Active pharmaceutical ingredient manufacturing has gradually been shifting to newer corporations in India and China from the leaders of the western
This drift will remain as the Indian and Chinese active pharmaceutical ingredient industries are growing at a rapid pace. Lower production costs in India and China is the main factor that drives this rapid growth. For example, developing, testing, manufacturing and marketing of a generic medicine in India cut short the prices to almost half when compared to the western countries.
There are several factors that aids this shift:
- A classic Western active pharmaceutical ingredient but in India it 10 and in China it even low as 8. Not even the higher productivity of a Western company can annul the labor cost difference.
- Indian and Chinese firms have lower shipping and transaction costs for raw materials as they embedded in a network of raw materials and intermediary suppliers. Firms in India and China frequently use inexpensive equipment, leading to a lower depreciation cost. The cost is also less and manpower is also less however productivity is always higher in these regions as there are real hardworking people available in these regions.
Fewer environmental regulations:
- Presently, Indian and Chinese firms are able to reduce the direct cost expenditure on buying, handling, and disposing of toxic chemicals due to fewer environmental regulations.
Larger scale manufacturing:
- Since the regulations of IFC demands the production of drugs to be over 1 billion annually, the firms in India and China have reached to a potential where large scale manufacturing of active pharmaceutical ingredient s can take place
- Market contestability in China and India is way less than any other western country, the competition in these two countries is less and the market is still not saturated, which it easy for the active pharmaceutical ingredient manufacturers to enter the market.