Opportunities in China’s API market

In his latest article, Ames Gross explores the opportunities for pharma in China's API market.

The active pharmaceutical ingredient (API) market in Asia is worth $32.5 billion, and it is growing faster than any other API market in the world. From 2008 to 2012, Asia's share of the global API market rose from 24.2 to 28.3 percent. The Asian API market is growing at 8.5 percent annually, and it should reach $54.9 billion by 2018.

China's API market is growing at an even faster pace than other Asian countries. From now through 2018, it is expected to expand at an annual rate of 17 percent. This will push China's API market – currently worth $7 billion – to a value of almost $18 billion by 2018.

Besides the China API market growing quickly, as discussed above, China is also one of the world's biggest producers of APIs. In 2012, there were 1,500 API manufacturers in China. About 250 have registered their products with internationally recognized agencies like Japan's Pharmaceuticals and Medical Devices Agency (PMDA) and the US Food and Drug Administration (FDA).

More and more Chinese API manufacturers now have internationally recognized GMP certifications. However, many Chinese API production facilities still have serious quality problems. Investigations by independent audit firms have uncovered misrepresentation or fraud at hundreds of API manufacturing facilities in China. Product quality and safety are major concerns. Many locally manufactured APIs are made from unregulated bulk chemicals, some of which are not pharmaceutical grade.

As a result, the China Food and Drug Administration (CFDA) has recently passed a series of new laws for the registration of API facilities and the regulation of high-risk excipients. The CFDA further plans to set up a comprehensive Drug Master File (DMF) system for APIs within the next year or two.

Product registration

Although there is currently no DMF system in China, a limited registration system has been established for drug companies manufacturing APIs in China.

If a locally manufactured API is included in any product sold on the Chinese market, then that API must be registered. The registration process follows guidelines laid down by the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH).

Registration materials include:

• The name of the API substance

• The structure of the API substance

• The name of the manufacturing site

• Manufacturing methods used

• Manufacturing process control

• Quality control tests and results

• Specifications and test methods

• Stability tests and results

• Packaging methods

• Storage methods

• Expiration dates

In China, an API application may be submitted together with an application for the finished drug product it is supporting. When this happens, the API application can use clinical information and test results from the finished drug product application.

"In China, an API application may be submitted together with an application for the finished drug product it is supporting."

Foreign manufacturers of finished imported drugs are not required to submit foreign DMFs to the CFDA. However, if they so choose, they may submit information from foreign DMF filings in the place of a CPP (Certificate of a Pharmaceutical Product) filing.

Proposed DMF system

In September 2010, the CFDA issued a draft proposal for establishing a comprehensive DMF system. The draft was revised, and a second draft was released for public comment in November 2011.

According to the latest draft, DMF filings would be required for APIs, excipients and auxiliary materials (packaging materials that come into contact with the product) for drugs marketed in China. DMF filing would not be required for APIs or excipients in export-only drugs.

The CFDA Center for Drug Evaluation (CDE) would be in charge of all DMF filings. Like their counterparts at the US FDA and the Japanese PMDA, CDE officials would not disclose sensitive DMF information to finished drug manufacturers. During registration, finished drug manufacturers would have to cite the DMF registration numbers of all APIs, excipients and auxiliary materials used in their product. The CDE would then pull all relevant information from the DMFs to evaluate the finished drug application.

According to the draft regulations, whenever an API manufacturer changes their production process, they must notify all finished drug manufacturers using their product. The finished drug manufacturers then have the responsibility to audit the API manufacturer regarding those changes.

"An increasing number of Western API companies are setting up their own production facilities in China."

The CFDA's draft regulations further require that domestic API manufacturers conduct periodic quality audits of their suppliers. Final audit reports must be included in DMF application materials.

Foreign companies in China

An increasing number of Western API companies are setting up their own production facilities in China. In November 2009, for example, Novartis announced it was investing $250 million in an API research, development and manufacturing center located just east of Shanghai. The center was finished in 2010 and focuses on drugs for hypertension, oncology and Hepatitis B.

In addition to setting up their own API manufacturing facilities in China, many Western pharmaceutical companies are also forming partnerships with Chinese API manufacturers.

In September 2012, Pfizer launched a $300 million joint venture with Chinese API manufacturer Zhejiang Hisun Pharmaceuticals. Under the terms of the agreement, Pfizer owns 49 percent of the JV, which will develop, manufacture and commercialize branded generics for cardiovascular disease, infectious disease and oncology.

Conclusion

Western pharmaceutical companies with production facilities in China will find many sales opportunities for certified, high quality APIs. In contrast to most local production, manufacturing processes at foreign facilities are often GMP compliant. Although Chinese API manufacturers still have a price advantage, foreign API manufacturers will generally have a quality advantage when selling to Western and Chinese finished drug manufacturers.

About the author:

Ames Gross is president and founder of Pacific Bridge Medical, a Bethesda, Md.-based consulting firm that helps medical companies doing business in the Asian market (www.pacificbridgemedical.com). A recognized national and international leader in the Asian medical markets, he founded Pacific Bridge Medical in 1988, which has helped hundreds of medical companies with business development and regulatory issues in Asia.

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