Japan’s 55 Billion Yen Push for Domestic Antibiotic APIs: Impact of Global Reshoring Trends: Impact of Global Reshoring Trends
According to multiple Japanese media reports, the Ministry of Health, Labour and Welfare of Japan has decided to support two projects led by Meiji Seika Pharma, a subsidiary of Meiji Holdings, and Shionogi Pharma, a subsidiary of Shionogi & Co., Ltd. The total subsidy for equipment investment is about 55 billion yen to support the domestic production of antibiotic APIs (active pharmaceutical ingredients) to reduce reliance on China. It is reported that the formal supply of raw materials may begin after 2025.
Japan's 55 Billion Yen Plan to Support Domestic Production of Antibiotic APIs
Japan has long relied on China for raw pharmaceutical materials. Historically, Japan was an active producer and exporter of antibiotic APIs (active pharmaceutical ingredients). Until the mid-1990s, Western countries and Japan produced 90% of the world’s APIs. However, since the 1990s, Japan started transferring technology to China, where labor costs were lower. Currently, most of Japan’s penicillin and other drug APIs depend on China, including nearly 100% of the raw materials for "β-lactam" antibiotics, commonly used in surgeries.
In 2019, many Japanese medical institutions faced difficulties obtaining cefazolin, an essential surgical antibiotic effective against Staphylococcus aureus. The primary source of cefazolin in Japan, produced by the major generic drug company Nichi-Iko Pharmaceutical (Toyama City), also depended on raw materials from China. The shortage occurred because tightened environmental regulations in China led to factory shutdowns, disrupting raw material imports and causing chaos in Japan's healthcare system. A June 2019 survey by Japan’s Ministry of Health, Labour and Welfare revealed that over 50% of medical institutions with more than 300 beds struggled to use cefazolin normally.
This shortage sounded an alarm in Japan's medical community. In December 2022, under the Economic Security Promotion Act, Japan’s Ministry of Health designated antibiotics as "specified essential materials" and subsequently identified domestic manufacturers in the summer of 2023.
Meiji Seika Pharma Co., Ltd., established in 1946 with a registered capital of 35 million yen, was active during the era when Japan was a major producer and exporter of antibiotic APIs. Its Gifu plant in Kitakata Town, Gifu Prefecture, with an 11-meter-high fermentation tank, produced penicillin G API until 1994. At its peak, the plant’s annual production exceeded 1,000 tons, five times the domestic demand. In May this year, the company began constructing new facilities for raw material refinement.
As part of its plan to expand CMO/CDMO (Contract Manufacturing Organization/Contract Development and Manufacturing Organization) business, Meiji Seika Pharma invested $20.1 million in a new production plant in Bangalore, India, which began commercial operations in January this year. The new plant covers approximately 8,000 square meters, with an estimated annual capacity of 750 million tablets, 75 million sachets, and 400 bottles.
Shionogi Pharma, a subsidiary of Shionogi & Co., Ltd. (Settsu, Osaka Prefecture), was selected by Japan’s Ministry of Health in the summer of 2023 as a manufacturer of two antibiotics, including cefazolin. According to a January 2023 report by Nikkei, Shionogi Pharma's domestic factories had the capacity to produce 10 million doses annually. CEO Yoshihiro Kono mentioned plans to establish new supply chains in multiple countries, aiming for a global capacity of 30 million doses by the fiscal year ending March 2024.
In Japan, the import unit price of antibiotic APIs has multiplied several times over the past five years, highlighting the high demand for stable supply. The key challenge is reducing manufacturing costs. However, during an expert meeting held by the Ministry of Health in 2020, one committee member pointed out that if some drugs were domestically produced, their prices could increase tenfold. Hiroyuki Sakakibara, a professor at Kanagawa Prefectural University of Health and Welfare, emphasized the need to support technology development to enhance manufacturing efficiency.
Japan is considering subsidies for API manufacturers and suppliers and a system where the government purchases products from API manufacturers. Whether these subsidies will fundamentally resolve the issue or be just a temporary fix remains to be seen.
领英推荐
Europe, America, and Japan Promote Domestic API Production, Some Capacity Shifts to India
According to the 2017 estimates by the UK's Medicines and Healthcare products Regulatory Agency, China alone produced about 40% of the global antibiotic APIs (active pharmaceutical ingredients). Even India, often seen as an alternative pharmaceutical powerhouse, heavily relies on Chinese supplies.
Data shows that India accounts for about 20% of the global generic drug demand but imports about 70% of its APIs from China. For certain drugs, such as the pain reliever and anti-inflammatory drug ibuprofen, India procures most of its APIs from China. Although India is one of the largest API exporters, many of its key starting materials (KSMs) and intermediates come from China.
In March 2020, the Indian federal government launched the Production Linked Incentive (PLI) scheme, listing 53 essential and technically feasible APIs that could be produced domestically, each eligible for subsidies. Under this scheme, Indian pharmaceutical companies have been actively building, expanding, merging, and acquiring. For instance, in 2021, Indian pharmaceutical giant Aurobindo Pharma built a new factory to produce both β-lactam and non-β-lactam antibiotics. Biocon Biologics acquired an antibiotic manufacturing plant in Hyderabad, expanding its capabilities in producing fermentation-based APIs.
Recently, Aurobindo Pharma's Penicillin G potassium (PenG) factory began trial production, though full production capacity will take a considerable time to achieve.
Beyond Japan and India, the US and the EU have also initiated the "reshoring" of API production. In 2022, the US compiled a list of 86 essential drugs, including antibiotics, and announced plans to produce APIs domestically and source from allies, including Japan.
In 2021, the EU identified 34 sectors, including APIs, as highly dependent on non-EU countries and difficult to replace, urging member states to respond accordingly. Seizing the opportunity, Novartis’s generics division Sandoz, together with the Austrian federal government, invested in establishing integrated antibiotic production within Europe.
Both Europe and the US, alongside Japan, are shifting new production to India. For example, Meiji Seika Pharma's new production plant in Bangalore, India, started commercial operations in January this year, following a $20.1 million investment. Shionogi Pharma, which previously relied entirely on China for synthetic chemicals used in their oral COVID-19 drug Xocova, began sourcing materials from both Japan and India starting in 2023. It is estimated that from 2023 to 2028, the Indian API market will grow by $7.56 billion, with a compound annual growth rate of 6.49%.
Response to the API Relocation Trend in China
According to a recent report by China Pharmaceutical News, many Western countries have outsourced their API (active pharmaceutical ingredient) industries for years. They lack the fundamental chemical raw materials, supporting industry supply chains, and skilled labor needed to rebuild these industries domestically. The restructuring process is challenging, costly, and often fails to meet local environmental standards. Conversely, India has been positioning itself as a formidable competitor to China by integrating its global, full-industry chain for API and formulation development through significant capital investment.
Despite this, China's API industry has developed substantial scale and support advantages over many years. China excels in product quality, cost control, and delivery timelines compared to India, making it a crucial player in the international market. In recent years, trade in APIs between China and countries like India and the United States has continued to grow.
According to Deloitte, one of the Big Four accounting firms, China's API exports are primarily driven by bulk APIs and intermediates, leveraging their price advantage to maintain strong international competitiveness. However, with India emerging as a low-cost competitor with increasing API capacity, China needs to accelerate its transformation and upgrading efforts.
China Pharmaceutical News suggests several directions for this transformation:
While India is emerging as a significant competitor, China's established advantages in scale, cost efficiency, and quality position it to remain a stable and essential part of the global API supply chain.