Current situation and trend of API Industry in China

Behind the prosperity of China's API industry, there are many bottlenecks and challenges.

Objectively speaking, the current Chinese API in the world in the leading position, and the market is still expanding. The data show that China is the largest producer and exporter of raw materials, and can produce more than 1500 kinds of raw materials and intermediates, accounting for 27.7 percent of the global market for generic pharmaceutical products. In 2017, the export of raw materials reached 8.9615 million tons. Hit a record high, increasing 8.33% from the same period last year; The average export price hit the bottom rebound, rising 4.96 against the previous year.

In terms of data, China's API industry is booming, both in terms of overall market share and exports. But this kind of lead, in fact, is only the lead in quantity, the real product added value is still lagging behind, and there are a series of challenges, even difficulties, in this rise.

Four challenges, China's API calls for Transformation and upgrading

The bottleneck and challenge of China's API industry is not just today, but is caused by the long-term development of the industry itself and the change of external environment. These factors together form the current development situation and pattern of the industry.

The first challenge is overcapacity, homogeneity, and repeated production.

From the product point of view, there are mainly antibiotics, antipyretic and analgesics, vitamins, corticosteroids and other raw materials in our country. These raw materials have a pivotal position in the international market. However, due to the continuous expansion of domestic API industry in recent years, the low level repeated construction of API in China is very common, the problem of overcapacity is prominent, resulting in low price competition, waste of resources, and then form a vicious circle. Moreover, there are more and more API enterprises in our country, and many enterprises are still building production bases on a large scale and expanding production capacity blindly. Although the situation has eased in the near future, but the current problem of overcapacity remains serious.

The second challenge is weak product conversion capacity and low added value.

In fact, the raw drug products exported in China are still at the bottom of the value chain, and there is still a big gap between the production technology level of domestic API and other countries. Some European enterprises have already successfully transformed to the R & D and production of characteristic and efficient API for a long time, and gradually occupied the high-end API market. However, our country still mainly produces traditional chemical API, and the added value of products is relatively low.

The third challenge is environmental pressure and rising costs are unbearable.

As we all know, the issue of API pollution has always been criticized. The new environmental protection law, which has been implemented in China since 2015, has substantially increased its provisions, methods and penalties for violating the law, saying it has become "the most severe in history." It can be said to have a huge impact on the API enterprises. With the development of the new environmental protection law, some large or polluted cities, such as Shijiazhuang and other cities, began to restrict production or even stop production for chemical and pharmaceutical enterprises with pollution problems. Against this background, we can see that under the pressure of environmental protection, our country's API enterprises are constantly moving from the city centre to the suburbs. From the non-chemical park to the chemical concentration zone, from the eastern coastal developed areas to the western and western underdeveloped areas. In addition, a number of factors, including environmental protection, have led to higher costs for API companies, which many companies cannot afford.

The fourth challenge is the increasing severity of the external environment and the continuous improvement of international standards.

Depending on the past scale and cost advantage, it is obviously difficult to maintain the stability and rapid development of China's API enterprises. In contrast, the European Union and the United States have all put forward higher requirements for the import of API, including technology, quality, registration, access, and so on. This is precisely what is missing in many of our country's API enterprises. How to realize the transformation and upgrading of API products, enterprises and industries is a difficult problem in front of us.

Of course, in addition to the challenges, there are also opportunities. As the world's second largest pharmaceutical consumer market, Chinese drugs are dominated by generic drugs. With the global patent drug concentration expiring in the next few years, China's API will probably usher in a rare period of development. In addition, many domestic pharmaceutical enterprises have gradually made some achievements in the field of characteristic API and patent API through increasing investment and continuous exploration, such as anti-hypertension and anti-tumor. Central nervous system (CNS) and hypoglycemic agents are mainly used in the production of generic drugs whose patents are expired or which are about to expire, and the added value of the products is often high.

In the face of difficulties, the only path for China's API industry is to seek change, and the transition will inevitably experience pain. Therefore, we can meet, the next few years, China's API industry will enter a transition period, survival of the fittest become inevitable.