Unless you have never taken a pharmaceutical drug in your life, then you have taken an Active Pharmaceutical Ingredient (API). All drugs are made up of two things: the major active ingredient which is the API and an excipient which is an inactive compound that can be thought of as a carrier component. APIs are found in both over-the-counter and prescription medication. In generic (non-name brand) medications, the name of the API is also the name of the product. For example, you might recognize acetaminophen as Paracetamol or diazepam as Valium. 

Some drugs, specifically combination therapies, include more than one API and have more than one intended health effect. It can be easy to confuse APIs for raw materials, but the main difference is that a raw material needs to be manufactured before it becomes an active and potent ingredient that can be used.  

APIs can be divided into two broad categories: synthetic APIs which are manufactured in labs, and natural APIs which are derived from biological sources, then purified to become usable APIs. APIs are also sometimes categorized based on solubility into soluble and insoluble APIs.  

APIs make it easier for pharmaceutical companies to manufacture drugs without having to start from scratch every time. It can be more profitable to outsource APIs to a different pharmaceutical company which specializes in the drug, which in turn helps companies allocate more resources to research and development. It also makes drugs more accessible to a wider public since costs come down because of economies of scale. A company that can manufacture an API at a large volume can offer it at lower prices, bringing down the cost of the final drug. This has helped improve healthcare and medicine availability in poorer countries that may not have otherwise been able to develop their own drugs.