures have also led to decline in the growth of the market in 2020. Combined together, these factors led to a negative impact on the market.
Additionally, the COVID-19 pandemic has led to a decline in the sales of API products across the globe, due to the supply chain disruptions caused by the restrictions of factory closures. The revenues of prominent companies declined in FY 2020. For instance, Jubilant Pharmova, a key company, reported a decrease of 7.0% in revenue in FY 2020 compared to FY 2019. Market players like Cipla have also recorded slower growth in the sales of their active pharmaceutical ingredient segment. However, strong demand for lifesaving drugs such as respiratory pharmaceuticals coupled with the reopening of API factories worldwide is anticipated to rebund sales growth to reach pre-pandemic levels.
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Increased Outsourcing of API Production to Accelerate Growth Prospects
As the pharmaceutical industry is witnessing growth every day, several countries have implemented rigid regulatory guidelines for the production of pharmaceutical ingredients. These guidelines have been enforced upon the companies to regulate their production quality, thus enhancing the potential clinical effectiveness of the final product. This is further augmented by the increasing overhead costs of in-house API manufacturing, which has led the pharmaceutical companies to reduce their focus on in-house manufacturing. Thus resulting in many companies outsourcing their API manufacturing process. Asia Pacific is one of the regions that has witnessed massive growth in manufacturing, this is due to the companies that are situated in the western countries, have cited a comparatively low cost alternative for outsourcing production.
Currently, various manufacturers have their robust footprints in China & India which is driving biopharmaceutical industries to look for partnership with contract development and manufacturing organizations (CDMOs). For instance, in August 2020, AGC Biologics, a global biopharmaceutical CDMO announced a partnership with Ono Pharmaceutical Co., Ltd. for the production of new and innovative biopharmaceuticals during the clinical development stage. Thus, these organizations possess the technical know-how and capabilities for large-scale API manufacturing, which is anticipated to upsurge the active pharmaceutical ingredients market growth during the forecast period.
Robust Demand for Pharmaceutical Drugs to Stimulate Market Growth
The burden of chronic diseases worldwide is rising rapidly owing to the increase in geriatric population, growing adoption of sedentary lifestyle, coupled with urbanization. This is creating an ever increasing demand for therapeutic drugs in this market. According to the Indian Brand Equity Foundation’s (IBEF) analysis in June 2021, the Indian pharmaceutical sector covers over 50.0% of the global demand for several vaccines, 40% of U.S. generic brand’s demand and U.K.’s 25.0% of all medicines demand. Furthermore, according to the Indian Economical Survey, India’s domestic pharmaceutical market is expected to grow to USD 42.0 billion in 2021 and is estimated to reach USD 65.0 billion in 2024.
The pharmaceutical industry of China is the second fastest growing industry after India. The change in the complexity of chronic diseases and increase in frequency of new cases of these diseases, has led to the increase in demand for innovative drugs including biological drugs. Increasing demand for biologics and biosimilar is likely to drive the market growth during the forecast period. A notable uptick has been observed in the import of raw pharmaceutical ingredients from developing countries for the development of highly-advanced biopharmaceutical products. Moreover, growing emphasis on research and development activities by many pharmaceutical firms for the introduction of innovative drugs in the market is likely to drive the active pharmaceutical ingredients market growth during the forecast period.
Growing Prevalence of Chronic Disease to Fuel API Demand
The rise in prevalence of various infectious diseases and chronic disorders across the globe is expected to drive the demand for APIs for the development of innovative drugs. According to the estimates released by The Joint Research Center of the European Commission in July 2020, the cancer burden on the European region has risen to 2.7 million new cases and 1.3 million deaths in 2020. Furthermore, according to the WHO, more than 17.9 million people died due to cardiovascular disorders, which represented 32.0% of global deaths. Various statistics similar to this, are likely to provide potential opportunities to multiple pharmaceutical & biotechnology industries for the production of dosage forms of new chemical entities in high-end therapy areas, such as oncology and cardiovascular diseases.
The rise in per capita healthcare expenditure in the emerging countries, along with the increase in diagnosis rates in these countries is presenting a large population requiring treatment. This is further anticipated to augment the demand for pharmaceutical drugs in the global market. The ever-increasing demand for pharmaceuticals will subsequently drive the demand for generic and branded products in this market.
Price Fluctuations in Emerging Nations to Restrict Market Growth
The periodic and unanticipated changes in the pricing policies of drugs in the emerging regions, where most of the manufacturing companies are situated, is expected to hinder the market growth during the forecasted period. Dependency of the developed regions for the production of active ingredients on China has led to unforeseen changes in the pricing policy of China. This is projected to have a negative impact on the overall growth of this market.
For example, in August 2018, the price of chlorpheniramine API shot up 57 times, as Hunan Er-Kang Medical Operation and Henan Jiushi Pharmaceutical were abusing their dominance as the only local supplier. However, due to the intervention of China’s State Administration of Market Regulation (SAMR), and a high fine imposed by the regulatory body the prices were driven back to regular levels.
Generic API Segment to Exhibit Strong CAGR during 2021-2028
Based on type, the market is segmented into generic API and branded API. The branded API segment dominated the active pharmaceutical ingredients market share in 2020. Due to substantial R&D programs focusing on the development of various cost effective and innovative products, various players are driven to launch innovative drugs in the market. The growth in the therapeutic application of novel generation of ingredients, which includes high potency ingredients and peptides is anticipated to play a crucial role in the acceleration in the production of branded API. The rapid growth in the biotech and pharmaceutical firms across the globe is another major force that is set to boost the demand for branded APIs during the forecast period.
Although, as various key drugs are going off-patent and due to the consolidation in the pharmaceutical Industry, the demand for branded APIs has gradually decreased over the years. In consequence to this, the generic APIs segment is likely to exhibit a significant growth rate during the forecast period owing to patent expiry of branded drugs. Due to unmet clinical needs in the developing countries and rise in acceptance of over the counter drugs and lower cost of generic drugs, the generic segment is expected to witness growth.
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Synthetic API Set to Dominate Market during Forecast Period
In terms of type of synthesis, the market is segmented into synthetic and biological.
The market is dominated by the synthetic API segment, this is due to the low production cost of chemically synthesized ingredients and comparatively low cost of the raw materials used for the production of synthetic ingredients. Easier protocols for the development of these molecules also lead the growth of this segment.
The biological segment is anticipated to register a comparatively higher growth rate during 2021-2028, owing to the increase in demand for biopharmaceuticals and the growing number of innovations in biologics to address the high unmet medical needs existing for various diseases conditions. Furthermore, the biological API segment is expected to be a highly profitable segment which in turn attracts the major pharmaceutical and biopharmaceutical companies. The increase in the number of FDA approvals for biological drugs including vaccines, blood components, and recombinant proteins is likely to boost the biological segment growth at a significant rate during the forecast period. For instance, in July 2020, Richcore LifeSciences, an Indian biotechnology company announced the expansion of a new manufacturing facility for the production of recombinant protein. The organization will house 180,000-liter fermentation capability to produce recombinant protein for multiple purposes like biopharmaceutical, cell culture and food industry.
North America Active Pharmaceutical Ingredient Market Size, 2020 (USD Billion)
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On the basis of region, the global market can be segmented into North America, Europe, Asia Pacific, and the Rest of the World.
The market size in North America stood at USD 76.77 billion in 2020 and the region is expected to account for the dominant share of the global market during the forecast period. The North American market is characterized by the growing incidence of chronic diseases and increasing government initiatives for the development of innovative drugs. Along with it, the rapid adoption of biological drugs among patients for the treatment of various chronic disorders is driving the demand for the biological API segment in North America. For instance, according to the Alzheimer’s Association, approximately 6.2 million people above the age of 65 and above are suffering from Alzheimer’s dementia in the U.S., and it is estimated to increase to 12.7 million by 2050. Hence, the increase in cases of such chronic disorders have proliferated the growth of this market in the North American region.
The European region is expected to witness a positive growth during the forecast period owing to the rise in funds for research programs along with presence of major market players in this region. The increase in R&D programs by various pharmaceutical and biopharmaceutical companies in Europe will also fuel the growth of this market of this region. For instance, according to the European Federation of Pharmaceutical Industries and Associations (EFPIA) published a report stating that, in 2019, the total pharmaceutical production of Europe was valued at USD 344,837.0 million. Such trends are expected to drive the market growth in the region.
The market in Asia Pacific is projected to outpace the mature market in North America and Europe, by registering the highest CAGR throughout the forecast period. The rise in the number of contract manufacturing organizations & pharmaceutical industries in various countries such as China and India is likely to propel the market in Asia Pacific. These countries have become an attractive destination for outsourcing the active ingredients manufacturing due to factors including lower labor cost and the abundance availability of raw material for production. Moreover, favorable regulatory policies in Asia Pacific are encouraging many manufacturers to expand their manufacturing capacities in the region, boosting the growth of this market in the region.
The Rest of the World segment covers regions including Latin America and the Middle East & Africa. The market in Latin America is expected to witness significant growth in the forecast period. Due to cheap labor costs, various companies are attracted towards Latin America. Although the region still suffers from infrastructural difficulties, it is expected to improve in the coming years. Brazil is the fastest growing Country in Latin America. Recent regulatory changes in Brazil are expected to fuel the market in this region. For example, in April 2020, Brazil’s ANVISA announced new regulations referring to active ingredients manufacturing. These new regulatory frameworks will ensure direct interaction of API manufacturers with the authorities. The Middle East and Africa region is a slow growing market for API. This is attributed to the stringent regulatory framework and various regulatory requirements that make these regions a difficult market for the key companies to operate.
Strong Technical Capabilities Have Propelled AbbVie, Teva, and Mylan to Apex Position in Global Market
The competitive landscape demonstrates a fragmented active pharmaceutical ingredients market with the presence of various types of manufacturers. AbbVie Inc., Teva Pharmaceutical Industries Ltd., and Mylan N.V. are the top API manufacturing companies with a diversified product portfolio, combined with the presence of state-of-the-art technology for the manufacturing of active ingredients. Core focus on API production by these companies, along with strategic partnerships with domestic players for securing raw materials, have been instrumental for the dominance of these companies in the market.
Many contract manufacturing organizations are now solely focusing on developing biological APIs citing the lucrative opportunities in the market. This market is further characterized by a large proportion of players in Asia Pacific focusing on developing generic APIs, while manufacturers in Europe and North America are moving towards biological API manufacturing. Other key players include Cipla Inc., Biocon, Amgen Inc., Dr. Reddy’s Laboratories Ltd, Sun Pharmaceutical Industries Ltd., and others.
An Infographic Representation of Active Pharmaceutical Ingredient (API) Market
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The Active Pharmaceutical Ingredient (API) market report provides a detailed analysis of the market and focuses on key aspects such as the COVID-19 impact, leading companies, product types, and leading therapeutic applications of the different types of APIs such as innovative APIs. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors that have contributed to the growth of the market over the recent years.
Value (USD billion)
Fortune Business Insights says that the global market size was USD 159.35 billion in 2020 and is projected to reach USD 272.44 billion by 2028.
In 2020, North America stood at USD 76.77 billion.
Growing at a CAGR of 6.6%, the market will exhibit steady growth in the forecast period (2021-2028).
The synthetic API segment is expected to be the leading segment in this market during the forecast period.
Growing demand for biopharmaceuticals, strong surge in the demand for cost effective drugs such as generic drugs, and technological advancements in API production are some of the key factors driving the market.
Teva Pharmaceutical Industries Ltd, AbbVie Inc., Abbott, Aurobindo Pharma, Cipla Inc., Dr. Reddys Laboratories Ltd, and Sun Pharmaceutical Industries Ltd., are some of the major market players in the global market.
North America dominated the market in 2020.
Increased prevalence of chronic diseases such as cardiovascular diseases, growing demand for advanced pharmaceuticals, presence of potent raw materials, and technological advancements in API production processes are expected to drive the adoption of the products.
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