There is an increased push on the pharmaceutical industry to increase transparency of API pricing as procurement teams struggle with rising raw material costs, freight cost volatility, regulatory risks and varying supplier quotes. For most of the pharmaceutical companies, having a single supplier is no longer a viable sourcing strategy.
API pricing has been dynamic in the past few years, influenced by several events such as disruptions in the supply chain, geopolitical turmoil, and shifting market demand. Some APIs were faced with high price increases during this pandemic as the raw materials and logistics were in short supply.
Meanwhile, the manufacturing expansion in India and China has brought down the prices of several antibiotic and statin APIs.
Procurement and sourcing teams today are more likely to look around the world for several drug suppliers before they make their purchasing choice. Rather than relying on manual supplier outreach, companies can now look and compare pricing, compliance, and mitigate sourcing risks by using global API supplier lists and pharmaceutical intelligence platforms.
API price transparency is the capacity of pharmaceutical procurement team to be able to compare and assess the total sourcing cost of the API from various API suppliers across the globe. It isn't just about quotes; it also provides visibility into freight costs, regulatory compliance, lead times, and minimum order quantities, as well as supplier reliability.
Not every time the lowest price is an indication of the lowest total price to be obtained in a pharmaceutical procurement. To choose API suppliers, buyers have to consider several operational and regulatory factors.
The price of API varies from place to place around the world and is influenced by several factors:
The cost of raw materials and intermediates.Raw material and intermediate costs.
The market mechanism of demand and supply.The Laws of demand and supply.
The price of API can fluctuate for many reasons, such as:
In addition, regulatory inspections and plant shutdowns.
This is why more and more pharmaceutical companies are using more than one source of quotes, such as supplier intelligence platforms.
Comparing prices from different pharmaceutical suppliers is a big challenge for pharmaceutical procurement teams. API procurement is not the same as commodity sourcing; in addition to regulatory complexity, the supplier qualification requirements and region-specific pricing structure also differ.
There is a lack of centralized supplier intelligence, one of the greatest challenges. Many procurement teams are still stuck in the time-consuming process of RFQs, distributor references and disjointed supplier communication. This renders it hard to benchmark, particularly when procuring from a number of API suppliers globally.
The cost of API could vary from one supplier to another for the same molecule because of:
Some suppliers may cover freight and documentation as part of their quotation, some may cover them as part of their quotation, and some may cover them as a separate charge altogether, which makes it more difficult to compare quotes from suppliers.
The price quoted as API is just a component of the procurement price. However, among other factors pharma buyers need to consider is:
In today's increasingly volatile global freight environment, procurement teams are increasingly turning to landed cost analysis rather than solely base quotations.
A comparison of price differences on the international markets. An international markets price comparison.
There is a wide variation in API prices between manufacturing areas. India and China continue to be the key sources of most of the high volume APIs due to their extensive manufacturing capacity and cost-effective production.
But the prices may vary depending on:
This is why procurement teams are looking at more than one supplier from various geographical locations before they make sourcing decisions.
API benchmarking isn't merely about gathering quotes from a variety of suppliers. When determining the price of a product, procurement teams must take into account compliance, logistics, the reliability of the supplier, and the risk that it may be sourced.
The best way to benchmark suppliers is to use a verified supplier list from around the world. This makes it possible to:
Not all the cheapest suppliers are the best sourcing partners. As they are formulating a procurement strategy, they should take into account:
Better compliance history can lead to lower longterm operational and regulatory risks for suppliers.
Benchmarking should also consider:
A supplier with cheaper API prices but with a longer lead time could cause delays in production and stocking danger.
Platforms such as Chemxpert Database allow many pharmaceutical procurement teams to benchmark suppliers through:
These platforms aid in making quicker and informed sourcing decisions for procurement teams.
A savvy sourcing team knows that the price is not the only factor in choosing a supplier. A cheap provider who does not have the systems in place for compliance or cannot guarantee the acceptable delivery may generate serious operational issues.
Typical factors that procurement teams will consider are:
In general, suppliers with good compliance history will supply more reliably in the long term.
Appropriate procurement teams need to assess if suppliers are able to:
Provide long-term commercial quantities
Several pharmaceutical firms have diversified their needs by developing multiple API suppliers to lower dependency issues.
Having sole supply from one source can lead to procurement risks. API availability and pricing may also be influenced by geopolitical factors, environmental constraints, and logistics challenges.
That is the reason pharmaceutical firms are increasing the usage of multi-region sourcing strategies.
More than simply getting the lowest price, negotiating an API is a successful endeavor. In today's world, procurement teams use a variety of data, such as supplier benchmarking data, market intelligence, and negotiation history, to improve their negotiation outcomes.
A procurement team with knowledge and understanding:
Typically play a stronger role in negotiations.
Having several suppliers helps to improve:
This approach also helps to minimise risks to dependency in the event of supply disruption.
A number of companies in the pharmaceutical industry engage in negotiation:
To decrease the volatility of prices when there is a fluctuation in the market.
The value of Global API supplier lists in Pharma Procurement.
Today global API supplier lists are indispensable in the pharmaceutical procurement processes. They help procurement teams:
To make the sourcing experience more efficient and to gain more visibility into their sourcing operations, pharmaceutical companies are adopting supplier intelligence platforms over fragmented sourcing approaches.
Chemxpert Database Supports API Supplier Benchmarking.Pharmaceutical procurement teams can use Chemxpert Database to access:
This platform enables buyers to compare drug suppliers in different regions, analyze compliance data, track certifications and enhance their procurement decision making.
Chemxpert's integration of supplier intelligence and sourcing visibility enables procurement teams to better benchmark suppliers and gain a stronger market position.
API price transparency has become a key need of today's pharmaceutical procurement teams. Traditional sourcing approaches are less effective because of the volatility of the supply chain, volatile raw material prices and growing complexity of regulation.
To benchmark a number of API suppliers around the world, understand supplier conformance, evaluate landed costs and diversify sourcers to increase procurement efficiency and reduce supply risk today, is a requirement for the pharmaceutical industry.
Global API lists and supplier intelligence platforms provide verified supplier lists to help procurement teams gain pricing visibility, negotiating power with suppliers, and more resilient pharmaceutical supply chains.
Drug sourcing platforms like the Chemxpert Database help sourcers to find suppliers more quickly, compare suppliers from various countries and make informed decisions on procurement of API from drug suppliers.
Sick and tired of always wondering if you are being asked to pay the right price for your APIs? This empowers you with the answers you need to make the right decisions in the Global API market.
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