Discover the opportunities and challenges ahead.

9 May 2023

With the global Active Pharmaceutical Ingredients (API) market projected to reach a value of USD 308.96 billion by 2028, it is fascinating to delve into the market landscape and understand the enormous potential that the API business has in the US over the next few decades.

Over the last few years, the AIMS International Life Sciences team has been helping European companies establish and grow their API manufacturing businesses in the US. 

As is customary, we conduct a deep dive into our client’s market landscape, and we’d like to share some of the most eye-opening insights we have learned over time.

Understanding API

An API is the term used to refer to the biologically active component of a drug product. It is the primary ingredient in a drug, which is composed of various other components. 

The safety of APIs is of utmost importance. These substances, which make up a variable fraction of the drug product, are required to be biologically safe. The procedure for optimizing and composting the mixture of the various components used in the drug is known as ‘formulation’.

API production is a highly sophisticated, technically demanding chemical and biochemical fermentation and/or synthesis process.  These ingredients comprise a considerable portion of the total cost of a drug. For instance, on average, 40-50% of the cost of goods sold for generic oral solids comes from APIs.

APIs are used in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or function of the body.

The global API market landscape

The global API market was valued at USD 189.51 billion in 2021 and is expected to reach a value of USD 308.96 billion by 2028, according to an article from Globe Newswire in April 2023 (Vantage Market Research). Over the forecast period 2022-2028, its compound annual growth rate (CAGR) is 6.30%.

The API manufacturing base in the US

Recent studies from institutions such as the School at Washington University in St. Louis, Missouri, analyzing the data from the business intelligence firm Clarivate Analytics, give us a clear picture of the US manufacturing base for generic APIs. The key findings from the study are fascinating:

  • More than 80% of APIs for essential medicines and across key therapeutic areas have no US manufacturing source.
  • Less than 5% of large-scale API sites, globally, are located in the US.
  • The majority of large-scale manufacturing sites are in India and China, followed by Europe. 
  • The main reasons for US weakness in API manufacturing are a so-called “race to the bottom” on pricing against global players, with structural advantages for ex-US manufacturers in higher government subsidies, lower input costs, and lesser regulatory burdens.
  • Solutions to protect US healthcare security must address these risks by creating a critical mass of domestic manufacturing infrastructure to protect domestic interests. This critical mass will lead to a level playing field for global competition and facilitate a sustainable domestic market for US-based manufacturers.

Opportunities for API manufacturers in the US

The pharmaceutical supply chain is complex, global, and highly influenced by market factors that have led to an increasing reliance on foreign countries to manufacture the medicines, APIs, and key starting materials that are used in the production of APIs, according to a recent FDA and ASPR report on U.S. supply chain vulnerabilities (under Executive Order 14017 – Biden administration).

The report identified four focus areas:

  • Boosting local production and fostering international cooperation.
  • Promoting research and development on innovative manufacturing processes and production technologies to strengthen supply chain resilience.
  • Creating robust quality management maturity to ensure consistent and reliable drug manufacturing and quality performance.
  • Leveraging data to improve supply chain resilience.

The agencies, as well as the current Biden administration, recognize that public-private collaboration and funding access will be required for success, and they propose incentives that recognize and reward API manufacturers in the US. This is an excellent time for API manufacturers to come to the US  to build/develop their manufacturing facilities.

Partner with AIMS International Life Sciences experts

AIMS International Life Sciences team helps foreign companies establish and grow their API manufacturing businesses in the US. The team has deep expertise in the industry and can provide valuable insights and support for any foreign company interested in developing an API manufacturing business in the United States.

Take advantage of this growing opportunity in the US API pharmaceutical manufacturing market and partner with AIMS International Life Sciences to achieve success.

About the Author:

Bernardo Entschev, Managing Partner of AIMS International USA, a physician,  an expert in the Life Sciences Industry, and  a member of the Global Life Sciences Team at AIMS International