The global spread of the coronavirus has raised urgent concerns over the pharmaceutical sector’s excessive dependence on China. China produces many of the active pharmaceutical ingredients (APIs) essential to the manufacturing of medicinal drugs, and the risk of China intentionally invoking export restrictions has led to increasing apprehension.
In actuality, fragmented pharmaceutical supply chains with China had caused problems even before the coronavirus pandemic. The current pandemic that has shaken the world has made nations aware of the new issue — an unprecedented crisis in “drug security.”
The World’s Biggest Supplier
A United States Congressional Research Service (CRS) report on China’s medical supply chains, released April 6, sounded the alarm over dependence on China in the medical field:
Now apparently past the peak of its COVID-19 outbreak, the Chinese government may selectively release some medical supplies for overseas delivery, with designated countries selected, according to political calculations.
According to the report, China is the world’s largest supplier of APIs, including those for painkillers and diabetes medications. The U.S. depends on China for 52% of its imports (in monetary value) of the antibiotic penicillin, and 90% of tetracycline.
Thus, any limitations that China puts on the export of APIs would result in unavoidable impacts on medical care in the U.S. The current pandemic has been riddled with shortages of masks, personal protective equipment, and ventilators, but just one impulsive move by China could create a similar situation in the pharmaceuticals sector.
In response to the crisis, a bill on “Protecting Our Pharmaceutical Supply Chain from China Act” was introduced in the U.S. Congress and is now under consideration. The bill would prohibit medical institutions from purchasing drugs using APIs made in China. The sponsor of the bill, Senator Tom Cotton, asserted, “It's time to pull America’s supply chains for life-saving medicine out of China.”
Lives Could Be Easily Affected
The risk of supply chain fragmentation is not merely hypothetical. In 2019, considerable confusion arose in medical settings in Japan due to trouble arising in a pharmaceutical supply chain coming from China. Supply of “Cefazolin for injection” produced by the generic pharmaceutical manufacturer Nichi-Iko Pharmaceutical Company was cut off due to delays in shipments of raw materials from China.
The origin of the problem lay in the Chinese government’s 2018 suspension of shipments in connection with environmental regulations targeted at the only company in the world that produces Thioacetic Acid (TAA), one of the ingredients of Cefazolin. Subsequently, an Italian company found that contaminants had been mixed into the raw materials used to make TAA by this Chinese company, leading to a halt in the production of Cefazolin from spring and into autumn of 2019.
Shortages of Cefazolin, used to treat a variety of infectious diseases, caused confusion in medical settings. Regarding excessive dependence on certain companies for pharmaceutical production, the Japan Association for Infectious Diseases warned, “It has become an issue of security whereby the lives of infectious disease patients in Japan could be too easily affected.”
The case was examined in a “Meeting of stakeholders on securing a stable supply of medicinal drugs” held last March by the Ministry of Health, Labor and Welfare in response to the current pandemic. The ministry conducted fact-finding surveys on the supply chains of 10 ingredients in Cefazolin and other drugs, announcing its conclusion that “China accounts for the bulk of raw material manufacturing.”
Bolstering Domestic Procurement
The supply chains of APIs used to make drugs and the raw materials that are the ingredients of these APIs are complicated, making an accurate calculation of China’s share in the global market problematic. However, in the context of low manufacturing costs in China, an increasing sense of dependence on China has certainly come to pervade the industry over the last two decades.
“Approximately 68% of APIs used in India rely on imports from China,” a world-leading Indian industrial group in generic pharmaceutical production disclosed in a report released in April. The report links plentiful resources of limestone, used as a raw material in pharmaceuticals, found in the Inner Mongolia region of China, to the low cost of importing from China.
The EFCG, a European industry group for API manufacturers, released a position statement in February, presenting the analysis that the production bases of APIs have moved away from Europe and the U.S. with increased dependence on Asia, including China.
The Japanese government plans to bolster domestic production of pharmaceuticals amidst rising concerns around the world over dependence on China, and private companies are responding. On April 15, Fujifilm, whose subsidiary produces the anti-influenza drug Avigan that has proven promising in the treatment of coronavirus infections, announced it would expand its production system.
“In addition to importing raw materials from overseas, we will increase domestic procurement to respond to rising demand,” noted a representative of Fujifilm.
(Click here for access to the article in Japanese.)
Author: Norio Kokumo, Economic News Department, The Sankei Shimbun