The Global Active Pharmaceutical Ingredient Market: The high adoption rate of generic drugs in developed and developing economies is fuelling the growth of the market

Published Date: 05/05/2021

The Global Active Pharmaceutical Ingredient Market is estimated to reach USD 293 billion by 2027 from USD 187.76 billion in 2020, at a CAGR of 6.6 % during the forecast period 2021 - 2027.

With advancements in healthcare infrastructure, healthcare spending has increased over time. This augmenting focus on healthcare spending positively influences the market for active pharmaceutical ingredients. The high adoption rate of generic drugs in developed and developing economies is fuelling the growth of the market. Another positive impact comes from the high demand for specialty medicines which is anticipated to escalate the spending in the pharmaceutical sector. Developed nations are expected to exhibit faster growth in these spending as compared to the developing economies on the back of factors such as the presence of adequate manufacturing units, transparent pricing, and higher spending power.

Outsourcing of R&D activities has emerged as a major trend in the market owing to reduced operational cost and enhanced operational efficiency in the value chain. Market participants are focused on possessing branded as well as unbranded generic drugs to maintain a balanced product portfolio. Asian nations such as India and China lead the market in the manufacturing of antibiotic Active Pharmaceutical Ingredient (API).

A higher generic adoption rate in developed countries driving global medicine spending and aiding greater access to improved, lifesaving healthcare services. The adoption of branded generic drugs is predicted to be higher in emerging economies such as China and India and generic drugs accounted for nearly 80% of the total drugs sold by value in these fast-growing nations in 2016. Rising use of specialty medicines is anticipated to grow the pharmaceutical spending worldwide with quicker growth in richer, developed nations as compared to their emerging counterparts. This is primarily because the former has adequate manufacturing units, a higher spending power, and greater emphasis on transparent pricing by assessing measuring effects on the population.

An intense focus on commercializing drugs and reducing operating costs by outsourcing R&D activities can improve the organizational efficiency substantially. Outsourcing at later stages of development through the appointment of strategic partners can potentially improve operational efficiencies throughout the value chain. A balanced portfolio approach goes a long way in expanding sales and simultaneously reducing risk. This could be by possessing branded generic drugs, branded drugs, and unbranded drugs within the same portfolio. In addition, clearly defined forward linkages in the supply chain can garner greater market share in different regions over the course of the forecast period.

The global APIs market is competitive in nature, with several big as well as emerging players. The prominent players in the market are Pfizer, Inc. (US), Novartis AG (Switzerland), Sanofi (France), Boehringer Ingelheim (Germany), Bristol-Myers Squibb (US), Teva Pharmaceutical Industries Ltd. (Israel), Eli Lilly and Company (US), GlaxoSmithKline plc (UK), Merck & Co., Inc. (US), AbbVie Inc. (US), F. Hoffmann-La Roche Ltd. (Switzerland), and AstraZeneca plc (UK).

Geographically, the active pharmaceutical ingredient market is segmented into North America, Europe, Asia, and the Rest of the World (RoW). In 2020, North America is expected to dominate the market, followed by Europe. The major factors driving the overall growth of the APIs market in this region include the growing incidence of preventable chronic diseases, increasing government focus on generic drugs, rising demand for biologics and specialty drugs, and technological advancements in the manufacturing processes of APIs. This market segment is expected to grow at a modest rate due to a combination of economic and healthcare severity measures and the introduction of low-cost, generic versions of branded drug.