Active Pharmaceutical Ingredients (APIs)

Every medicine has one part that actually treats the illness. This part is called the Active Pharmaceutical Ingredient, or API. In a paracetamol tablet, the paracetamol is the API; the rest (starch, binders, coating) only helps shape the tablet and make it easy to swallow. APIs are also called bulk drugs, because they are made in large quantities as a powder and later turned into tablets, capsules, syrups or injections.

Why do APIs matter so much?

Without the API there is no medicine. A factory can have every machine to press tablets, but if the API does not arrive, production stops. So whoever controls the supply of APIs controls, in a way, the medicine supply of a country. For India, this is a question of both health security (medicines for our own people) and economic security (India's large pharma export business).

How is a medicine made, step by step?

Think of it like cooking a dish from raw vegetables.

1. Key Starting Material (KSM): the basic raw chemical, like the raw vegetables.
2. Drug Intermediate (DI): the half-processed chemical made from the KSM, like chopped and half-cooked vegetables.
3. API: the final active chemical, like the finished curry.
4. Formulation: the API mixed with other substances (called excipients) and turned into the final tablet, capsule or syrup you buy at a chemist, like the curry served on a plate.

A country can be strong at step 4 but still weak at steps 1 to 3. That is exactly India's situation.

Two ways of making APIs

APIs are made mainly in two ways:

• Fermentation: tiny living organisms like fungi or bacteria are grown in large tanks, and they produce the chemical. Many antibiotics, such as Penicillin-G, are made this way. This needs huge plants, a lot of power and water, and cheap large-scale production to earn a profit.
• Chemical synthesis: chemicals are reacted with each other in steps to build the API. Most common medicines are made this way.

Where did India's API problem come from?

After Independence, India depended heavily on foreign drug companies and medicines were costly. Two big steps changed this:

• The Patents Act, 1970 allowed only process patents (not product patents) for medicines. This meant an Indian company could legally make the same medicine by a different process. Indian firms became very good at copying and making medicines cheaply. (India moved back to product patents in 2005 to meet the rules of the World Trade Organization's TRIPS agreement.)
• The Hathi Committee (1974) looked at the drug industry and recommended building up Indian companies and self-reliance in medicines.

By the 1980s and early 1990s, India made many of its own APIs. But from the 1990s, China built very large API and KSM plants with cheap power, cheap land, government support and huge scale. Chinese APIs became far cheaper. Many Indian firms found it more profitable to buy APIs from China and focus on making formulations. Over time, Indian fermentation plants (for example for Penicillin-G) shut down.

How big is the dependence?

India imports a large share of its bulk drugs, APIs and KSMs, and China supplies roughly 70% of these imports. For some product groups, like antibiotic APIs, the share from China is even higher. This is why India is called the "pharmacy of the world" for finished medicines but still depends on others for the raw materials.

The warning signs

In 2015, the Katoch Committee (on APIs) warned about this dependence. It recommended mega parks for bulk drugs, with shared land, water, power, effluent treatment and testing facilities, so that Indian plants could match China's low costs. In early 2020, the COVID-19 outbreak shut factories in China. Supplies of APIs to India were disrupted and prices jumped.

India even had to restrict the export of some APIs and medicines (including paracetamol) for a period to protect its own supply. This shock pushed the government to act.

What India did in 2020

Two separate schemes were launched by the Department of Pharmaceuticals:

• PLI Scheme for Bulk Drugs: outlay ₹6,940 crore. It covers 41 products (covering 53 critical APIs, about half fermentation-based and half chemical-synthesis-based) for which India depends heavily on imports. Companies get a percentage of their extra sales as a reward: 20% for fermentation products in the early years (reduced to 15% and then 5% later) and 10% for chemical-synthesis products.
• Scheme for Promotion of Bulk Drug Parks: outlay ₹3,000 crore. The Centre helps states build common infrastructure for API makers. Maximum help is ₹1,000 crore per park. It pays 90% of the cost of common facilities for hilly states and 70% for other states. Three parks got in-principle approval in 2022: Himachal Pradesh (Haroli tehsil, Una district), Gujarat (Jambusar tehsil, Bharuch district) and Andhra Pradesh.

A further PLI Scheme for Pharmaceuticals (2021, ₹15,000 crore) supports high-value finished medicines and some APIs.

Who regulates APIs in India?

• Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945: the main law for making, importing and selling medicines.
• Central Drugs Standard Control Organisation (CDSCO), headed by the Drugs Controller General of India (DCGI), under the Ministry of Health and Family Welfare: approves new drugs and imports. State drug controllers license most manufacturing units.
• Schedule M of the 1945 Rules sets Good Manufacturing Practices (GMP), the quality rules for factories. A revised Schedule M was notified on 28 December 2023, bringing Indian rules closer to global standards. Large firms got six months to comply; small and medium firms got more time (later extended to 31 December 2025).
• National Pharmaceutical Pricing Authority (NPPA), under the Department of Pharmaceuticals: controls the prices of essential medicines under the Drug Price Control Order.

Commonly confused concepts

• API vs formulation: the API is the active chemical; the formulation is the finished product (tablet, syrup) that contains the API plus excipients.
• KSM vs Drug Intermediate vs API: KSM is the basic raw chemical, DI is the half-way product, API is the final active chemical. India's weakest link is at the KSM and DI stage.
• PLI for Bulk Drugs vs Bulk Drug Parks scheme: the PLI scheme rewards individual companies for extra sales. The parks scheme gives grants to states to build shared infrastructure. One pays for output; the other pays for facilities.
• PLI for Bulk Drugs vs PLI for Pharmaceuticals: the first targets the basic building blocks (APIs, KSMs, DIs); the second targets high-value finished medicines such as biosimilars, complex generics and orphan drugs.
• Process patent vs product patent: a process patent protects only the method of making a medicine; a product patent protects the medicine itself, however it is made.

Issues, criticism and the way forward

• Cost gap with China: Chinese plants are much larger and get cheap power and inputs. Even with incentives, some Indian APIs may cost more. When the incentive period ends, plants may struggle to compete.
• Slow park development: bulk drug parks need land, environmental clearances, common effluent treatment and utilities. Such big projects often take years.
• Environmental concerns: API making, especially fermentation and chemical synthesis, produces chemical waste. Strong effluent treatment and pollution monitoring are needed.
• Hidden dependence: even if an API is made in India, its KSM may still come from China. True self-reliance means building the whole chain.
• Quality and trust: cases of poor-quality or contaminated medicines damage India's reputation. Enforcing the revised Schedule M is important.
• Way forward: experts suggest cheaper power and water for API clusters, faster clearances, more research on green chemistry and continuous manufacturing, and diversifying imports to more than one country.

Concepts to Know

• Excipient: a non-active substance (like starch, sugar or colour) added to a medicine to give it shape, taste or stability.
• Fermentation: a process where microorganisms like fungi or bacteria are grown in tanks and make a useful chemical, much like yeast makes dough rise.
• Generic medicine: a copy of a medicine whose patent has ended. It has the same API and works the same way as the original brand, but is much cheaper.
• Good Manufacturing Practices (GMP): a set of rules on cleanliness, testing and record-keeping that factories must follow so every batch of medicine is safe and of the same quality.
• TRIPS: the World Trade Organization's agreement on intellectual property. It required member countries, including India, to give product patents for medicines.
• Import substitution: making at home the goods a country used to buy from abroad.