Prescription drug costs.©Kenishirotie - stock.adobe.com
Employers and workers have two overriding priorities about pharmaceuticals – access to drugs they need at prices they can afford. As the pandemic revealed, a serious disruption to the global supply chain can affect both availability and price, with much of the concern focused on China.
“Interest in the exposure of U.S. drug supply chains to China surged during the COVID-19 pandemic, as Chinese manufacturing plant closures underscored the risks of relying on China for critical medicines and ingredients,” according to a new Brookings report. “In that context, President Trump issued an executive order in August 2020 directing the Food and Drug Administration to create a list of essential medicines and critical inputs to aid in prioritizing domestic production and reducing dependence on foreign suppliers for those products.“
Researchers found that although concerns about conflict with China disrupting U.S. drug supply chains are valid, the nature of the exposure often is misrepresented, risking ineffective policy responses. The broadest exposure is with raw materials, Exposure in the production of active ingredients varies by manufacturing process, creating great exposure for some drug classes and little for others.
The report reached four conclusions.
- China’s share in active pharmaceutical ingredient (API) production of U.S.-bound drugs must be understood in the context of specific drug categories. Although it is high for some and low for others, the current aggregate exposure across all categories is much less than many reports suggest -- likely one-quarter of U.S. drug volume.
- Exposure to China at the intermediates stage is significant for some drugs and is related to specific processes. U.S. analysis of exposure to China usually highlights its grip on drugs that require fermentation, such as antibiotics. However, reports do not appear to focus on the importance of China’s control of fluoridation processes used in formulating intermediates for some of the largest therapeutic classes.
- China plays a critical role in auxiliary chemicals, such as the production of reagents and solvents. Although these chemicals are necessary for the chemical synthesis of APIs and intermediates, they are omitted from nearly all analyses.
- China is moving downstream in the drug supply chain, showing significant gains in its ability to make APIs. At this point, the recent increase in China’s ability to make APIs has not been reflected in a similar uptake from finished dosage form manufacturers. However, the persistent price point advantages and improving technical capabilities create the potential for ever-increasing exposure on the API level.
As a result of these findings, researchers believe policies to onshore API will have a
limited effect on reducing the risk from reliance on China unless they also reduce risks associated with the upstream supply chain.
“Policymakers should consider ways to limit China’s expanding API production stage ability,” the report concluded. “The broad upstream exposure also reinforces the need for prioritizing how the U.S. government engages and what role foreign alliances play in solving the seemingly ever-increasing scope of China’s exposure to U.S. drug supply.”
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