Active Pharmaceutical Ingredients (API) Market Size, Share & Trends Analysis Report By Business Mode (Captive API, Merchant API), By Synthesis Type (Synthetic, Biotech), By Type (Generic, Branded), By Applications (Cardiology, Pulmonology, Oncology, Ophthalmology, Neurology, Orthopedic) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global active pharmaceutical ingredients (API) market size was valued at USD 209.19 million in 2022. It is expected to reach USD 487.01 million by 2031, growing at a CAGR of 6.05% during the forecast period (2023–2031).

Any substance or combination of substances used in the finished pharmaceutical product (FPP) that is intended to have a direct impact on the diagnosis, treatment, mitigation, therapy, or prevention of disease or to directly affect the repair, correction, or alteration of physiological functions in humans, is considered an active pharmaceutical ingredient (API). An active element of medicine is the active pharmaceutical ingredient (API). Medicines are made up of a variety of ingredients, with the API serving as the main constituent. Excipients are additional substances that are often identified and ought to be harmless to biological systems. The formulation is the process of composing and optimizing the combination of components used in medicine. There are not many medications that can address various symptoms with various active APIs. Regional pharmaceutical firms have handled the majority of API production.

Market Dynamics

Global Active Pharmaceutical Ingredients (API) Market Drivers:

Prevalence of Chronic Diseases like Infectious, Genetic, and Cardiovascular

Lower back pain, migraines, iron deficiency anemia, and major depressive disorders were the top five global causes of years lived with disability (YLD) in 2016, according to the Global Burden of Disease Study 2016. The same study also found that, aside from gout, the main conditions causing higher YLD rates in women were iron-deficiency anemia, migraine, Alzheimer's disease, major depressive disorder, anxiety, and all musculoskeletal disorders. Additionally, according to the Global Burden of Disease Study 2016, the top 10 diseases with the highest global prevalence were respiratory infections, caries of permanent teeth, diarrheal disease, skin infections, migraine, and mineral deficiency disorders, listed in decreasing order. The WHO estimates cardiovascular diseases (CVDs) account for about 18 million fatalities yearly. As a result, CVDs account for 31% of all deaths yearly.

A combination of several concurrent factors, including the growing geriatric population worldwide, the shift to sedentary lifestyles in areas of economic progress, and other lifestyle-related vices, like smoking and drinking, are to blame for the rising prevalence of cardiovascular disease. The factors above factors all point to an increasing need for pharmaceuticals worldwide. The global active pharmaceutical (API) market growth is driven by the rising prevalence of various disease categories, which has led to increased production of different drug categories.

Rising Adoption of Biologicals and Biosimilar

Biologics are made from plant or animal microorganisms. Biosimilars are similar versions of biologics. Most biologics used to treat cancer, Alzheimer's, MS, HIV/AIDS, and others are large, complex molecules or mixtures. Biosimilars are often less expensive and could make the healthcare system more innovative, allowing more patients to receive the best care. Small-molecule drugs have traditionally dominated the market (API). Today, biopharmaceuticals are quickly gaining market share. According to the Generics and Biosimilars Initiative (GaBI), biological ingredients grow faster than their chemical counterparts in the API market. Biologicals are expected to grow 12–15% annually. Small-molecule APIs are expected to grow by 5% to 6%. Monoclonal antibodies and therapeutic proteins are biological's fastest-growing segments. Using more biologicals and biosimilars boosts the API market.

Global Active Pharmaceutical Ingredients (API) Market Restraints:

Conscious Regulations

Businesses often need to meet API regulatory requirements, a crucial step in ensuring drug quality. The FDA and other government agencies provide medication quality and guard against subpar products. Pharmaceutical companies can face fines or recall for breaking the rules. Even when outsourced, countries, where APIs are shipped, have strict regulations. The FDA inspects API factories abroad. Manufacturers must follow the directions to outsource API plant production. Different regulatory requirements and approval procedures across nations make it difficult for manufacturers to pass API regulations. European and American approval processes differ. FDA processes in the US move more slowly than in Europe. Different countries have different exposure and cross-contamination limitations for highly potent API and cytotoxic medications. Global restrictions constrain the API market.

Global Active Pharmaceutical Ingredients (API) Market Opportunities:

Incredibly Strong Pharmaceutical Ingredients

Pharmaceutical companies' use of small molecules to deliver novel therapies has significantly changed with the introduction of highly potent active pharmaceutical ingredients (HPAPIS). The transition to HPAPIS has created a pipeline of more potent drugs requiring smaller dosages. The advantages of HPAPIs, including their high efficacy, lower need for therapeutic doses (due to the selective mode of action), and capacity to bind to receptors, can be viewed as the leading causes of both manufacturers' and consumers' increasing demand for them. Small molecules have historically dominated the market for APIs. API producers are turning to more recent channels, like HPAPIs, to set themselves apart from the competition as the generic APIs market opportunities continues to get highly competitive.

Regional Analysis

North America Dominates the Global Market

The global active pharmaceutical ingredients (API) market share is segmented by region: North America, Europe, Asia-Pacific, the Middle East and Africa, and South America.

North America is the most significant revenue contributor and is expected to grow at a CAGR of 5.83% during the forecast period. The world's highest pharmaceutical R&D expenditures are in the United States. Additionally, it is the biggest market for finished dosage formulations and bulk medications. The US market operates under the principles of a free market economy, which are intended to enact open trade policies and prohibit anti-competitive behavior. Manufacturers worldwide are facing significant cost pressure due to the U.S. FDA's considerable increase in regulatory requirements for API manufacturers. The FDA has increased the frequency of its inspections of foreign manufacturers and formed teams to visit the factories in particular nations. The API market in the United States is anticipated to expand significantly over the forecast period, despite pricing pressures and regulatory difficulties. 

Asia-Pacific is expected to grow at a CAGR of 7.07% during the forecast period. The World Bank's data shows that healthcare spending in Japan has been steadily increasing. In 2015, it made up about 10.89% of the GDP, compared to approximately 10.83% in 2014. To lower healthcare costs, the Japanese Ministry of Health, Labor, and Welfare (MHLW) has acted and chosen to encourage the use of generic medications. Japan has the third-largest pharmaceutical market in the world. Japan's domestic market is focusing more and more on exports, while foreign businesses are looking for ways to invest in and use the country's sizable, well-funded healthcare system. It was recognized that in order to rely on generic medications, it is essential to promote the manufacturing of the API because Japan relied heavily on the importation of the API, which caused a shortage of the substance. As a result, API manufacturing has increased in Japan. The market has expanded due to an increase in regional businesses.

Germany is a developed country with well-established healthcare systems and broad access to health insurance. Spending on R&D in the nation is very nearly 3% of the GDP. Germany provides the ideal environment for developing, manufacturing, and distributing top-notch pharmaceuticals. Advantages include innovative research, a long production history, and quick access to the pharmaceutical market. The nation's need for more drug manufacturing is being driven by factors like an aging population, an increase in the prevalence of chronic diseases, and an increase in the expected life span. Due to increased contract manufacturing, exports, and quick vertical integration by major pharmaceutical companies, Germany has seen consistent growth in active ingredients.

GCC comprises six Arab nations: Oman, Kuwait, Bahrain, the United Arab Emirates, and the Kingdom of Saudi Arabia. The GCC nations share social and economic backgrounds, health problems, and nearly identical health systems and policies. Saudi Arabia, which is estimated to account for two-thirds of total GCC sales and has the most advanced healthcare system in the area, dominates the API market in the GCC. The pharmaceutical industry in the GCC is driven by the region's high disease burden, growing population, and rise in lifestyle diseases, which affects the API market in this area.

Brazil's domestic production and consumption patterns have recently been deficient, which has negatively impacted the country's active pharmaceutical ingredient (API) market. Only one to two percent of the total volume of API used in the pharmaceutical market is produced nationwide, indicating a heavy reliance on imports. Even though most drugs used in Brazil are produced there, it was found that only a small portion of these drugs contain Brazilian-produced APIs. However, the API market in Brazil is anticipated to experience significant growth during the forecast period due to rising government interest in developing pharmaceutical manufacturing capacity in the country and increasing funding for research and development.

Segmental Analysis

The global active pharmaceutical ingredients (API) market is segmented by business mode, synthesis type, type, and application.

Based on business mode, the global active pharmaceutical ingredients (API) market is bifurcated into captive API and merchant API.

The captive API segment is the highest contributor to the market and is expected to grow at a CAGR of 6.14% during the forecast period. The study's captive API segment consists of APIs used by pharmaceutical firms to produce finished dosage forms on-site. Pharmaceutical companies themselves have traditionally made APIs in their home nations. Many businesses have recently chosen to outsource manufacturing to reduce costs. As a result, stricter regulations and inspections have been implemented, significantly changing how these drugs are regulated. The pharmaceutical industry is experiencing slowing global economic growth, increased pricing pressure from cost-containment measures taken by most nations, and increased competition from generic drugs, all contributing to the market's slowing.

The business model known as merchant API enables manufacturers to provide APIs to additional distributors. Except for biologic-based APIs, where the larger pharmaceutical companies have made significant investments, the growth in the API market is more pronounced in the merchant market. Since China and India produce and export most APIs, this business model primarily thrives in these two countries. Drug manufacturers are now putting more emphasis on compliance than on pricing. European manufacturers can grow their market share by adhering to international standards and satisfying consumer demands.

Based on synthesis type, the global active pharmaceutical ingredients (API) market is bifurcated into synthetic and biotech.

The synthetic segment owns the highest market and is expected to grow at a CAGR of 5.70% during the forecast period. Based on their sources, active pharmaceutical ingredients can be divided into two main groups: synthetic chemical drugs and natural chemical drugs. Inorganic and organic synthetic drugs are two categories of chemically synthesized substances. Inorganic compounds like magnesium trisilicate and aluminum hydroxide are examples of inorganic synthetic drugs. Drugs made from basic organic chemical raw materials and a series of organic chemical reactions make up most organic synthetic drugs. Due to the already developed market for synthetic APIs, the API for synthetic drugs accounts for a significant portion of the global API market. But as the prevalence of chronic diseases rises and pharmaceutical manufacturing technology advances, biotech APIs are steadily eroding the market share of synthetic APIs. As a result, artificial API growth is also modest compared to biotech APIs during the forecast period.

Production of active pharmaceutical ingredients based on biotechnology is included in the biotech API manufacturing services segment. The production of active ingredients from animals, microorganisms, humans, or genetically modified organisms is included in the biotech APIs. Due to the relatively low usage of biotechnology in the pharmaceutical industry, the share of biotechnology APIs is small. The use of biological molecules in the pharmaceutical industry is growing along with the global biotechnology sector.

Based on type, the global active pharmaceutical ingredients (API) market is bifurcated into generic and branded.

The branded segment is the highest contributor to the market and is expected to grow at a CAGR of 6.11% during the forecast period. Generic APIs are expected to grow faster than branded APIs in the studied market. Europe and Asia-Pacific dominated the generic API market. China is the world's largest generic API supplier. India's fastest-growing generic API supplier. Germany and the UK dominate the European generic API market. Italy is Europe's top API producer. Italy was the leading producer of generic APIs before China and India rose. Growing demand for generic and expiring branded drugs drives the generic API market. The need for affordable, high-quality medications is increasing. While the US and EU markets are stagnant, the APAC market is expected to grow.

Branded APIs, which have historically made up the largest segment, are still expanding more slowly than generic APIs, which make up the fastest-growing segment. The demand for branded APIs has decreased significantly over time due to the pharmaceutical industry consolidating and several notable brands going off-patent. With more anticipated patent expirations and a rise in generic production capacities globally, generic APIs have experienced a boom and are predicted to continue growing steadily. The production of APIs for novel medicines and generic drugs is carried out by several hundred companies, resulting in a highly fragmented market. As many service providers have only minor differences between their technology platforms and manufacturing capabilities, there is a high degree of redundancy. As a result, there is fierce competition among API suppliers in the global market.

Based on application, the global active pharmaceutical ingredients (API) market is bifurcated into cardiology, pulmonology, oncology, ophthalmology, neurology, and orthopedics.

The cardiology segment owns the highest market and is expected to grow at a CAGR of 6.15% during the forecast period. Asia-Pacific has more than half the world's CVD patients. According to reports, CVD diseases cause the most deaths in Australia and New Zealand. According to the Heart Foundation, cardiovascular disease (CVD) killed 45,053 Australians in 2014. Cardiovascular disease kills one Australian every 12 minutes. CVS sells cholesterol- and blood-pressure-lowering drugs. The CVS segment is driven by cholesterol reducers, especially Statins, the most important class of medications for lowering cholesterol and triglycerides. Developed markets spent USD23-USD26 billion on hypertension care in 2017. In 2017, 14–17 billion dollars were spent in pharmerging markets. This market is expected to grow due to more cardiac cases, changing lifestyle and disease patterns, and increased spending.

With 8.8 million victims in 2015, cancer was one of the world's leading causes of death. On a global scale, cancer causes close to 1 in 6 fatalities. The number of cancer patients has increased significantly over the past few decades, and more people are anticipated to die from the disease during the forecast period. The American Cancer Society estimates that 12,000 people died from head and neck cancer in 2014 alone, out of the nearly 40,000 Americans diagnosed with the disease that year. If serious action is not taken, it is predicted that this number will rise. About 5–6% of all cancer cases in the United States are head and neck cancer. Every year, there is an increase in the incidence and prevalence of cancer, which necessitates the study and creation of new APIs for the oncology market. This is done to satisfy the rising cancer incidence, which is anticipated to drive the market during the forecast period.

Recent Developments

• February 2023- Zydus Lifesciences stated it had received final approval from the US Food and Drug Administration (USFDA) for Pitavastatin tablets.
• September 2022- Boehringer Ingelheim introducedFencovis, a calf diarrhea vaccine.