The massive potential of the US API pharmaceutical manufacturing market

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.