China has emerged in the past two decades as a major player in the international active pharmaceutical ingredient (API) market amid a growing trend of multinational pharmaceutical companies in API outsourcing. The growth of international generic companies, which traditionally rely on outsourcing for their raw materials and on cost efficiency, further elevates the importance of China as a low cost and long term API supply source.

While many domestic Chinese industries are expected to face tough challenges and competition from foreign companies following the WTO entry by China, experts predict that the API manufacturers in China will stand to gain international market shares in the post-WTO era.

API appeals more and more to Chinese companies
Chinese manufacturers of API have increasingly been attracted to the international API business as a result of cut-throat competition and growing pain from a complex, expensive and often corrupt drug registration regime at home. Also due to looser government control in the sector, there has been a sharp rise of private enterprises in API manufacture and export - these enterprises are completely profit-motivated and are inclined to embrace opportunities and changes.

Strength in chemistry research
China's modern pharmaceutical industry was built, following establishment of PRC in 1949, on the basis of imitating new drugs developed in the west. To do this, the Chinese pharmaceutical industry needed to develop good pharmaceutical chemistry to reproduce what were developed in the west and be able to innovate manufacturing processes in order to use raw materials available and to cut production costs. The government, from the very beginning, stressed the importance of providing low-cost medicines to people, therefore invested heavily in chemistry research. This has put China in an advantageous position half a century later as a major supplier of API with a large pool of pharmaceutical chemistry experience and talents.

International regulatory compliance and quality
Major Chinese API manufacturers have learned the importance of international regulatory compliance and quality assurance through years of struggling to fit into the international API marketplace. More and more companies are investing to upgrade their facilities for international regulatory compliance, especially for USFDA approval. Quality control also improved as a result of such regulatory compliance and GMP implementation.

Emerging trend of Sino-foreign joint ventures in API and custom synthesis
A number of international API producers, including Gist Brocades and Antibioticos, are taking the lead to form joint ventures with Chinese companies to produce high quality APIs in China to supply both the local and international markets. These JV operations are reportedly successful.
Multinationals are also beginning to form collaboration with Chinese companies in custom synthesis and manufacture. One example in this area is DuPont which built a successful collaboration with Shanghai Institute of Organic Chemistry that evolved from a post doc program.

Willingness to supply intermediates
With abundant low-cost labor supply and lower environmental pollution control costs, Chinese manufacturers are often willing to supply advanced intermediates for API which are less profitable than API themselves. This will sometimes help international pharmaceutical companies in reducing API costs, keeping a better control on its API sources and/or bypassing certain international regulatory compliance requirements associated with sourcing from manufacturers which are not approved by concerned authorities.

Opportunities are knocking
All of the positive developments mean opportunities for international pharmaceutical companies. Following opportunities are worth considerations:

Buying direct from China with confidence - buying direct from China can save you a lot of money. This can be done easier than before with growing presence of Chinese API manufacturers internationally. A more reliable way to deal direct is through the use of consultants who can help identify best sources, negotiate and conduct certain QA functions.

Strategic alliances - international generic pharmaceutical companies may be interested in developing strategic alliance with Chinese API manufacturers for long term supply agreements, new generic drug co-development programs, and/or exclusive supply or distribution deals.

Joint ventures - international API producers and generic companies that are interested in upstream integration might want to consider forming joint ventures with Chinese companies to produce APIs in China for both the local and international market. This strategy will also provide foreign companies with better access to the local Chinese market.

Custom synthesis and manufacturing - given its strength in pharmaceutical chemistry, China is also a good choice for contract synthesis and manufacturing of new chemical compounds.

Source of pharmaceutical intermediates - there is a huge number of large and small API and chemical manufacturers in China that are eager for new business opportunities. This large number itself and their eagerness for business will offer international companies the great flexibility in finding the right intermediates at the right costs.

What makes WiCON special?
In addition to helping international pharmaceutical companies identify and negotiate the best sources of APIs, and WiCON can even provide a quality assurance service under which we will carry out QA tests prior to any shipments by manufacturers.

WiCON has a team of consultants who are insiders with the right experience and connections. In addition, we have a number of subsidiary companies on the ground in China which may meet needs of our clients directly or will provide us with the kind of support and resources that are not available to other consultants.