Quality probs and rising wages will see new API hubs replace China and India says analyst

By Gareth Macdonald contact

- Last updated on GMT

API hubs expected to emerge in "second wave" countries says RNCOS CEO
API hubs expected to emerge in "second wave" countries says RNCOS CEO

Related tags: Active ingredient

Analysts predicting a second wave of global API hubs say it will be hard for manufacturers in Latin America, Ukraine and Taiwan to avoid the pitfalls that stymied former high growth sectors in Asia.

Asia has benefitted from drug industry desire to cut costs with, according to recent comments by Hovione CEO Guy Villax​, approximately 80% of the active pharmaceutical ingredients (APIs) used in Europe at the moment coming from India and China.

However, the cost advantages that allowed India and China to emerge as key suppliers are disappearing says Shushmul Maheshwari, CEO of research firm RNCOS, who predicted that API firms in countries like Brazil, Mexico, South Korea and Taiwan stand to benefit from the trend.

Regulatory changes in the US and Europe along with rising labor costs in China and India are some of the factors responsible for the rise of second wave emerging regions in the API industry​” he told in-Pharmatechnologist.com, adding that “other countries are being explored as sourcing destinations​.”

Warnings to firms in India and China by Western regulators have also hurt said Maheshwari.

Another factor contributing to the search for additional manufacturing destinations has been the increased publicity of quality issues and import bans over the past few years, including in India and China.”

Further evidence for this is provided by the public relations campaign begun by representatives of the Indian Government at Industry tradeshow CPhI in Paris last week​ – which focused on ‘overzealous quality’ regulations – and ongoing legal battles with researchers in the US​.

Future API hubs

So which countries will be the next big global API suorces?

The answer to that question will depend on factors like regulatory framework, reputation and government incentives said RNCOS’ chief said citing former eastern bloc states and populous countries like Brazil and Mexico as examples of possible future ingredient hubs.

Latin America’s regulatory oversight, investment in domestic specialty manufacturing capabilities, formation of a growing number of partnerships and infrastructure helps this region to be an important area for sourcing lower-cost active pharmaceutical ingredients.

Ukraine's regulatory improvements have also encouraged foreign pharmaceutical companies to increase their presence in the country, and an increasing number of collaborations are emerging between local Ukrainian manufacturers and foreign companies​.”

On the other hand​” Maheshwari continued “Taiwanese API producers have gained recognition for high quality and international good manufacturing practices [GMP] compliance​.”

Pitfalls

How long the predicted boom in second wave countries will last is hard to say, although Maheshwari expects that these states may eventually suffer from the own economic success like India and China.

He explained that: “I don’t think it will be easy for these countries to avoid the issues of quality and wage increases. They are currently attractive as they are in the development stage of the market."

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