China Vs. India in the API Race?

China Vs. India in the API Race?

Andrew Badrot, CMS Pharma

Separating the noteworthy news from the noise is not always as straightforward as one may think. And sometimes, two separate newsfeeds get a new meaning when pieced together. Let me explain . . .

In December 2010, Fierce Pharma reported that India’s and China’s drugmakers associations signed an industry pact to collaborate on the development and production of generics drugs for the rapidly growing emerging markets. I was puzzled, to say the least. Why would India build a bridge to collaborate with its economic rival in its second most valued industry: pharmaceuticals?

Once I saw that this deal was signed ahead of a three-day visit to India by Chinese Premier Wen Jiabao, I was quick to discard the deal as a “symbolic gesture.”

The irony hit me two months later when the same publication reported that China is earmarking $750 million to build its export industry for APIs (active pharmaceutical ingredient). In no uncertain terms, this was a direct aim at India’s crown jewel, the pharma industry. It wasn’t the largest announcement coming out of China; they do publish lists of “strategic industries” behind which billions are earmarked.

But taken together, these events let us derive some important lessons about doing business in China and the ability to enforce business agreements, for instance. In this specific case, the earmark raises the question of whether China will catch up with India in terms of API exports. I get asked this question very frequently. 

I usually point out that APIs are no toys or electronics. It is a highly regulated industry with ever-increasing scrutiny from international regulatory organizations. And scandals such as the Heparin contamination emanating from China created awareness and worry within the western public. Such perception barriers will require time to dissipate.

But will China catch up with India? It is open for debate. The $750 million earmark from the Chinese government will certainly help, but it is a drop in the ocean when compared with typical investments in the pharma industry. I personally believe India will be able to retain its lead as the generic API export platform of the world. India has more than twice as many FDA-approved sites as in China, issues 3 times as many DMFs (drug master file), and is leaps ahead in terms of ANDAs (abbreviated new drug application), churning more than 100 a year; China celebrated its first indigenous ANDA in December 2010.

The more challenging question: will European CMOs (custom manufacturing organizations) reclaim some of the ground they’ve lost in generics API manufacturing? That would be a game-changer and would heavily influence the shape-up of the CMO landscape in the coming five years.

Andrew Badrot is chief executive officer of CMS Pharma, a provider of M&A advisory services and business strategy consulting to pharmaceutical custom manufacturing organizations. He can be reached at info@cms-pharma.com.