The market for active pharmaceutical ingredient (API) is expected to reach $182 billion by 2020 and is growing at a CAGR of 7.2% between 2014 and 2020. Every drug formulation has two units: The active ingredient and the excipient or the passive inert compound. The active ingredient in the drug causes the desired effect in the body whether it is mitigation of pain or curing the disease. With the expiration of patents of large number of drugs, there are many new pharmaceutical companies being set up which increases the demand for active pharmaceutical ingredients. There is a large investment being made on healthcare and pharmaceutical research resulting in new drugs, vaccines and antibodies which in turn contribute to the growing API market.

The Active pharmaceutical Ingredient market is segmented based on the customer base into Generic and Branded drugs. The generic drug market is fast growing as there are many new companies being set up with the expiration of patents allowing these companies to manufacture the same drug at cheaper costs as they save the costs that went into the research and discovery of the drug. The regulatory organizations like WHO and FDA are laying strict norms on the pharmaceutical companies to ensure that the drugs manufactured are all of the same standard quality. This makes these drugs reliable. There are a large number of branded drug companies that invest in the research and development of drugs and bring out novel drugs into the market. There are many big companies which outsource the production of the API, thus increasing the market size. The higher incidences of diseases and epidemics globally and a rising aging population are drivers of this market. With advanced healthcare facilities and medical research, the demand for drugs and hence the demand for active pharmaceutical ingredients in going to rise. The strict rules laid out by the regulating agencies and a highly fragmented market are the only constriants.

The market can be geographically segmented as North American, European, South East Asian and the Rest of the world. The North American market has the largest share because of the higher per capita income and advanced research facilities available. European market closely follows with good healthcare facilities available. Asia-Pacific has the fastest growing market because of the increasing affordability of healthcare facilities and the number of new companies being set up. Some of the key players in the market are BASF (Germany), Pfizer (USA), Mylan (Netherlands), Sun Pharma (India), Dr. Reddy’s (India), Lonza (Switzerland) and Novartis (Switzerland).

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