Pharma is a big industry. However, the value chain can be broadly divided into two categories: API and finished formulation.
API makes up a part of the drug that enables the latter to produce the desired effect.
China is one of the leading suppliers of API. In 2020, when the pandemic started and severely disrupted the supply chain in China, the pharma industry was affected for the time being due to the shortage of raw materials.
API full form in pharma is Active Pharmaceutical Ingredient. A simple API meaning in pharma is that it's a raw material that is included in medicines. In reality, there's a subtle difference between API and raw materials.
But first, talking about what is API in pharma, it is a biologically active component used in drugs (capsules, tablets, injectables, more) to produce the intended outcome. It is one of the two main ingredients in medicine, the other one being excipients, a chemically inactive substance that delivers the effect of API.
For instance, if Benadryl – a popular antihistamine medicine – works, that is because of the acetaminophen API it includes. Acetaminophen, an active ingredient, helps it manage allergy symptoms, producing the intended effects.
API manufacturers first acquire relevant raw materials. Several chemical compounds go through the process called intermediate before becoming an API. There are many different kinds of intermediates in the production process that transforms raw materials into an API. After manufacturing, the API is taken through rigorous quality checks and analysis to confirm its ultra-pureness so as to map to the desired quality criteria.
The amount of active ingredient included in medicine, aka its strength, defines the strength of the drug. You will find this detail on the packaging of the medicine. Different brands or manufacturers have their own methods and benchmarks that can affect the potency of their medicines even when they are producing the same drug. In any case, they are required to prove the potency of their medicines to the country’s regulatory body.
Coming to the difference between API and raw materials, many people use these two phrases interchangeably. In reality, raw materials are the base chemical compounds that are used to make an API. So, API manufacturers procure raw materials to produce this active component. The API is then supplied to the pharmaceutical manufacturers who use it to create drugs.
Earlier, drug manufacturers would make their own APIs. However, in recent times, more and more companies are outsourcing APIs to save costs on expensive equipment, infrastructure, and employees. They procure active ingredients from API manufacturers and then make medicine by mixing API with pharmaceutical excipients. So, a lot of pharmaceutical companies that are located in the U.S. outsource their APIs from overseas. China and India dominate the market when it comes to API manufacturing.
While there are benefits of sourcing active ingredients, there are also concerns on the flip side about the quality of the outsourced APIs, which impact the efficacy and safety of medicines. Poor quality APIs can result in illnesses and even fatalities. To counter this concern, governing bodies in countries have put stringent regulations and screening that ensure the quality of the shipped API adheres to the highest standards.
The pharmaceutical industry is changing fast. API in pharma has made a significant impact. Once when pharmaceutical companies managed everything of the production end-to-end, they now prefer to outsource APIs. This has made a big difference in their bottom line. This shift will deepen further, with more companies expected to follow suit.