As a result, the excipient industry in Europe is growing at a healthy rate - around 5 per cent a year - and should reach a value of $1.39 billion in 2008, according to a new study from consultancy firm Frost & Sullivan.
One of the main drivers for this growth is that pharmaceutical manufacturers are feeling the effects of patent expiries, growing generic competition and drug failures, compelling them to cut expenditure on product development without compromising on quality. In such a scenario, excipients offer a welcome opportunity to add better functionality to products at lower costs, according to Frost & Sullivan.
The ability of excipients to improve drug efficacy, safety, stability and storage is the main draw for drugmakers, according to the report, entitled Strategic Analysis of Pharmaceutical Excipients Market in Europe.
"The low returns on investment coupled with various regulatory issues account for the dwindling focus on innovation in the pharmaceutical industry," commented Frost & Sullivan industry analyst Himanshu Parmar.
"However, new technological advancements and novel drug applications in the pharmaceutical industry are likely to drive the excipients market, as well as heightened innovation in this sector."
While Europe and North America currently contribute to approximately 75 per cent of the global excipients market - with Europe accounting for about half of this share - the entry of manufacturers with substantial cost advantages is posing a challenge to European pharmaceutical excipients manufacturers.
For instance, India and China are poised to enter the excipients market in the next four to five years, having already become major forces for the supply of APIs. These countries are likely to have the advantage of low-cost manufacturing capabilities without compromising on product quality. Their established presence in APIs and intermediates manufacturing has also helped them build up a good brand image overseas, said Parmar.
Added to this challenge, excipients, particularly bulk excipients such as microcrystalline cellulose and lactose, face the problem of continuous commoditisation. This has created a situation of increased price pressure and shrinking profitability, with even speciality products likely to be at risk.
The answer for western excipient manufacturers may be to bundle excipient supply with other factors, such as expertise in technical and budgetary issues, regulatory issues and quality assurance.
"Manufacturers that understand and follow such approaches are more likely to gain customers' trust and consequently, earn continuous business from them. This is likely to help them avoid downward price pressure while achieving comfortable margins as customers could well agree to pay higher prices for value-added services," according to the report.
There has also been a shift from the use of excipients as inactive ingredients to functionally active materials, while biotechnological developments and various emerging protein-based therapies are broadening the definition for excipients products.
"The definition for excipients is changing and includes a wider range of products such as anti-bodies and chimera products," said Parmar. "Many new natural products, synthetic polymers, small molecules and the modifications of these molecules are likely to assume importance as this happens, and this enhanced product portfolio is likely to improve the market conditions."