API production

The emergence of China and India as low-cost production centers for APIs, combined with rising domestic demand in those countries, is shifting the balance of API production on a global level from Western Europe to Asia. China has become the largest API producer globally, holding 9.3% of the global merchant market (both innovator and generic APIs) in 2008 and 37.8% of the merchant market for generic APIs. Italy now ranks second, with a 10.4% share on the global merchant market for both innovator and generic APIs and a 16.7% piece of the global merchant market for generic APIs. Japan ranks third, which includes primarily innovator APIs. India ranks fourth in global API production with 7.4% of the global merchant market for both innovator and generic APIs in 2008, but ranks third in generic API production, with a 13.4% share, according to CPA.

Although India and China have increased their share of global API production, Western Europe remains the largest API-producing region in the world. Western Europe accounted for 38.9% of global API production (innovator and generic) in 2008, although this level is down from a 44.3% share in 2004, according to CPA. The Asia-Pacific region ranks a close second, with a 38.4% share of global API production (both innovator and generic), but holds a majority share of global generic API production with a 54.8% share in 2008. Italy has retained its historical position as the number one exporter of APIs to the US. Imports account for approximately 80% of total US generic API consumption, according to CPA, and of this amount, Italy accounts for 37% of US imports. China ranks second with 18%, followed by Spain and Portugal at 17%, and India at 8%.

Despite shifts to offshore markets in commercial APIs, research and development (R&D) by the large US-based multinationals is still largely based in the US. Domestic R&D spending accounted for $36.2 billion, or 75.5%, of R&D expenditures for human pharmaceuticals, and R&D spending aboard was $11 billion, or 23%, bringing total R&D spending on human pharmaceuticals to $47.2 billion in 2007, according to the Pharmaceutical Research and Manufacturers of America (PhRMA). Domestic R&D is defined as R&D in the US by PhRMA member companies. R&D abroad is R&D conducted outside the US by US-owned PhRMA companies and R&D conducted abroad by the US divisions of foreign-owned PhRMA companies. R&D spending performed abroad by the foreign divisions of foreign-owned divisions of foreign-owned PhRMA member companies are excluded. R&D spending (both domestic and abroad) on veterinary pharmaceuticals accounted for $718.4 million, or 1.5% of R&D spending, bringing total R&D spending by PhRMA member companies to $47.9 billion in 2007; it was $50.3 billion in 2008.

Of the $47.9 billion total in 2007, spending was greatest in Phase III and in prehuman/preclinical development, which respectively accounted for 28.5% and 27.3% of total R&D spending by PhRMA member companies. R&D spending for the rest of development broke down as follows: Phase I (7.4%), Phase II (13.0%), Approval (5.0%), Phase IV (13.4%), and uncategorized (5.2%). The drugs under development also were largely developed internally by the large companies. Self-originated compounds accounted for $27.1 billion, or 74.1%, of domestic R&D spending by PhRMA member companies in 2007. In-licensed compounds accounted for $63.3 billion, or 17.2%, and 8.7% of the drugs were uncategorized. Overall, there were approximately 2900 drugs in clinical development or awaiting review by the US Food and Drug Administration in 2009.

Patricia Van Arnum is a senior editor at Pharmaceutical Technology, 485 Route One South, Bldg F, First Floor, Iselin, NJ 08830 tel. 732.346.3072, pvanarnum@advanstar.com