Industry Best Practices for API Sourcing

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By: Sindhuja Ravichandran -- Analyst–Category Specialist, API & Biologics

01 January, 2017

ARTICLE

Abstract

A majority of the big pharma companies often choose the one-stop shop solution for contract manufacturing of API from development to commercialization. Hence, it is important to ensure there are no disruptions inAPIsupply. This article discussespharmaceutical companies’ industry practices forassessing the credibility of suppliers and ensuring a continuous supply of API using efficient Supply License Agreements.

Introduction

The global small molecule API market accounted for $92 billion in 2017,and the small molecule API CMO market forms a major part of the overall API market, contributing to nearly 91 percent of the total outsourced market revenue in 2017. Demand for API contract manufacturing is highly concentrated in North America and Europe. Currently,there are 3,000+ API manufacturers across the globe. Hence, the API market is highly fragmented with suppliers distributed in both developed and emerging markets. The generic small molecule API CMO market contributes to $37.1 billion (38percent) of the API market. Supply of generic APIs ishighdue to increase in patent expiry on branded drugs from 2015. However, certain quality issues have caused supply disruptions in the past due to which pharmaceutical buyers are relying on quality supply agreements with suppliers mentioning stringent regulatory audit procedures. Hence, big pharmaceutical manufacturers are looking to include certain key areas in their Supply License Agreements (SLAs) that would prevent product recalls and supply chain risks.

Supply Scenario with Generic Manufacturers

FDA warning letters wereissued to more than 35 manufacturing facilities outside the USA, prominently in India and China. Apart from incurringexpensesassociated to remediation of the warning letter received fromtheU.S. FDA, major suppliers like Wockhardt, Divi’s, Changzhou Jintan, and Zhejiang Hisoar were also forbiddenfrom exporting APIs totheUSA. China and Indiawere the top three countries receiving warning letters until mid-2018(Figures1and 2). Additionally, API manufacturing firms in Taiwan, South Korea, Italy,and Spain were also included in the list for quality issues related to patient safety. For example, a recent regulatory compliance issue pertainingto identification of the impurity NDMA (a probable human carcinogen) detected in Valsartan API. This API wassupplied by Zhejiang Huahai Pharmaceutical. This led totheFDA and European Medicines Agency (EMA)recalling the batches containing Valsartan.




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