Industry News
The global API industry pattern will change, the API industry under the outbreak of opportunities and challenges coexist.
The out-of-control outbreak in India has caused global concern. As a major exporter of APIs in the world, the supply pattern of China and India has been affected. At the same time, with the emergence of a new wave of global trade protectionism, countries due to the epidemic on the pharmaceutical industry chain security demand increased, China's API industry is facing new challenges, must accelerate the transformation and upgrading from a big country to a strong country. To this end, the "Pharmaceutical Economic News" launched a special "API Power Road" thematic planning.
2020 is a year in which the global pharmaceutical industry has been deeply affected by the epidemic, and it is also a year in which China's API industry has withstood the test of international market fluctuations. According to preliminary statistics from the China Medical Insurance Chamber of Commerce, China's exports of API products reached $35.7 billion billion in 2020, another record high, an increase of about 6% year-on-year.
In 2020, China's API export growth benefited from the epidemic stimulus, the epidemic pushed up the global demand for anti-epidemic-related APIs, but also led to India, the European Union and other major API production areas affected, the international market for China's API transfer orders increased. The specific performance is that the export volume of raw materials in China increased by 7.5 year-on-year to 10.88 million tons. From the perspective of specific export categories, the export amount of anti-infective, vitamins, hormones, antipyretic and analgesic, some antibiotics and other anti-epidemic related raw materials has mostly achieved different degrees of growth, and some specific varieties have grown rapidly, such as dexamethasone exports up 55% year-on-year, lamivudine, vitamin C, vitamin E exports up more than 30% year-on-year, paracetamol, analazine exports up more than 20%.
Since April this year, India's new coronary pneumonia epidemic has become more and more serious, and local governments have responded from time to time by closing cities and stopping production. As the main competitor of China's API in the international market, the serious epidemic in India will affect the normal production and export of its API. It is reported that in early April, the Indian government has announced a ban on the export of Redsivir raw materials and preparations to meet the country's anti-epidemic needs, resulting in a tight global supply of Redsivir raw materials. In view of the unstable supply of raw materials in India, it is expected that China will still be able to undertake some transfer orders of raw materials in the international market as it did last year, so as to maintain the steady growth of China's export of raw materials.
However, the export opportunities brought about by the epidemic are short-lived after all, how to face the deeper crisis and opportunity after the epidemic, is the future international development of China's API industry needs to think about the problem.
Challenge
01, the global API industry pattern will change, China's international market position?
The pharmaceutical industry is a strategic security industry, and the shortage of medical supplies and medicines caused by the epidemic has triggered a certain degree of tension and concern, and has once again aroused the attention of countries to the establishment of an independent and sound pharmaceutical supply system.
The vital and fundamental position of China's API in the global pharmaceutical industry chain has triggered unease in the United States and heated discussions on promoting the return of the pharmaceutical industry. Since last year, the U.S. government has taken a variety of measures to strengthen the API supply chain and reduce dependence on China's API.
In Europe, the European Parliament, the European Commission, the European Drug Administration and other institutions have discussed, studied and released strategies to strengthen the drug supply chain, and plan to take measures to attract the return of API production.
The Government of India announced the Production Linked Incentive Scheme (PLI) for APIs and key starting materials to encourage increased localization of APIs and pharmaceutical intermediates. In January this year, the program approved the first batch of production applications from Indian companies. In addition, Brazil, Iran and other countries are also taking measures to promote the independent production of raw materials.
In the future, as the policies of various countries to support the localization of API production gradually deepen and show results, the global API industry pattern may change slowly, and the international market position of China's API may decline. It is expected that European and American companies will regain the production capacity of some key APIs with the support of the government, and retain the capacity to expand at any time. Chinese-sourced APIs still occupy an important position in the European and American markets, but the right to speak is challenged. The market share of raw materials from India is expanding in Europe and the United States, and other sources of raw materials supported by Europe and the United States will occupy a place in the market. On the one hand, India expands its own API production capacity and seizes the international market share of Chinese enterprises. On the other hand, it extends to upstream pharmaceutical intermediates, improves the production and manufacturing capacity of intermediates, and breaks the relationship with China's upstream and downstream supply chain. China and India will enter the era of competition in the whole pharmaceutical industry chain in the future, especially in the field of API.
02, pay attention to the problem of overcapacity
China's API industry has been the problem of overcapacity. In 2017-2019, under the combined effect of stricter environmental protection and safety supervision and deepening supply-side reform, some domestic API production capacity with high energy consumption, high pollution and backward production technology was gradually eliminated, the problem of overcapacity was alleviated, the profit margin of enterprises rebounded, and the performance improved one after another. However, starting from 2019, domestic new or expanded API projects will be launched intensively. In the next few years, the industry will experience overcapacity or become a high probability event.
From a domestic point of view, first, with the guidance of environmental protection and safety supervision, the relocation of pharmaceutical and chemical enterprises into the park has been basically completed, and the production capacity of some raw materials has been restored. Second, the epidemic has spawned some enterprises emergency expansion of the epidemic much-needed raw materials, want to seize the epidemic short-term "dividend". In April last year, Shanghai Pharmaceuticals expanded its hydroxychloroquine production line, and recently individual enterprises urgently launched the Marydesivir production project, as well as some chemical plants during the epidemic also converted to API production, all of which brought about an increase in API production capacity. Third, the bottom-up demand transmission of centralized procurement, so that enterprises have a personal experience and good expectations of the actual procurement of centralized procurement exceeding the agreed procurement volume, and choose to expand the production of APIs and preparations to cope with the future larger-scale centralized procurement supply. Fourth, for the consideration of large-scale benefits or upstream and downstream coordination of the industrial chain, enterprises should build or expand API production lines to enhance their dominant position.
From an international point of view, in the future, as the global epidemic gradually improves under the popularization of vaccines, the production capacity of major API producing areas such as India and the European Union will not only recover soon, but may also increase under local support policies, plus the United States, Brazil And other countries in the API localization production policy to stimulate the new production capacity, the global API production capacity will usher in a wave of comprehensive expansion.
For a long time, China's API exports have been plagued by overcapacity. For example, penicillins, vitamins, antipyretic analgesics and other traditional bulk APIs, my country occupies a major share in the international market, but the right to speak in pricing has not been high. The main reason is that the production capacity of related products far exceeds the global demand. Market share has been sold at low prices. While companies export meager profits or even losses, they have also suffered anti-dumping investigations in some national markets, which has brought great obstacles to the healthy development of the industry.
Since the outbreak, the domestic and foreign API production capacity has increased simultaneously, indicating that the future overcapacity problem may appear on a global scale.
Opportunity
01, China's strong economic recovery for the development and upgrading of the pharmaceutical industry to bring more attention and opportunities.
In 2020, China's GDP grew by 2.3 percent year-on-year, making it the only major economy in the world to achieve positive economic growth; in the first quarter of 2021, China's GDP grew by 18.3 percent year-on-year, the highest since quarterly GDP statistics were available in 1992. These "eye-popping" figures fully demonstrate the strong momentum of China's economic recovery. At the same time, China's medicine and epidemic prevention materials have been exported in large quantities to more than 200 countries and regions around the world, effectively supporting the global anti-epidemic cause. Driven by the export of anti-epidemic products, the growth rate of pharmaceutical exports also hit a record high, according to the preliminary statistics of the China Medical Insurance Chamber of Commerce, China's exports of pharmaceutical products in 2020 increased by about 68% year-on-year, reaching $123.8 billion.
The above excellent performance has made the world look at China with admiration, and has also brought more attention and opportunities for the development and upgrading of my country's pharmaceutical industry. Among them, it can promote the upgrading of the international capabilities of my country's API industry from at least two aspects. First, China's API enterprises have the opportunity to enter the supply chain system of some multinational companies with high barriers, such as becoming alternative suppliers of API or undertaking the technology transfer of patented API. The second is to obtain more opportunities for the development and production of new products through CDMO. Multinational pharmaceutical enterprises in developed countries tend to outsource the production of innovative drugs, leaving only the most profitable R & D and sales links, while China's CDMO market is still growing at a high speed, coupled with the stable production environment under the epidemic, China has become an ideal API development and production outsourcing undertaker.
02, the epidemic makes the importance of APIs more prominent, more supportive policy.
The new coronary pneumonia epidemic has attracted global attention to the stability and security of the API supply chain, and China has begun to pay more attention to the API industry, with the status of APIs rising. First, the government has issued policies to guide the development of the API industry to be more standardized. For example, the Anti-Monopoly Guidelines in the Field of API (draft for comments) issued by the State Administration of Market Supervision and Administration in October 2020 have the consideration of ensuring the safety and stability of the domestic drug supply chain and promoting the healthy development of the API industry. Second, local governments actively explore new ways to support the development of the API industry, so that chemical parks are more willing to undertake the settlement of API enterprises, for example, Suzhou, in accordance with the spirit of the documents of the relevant ministries and commissions of the state, took the lead in exploring and proposing the development path of "referring to the identification and management mode of chemical parks and monitoring points, building high-standard pharmaceutical green manufacturing industrial parks and key pharmaceutical monitoring points" to promote the landing of API projects.
Recommendations
How to deal with the epidemic brought about by the "danger", while seizing the epidemic brought about by the "opportunity", in the future international development in an invincible position, is China's API enterprises should be considered, an important issue.
One is to increase innovation and research and development efforts, product development to the structure of complex, high value-added sub-categories of development, to obtain a certain technical threshold, process development to high efficiency, low pollution, green upgrade, such as biotechnology and enzymatic process, manufacturing methods to intelligent manufacturing such as continuous, automation, modular upgrade.
The second is to optimize the supply chain system, actively undertake the division of labor and cooperation in medicine, deeply embed the global pharmaceutical industry chain, and establish long-term and solid cooperative relations with upstream and downstream enterprises.
The third is to occupy the commanding heights of cost. Under the premise of meeting the requirements of environmental protection and safety, the cost advantage is improved through technological upgrading, process transformation and large-scale production. Under the same conditions, the cost advantage is always the most important weapon to occupy the market.
The fourth is to adhere to the global layout, conform to the changing trend of the global API industry pattern, and consider establishing production bases in Europe and the United States and along the "Belt and Road.
Fifth, domestic and foreign "two legs" walk, not only pay attention to the international market, but also take into account the domestic market, improve the ability to serve the two markets and deal with the "double cycle", while preventing the international "black swan" event caused by market fluctuations and survival crisis.
Competitiveness, transformation and upgrading at the right time
China is a big country in the production and export of raw materials (mainly chemical raw materials) in the world, and has occupied the first position in terms of quantity for many years. With the emergence of a new wave of global trade protectionism and the increase in the demand for security in the pharmaceutical industry chain caused by the outbreak of the new crown epidemic, the sustainable development of China's API industry is facing new challenges. While consolidating the traditional competitive advantage, it is necessary to speed up the transformation and upgrading from a big country to a powerful country, and it is imperative to adjust the structure and improve the quality and efficiency.
What new challenges?
Export short board to be filled
Export structure needs to be upgraded
At the present stage, the product structure of API in China is still dominated by bulk traditional type, and the characteristic API with relatively high added value is gradually increasing, but the proportion of high-performance API with patented technology and proprietary process is relatively small. Compared with Europe, the United States, Japan and other countries that mainly produce and export high-performance APIs, the original level of R & D of domestic API enterprises is insufficient, and the guarantee ability to meet the needs of clinical major diseases is weak. In addition, compared with India, which is also the main supplier of APIs in the world, there is also a certain technical and cost gap in some fine chemical synthesis API products.
According to Health Network, by the end of 2019, 1311 DMF numbers had been filed in China for imported APIs, with 637 activated, or 48.6 percent activated. Among them, India, Japan, Italy, Switzerland, France, South Korea, Germany, the United States, Spain, Sweden and other countries imported more than 30 API DMF numbers to China, and the imported API mainly came from India, Italy, South Korea, Spain and other countries. There are 8 APIs with an annual import volume of more than 100 tons, including sulfamethoxazole, trimethoprim, cefaclor, ranitidine, ethambutol, naproxen, lidocaine, amlodipine besylate, etc.
China's imports of APIs from India continued to increase, reaching US $0.76 billion billion in 2019, with imports ranking 7th by country, up 36.0 percent year-on-year. As the main competitor of Chinese APIs in the high-end market in Europe and the United States, India is already the third largest supplier of APIs in the Asia-Pacific region. India is far ahead in the number of APM approved in the United States, equivalent to more than three times that of China. India exports more raw materials such as oral cephalosporins, antipyretic analgesics, hypoglycemic drugs, digestive system drugs, and new expired generic drugs. Among them, cefixime, paracetamol, ibuprofen, metformin, omeprazole and other raw materials annual exports are more than 100 million US dollars.
Industry chain security considerations
The Self-Sufficiency Challenge
According to statistics, more than 70% of India's API is imported from China, and more than 90% of antibiotic API in the United States is directly or indirectly supplied from China.
The outbreak and spread of the new coronary pneumonia (COVID-2019) outbreak has had a significant impact on the production and export of APIs in China and the stable supply of APIs in the global market. In the face of the risk of supply fluctuations in the Chinese API market due to the outbreak, the call for the localization of APIs in India is high. It is reported that in the first half of 2020, the Indian government approved an industrial support policy of 69.4 billion rupees to promote the localization of 53 API drugs (PLI). In 2021, India's new policy planning incentives to promote the localization of the pharmaceutical industry will total 150 billion rupees. PLI's new plan aims to increase the production capacity of domestic APIs with existing production capacity, and to respond to competition from Chinese imported products, give priority to expanding the large-scale production of 20 key APIs. The plan period is from 2020-2021 to 2028-2029, focusing on supporting the independent production of high-value API products in India and increasing the added value of pharmaceutical exports.
Coincidentally. According to reports, the United States has also called for self-produced APIs to reduce dependence on China and India. In May 2020, a British think tank (Henry Jackson Society) released a report on "How the Five Eyes Alliance can get rid of the strategic dependence of China's industrial chain", describing the dependence of the "Five Eyes Alliance" (the United States, the United Kingdom, Canada, New Zealand, Australia and other countries) on China's industrial chain and how to get rid of China's industrial chain dependence. The API products mentioned in the report that rely on the Chinese supply chain include antibiotics, painkillers, vitamins and antiviral drugs. In fact, China's direct export of pharmaceutical grade APIs to the above five countries is not the largest, and India is the largest source of supply. The accusations in the report that my country's environmental protection and safety supervision are insufficient, and the protection of intellectual property rights is not true. They are all excuses for implementing trade protectionism.
For countries such as India and the United States to get rid of China's dependence on raw materials, its formation is not overnight, and it is impossible to solve it overnight. From the global industrial chain division of labor and raw materials, labor and other objective cost differences, India, the United States in the production of bulk APIs has been difficult to compete with China, some high value-added APIs may increase their own production, but most of them have to rely on long-term imports.
The competitiveness of my country's API industry already has comparative advantages in innovation and green development. The next step is to meet the needs of innovative technology and high-end product cooperation in the international market, strengthen stable cooperation with foreign strategic customers and guarantee supply, and respond to international trade protectionism. In terms of new trends, it is necessary to further strengthen the concept of openness and win-win and innovative competitiveness.
How to transform and upgrade
Special positioning
高质量发展
重视原料药作为战略性新兴产业重要组成部分的特殊定位，强化保障国家生物安全的重大作用，推动行业高质量发展。
完善原料药行业准入标准，严格质量、环保、能耗、安全等规范监管，利用市场机制淘汰落后企业和产能。规范过程监管，避免“一刀切”，杜绝地方保护主义。健全原料药与制剂关联审批制度，鼓励委托研发、生产和定制加工服务（CRO、CMO、CDMO）发展。推动原料药全产业链一体化整合，支持行业兼并重组和做大做强。促进原料药小品种的集中协作生产，保障国内短缺药稳定供应。
协同创新
全球拓展合作
聚焦原料药研发创新趋势，加大传统原料药技术改造，加快特色原料药工艺优化，加速高效能原料药新品开发。支持以企业为主体的“政产学研一体化”协同创新，面向全球拓展合作，加快专利到期原料药仿制和创新产品产业化。重点突破基因工程育种与微生物深层发酵，膜分离、手性拆分与合成，酶催化生物转化、微通道连续流反应、高效提取与结晶纯化等关键技术创新。完善知识产权保护制度，健全商业秘密保护法规，维护企业创新权益。深入落实《推动原料药产业绿色发展的指导意见》，提升绿色制造和清洁生产水平。
走出国门
提高国际竞争力
加强ICH国际平台注册研发合作，推进PIC/S体系质量认证协作，实现原料药全球产业链研发和生产资源共享。
支持企业开展全球高端市场和WHO等质量体系认证，研究制定差别化出口退税政策，加大国际高端市场出口激励力度，推动原料药出口结构和竞争优势升级。
落实“一带一路”建设要求，开展原料药全球产能合作，加快实现传统原料药绿色生产技术替代、高效能原料药绿色关键共性技术突破。
在境外适宜地区建设原料药工厂，探索国际经营“落地生根”，促进对外贸易和谐发展。