Over the last few years, Indian pharmaceutical manufacturers have repeatedly received Warning Letters and 483s from the FDA—documents that the FDA uses to highlight significant violations of safety regulations and good manufacturing practices. Other manufacturers have voluntarily recalled the drugs they’ve made due to efficacy problems, or higher than permissible levels of carcinogens in their medicines. But instead of signing long term purchase agreements with American labs, importers turned to China in 2024, according to a Special Report by Japanese news agency Nikkei. China labs areinspected even less by the FDA than Indian labs.
America’s dependence on foreign manufacturers for our drug supply has put us in a dangerous position. The U.S. is faced with two impossible choices: prohibiting drug imports because of failed and lackluster inspection results, leading to shortages. Or just keep importing them regardless of efficacy concerns to avoid shortages and fears of cost increases.
But there could be a third option that would actually benefit patients: Enact legislation that allows for long-term return on investment in the manufacturing of generics in the U.S., among other reforms.
In the past decade, thenumber of U.S. labs that produce active pharmaceutical ingredients used to make medicines decreased by 61% (~1,950 API-facilities) in favor of contract manufacturers abroad, or foreign pharmaceutical brands like Indian giantAurobindo, which relies on China for its key starting materials to make drugs.
Not all Generics are Created Equal
Not all generic drugs are as equal as they are supposed to be.
A new 54-page report by professors from Ohio State, Indiana University, Brigham Young University and two Korean universities, examined the results of an empirical analysis of generic drugs and their serious drug adverse events and compared those adverse events (meaning negative reactions by the user) to where the drugs were made.
The results are shocking. The results showed that the number of severe adverse events for patients was 54.3% higher than that of drugs made in emerging economies.
Their analysis found that generic drugs manufactured in India, where a majority of emerging market generic drug companies are located, are associated with significantly higher instances of serious adverse events than their counterparts in the U.S., where a majority of advanced economy generic drug labs are located.
Our research question addresses a fundamental premise underlying the generic drug industry; namely, that once an original brand-name drug is proven safe and moved to generic status, all generic drugs patterned after it are interchangeable and of high quality, regardless of where they are manufactured. However, this premise ignores the fact that firms can establish and run their operations and supply chains differently in ways that may impact drug quality risk. For example, a Cleveland Clinic cardiologist reported patient health deterioration after switching from a generic made in an advanced economy to one made in an emerging economy.
When an FDA inspector finds faults with a lab’s compliance to the FDA’s Current Good Manufacturing Practices, it does not ban the drug maker from selling into the U.S. More often than not, even in instances of contaminants found in drug samples, the FDA will err on the side of supply security. It rarely bans imports, unless the drug is found to be dangerous. Balancing drug shortages and safety is one of the FDA’s most difficult balancing acts. And so even foreign labs that have received Warning Letters from the FDA are still permitted to sell pharmaceutical goods into the U.S.
Even as the FDA may rigorously ensure generic drug interchangeability at the time of a lab’s approval to sell to the U.S., its post-approval drug quality assurance practices differ between emerging and advanced economies and these differences may be consequential as it pertains to drug quality, the report authors said. They highlighted important differentials like lab technician expertise, local regulations, and lab equipment.
Due to these quality concerns in our main supplier India, the U.S. was turning to Chinese labs, Nikkeireported last March 2024.
China's Rx: Imports Up 400%+
Increased Pharmaceutical Exports: Between 2020 and 2022, U.S. imports of China-made pharmaceuticals have grown by 485% from$2.1 billion in 2020 to $10.3 billion two years later, raising China’s share of U.S. pharmaceutical imports from 2.5% to over 6%.
Made in China 2025: China’s Made in China 2025 includes biotech as a pillar of economic growth. This includes high end, research and development in areas like synthetic biology, to commodity goods like generic medications.
The China-India Connection: India sources nearly 70% of its active pharmaceutical ingredients from China, according to a 2020 Lancetarticle. Indian labs often rely on China for the main chemical compounds used to make medications.
This dependence on foreign pharmaceutical imports began to raise national security concerns during the pandemic years.
In 2024, China and India accounted for 57.6% of total U.S. pharmaceutical imports by weight, highlighting the potential risks associated with such reliance. Growing U.S. dependence on China and India for widely-used generic pharmaceutical products creates serious risks to national security and patient safety when drugs are in short supply, or ineffective.
“Chinese and Indian manufacturers have demonstrated a pattern of repeatedly violating FDA regulations and inspections are ineffective at controlling quality standards at these facilities,” said Jeff Ferry, CPA’s Chief Economist Emeritus, in a March 2024 report.
“The rise of drug shortages, the unreliable quality of the output of Chinese and Indian facilities, and the increasing concentration of the industry to one or two manufacturers for many drugs or key ingredients raises real questions over the FDA’s ability to address the problem alone,” Ferry said. “Our import dependence is unsustainable.”
In 2023, then-FDA Commissioner Robert Califf warned that “there’s not enough reserve and supply” of generic drugs in the United States. Califf admitted that the stakes are too high and said the economics of the industry need to be altered to boost domestic production of generic drugs.
A CHIPS Act for Generic Drugs?
In the first half of 2024, the U.S. had 232 drugs in short supply; some of them critical, some of them basic medications like those used in IV solution bags in hospitals. Of that number, 58% of them have faced supply problems for a year or more, with 31% in short supply for 1-3 years, based on drug shortageanalysis provided by Qyobo.
That was an unusually high number. The number is usually in the low 100s. The current count is around98 drugs, including an injectable carboplatin, a widely used chemotherapy drug.
Last week, Rep. Claudia Tenney (R-NY24) reintroduced her Producing Incentives for Long-term Production of Lifesaving Supply of Medicines (aka thePILLS Act) in the House. The bill provides tax incentives to produce generic drugs in the U.S., similar to the CHIPS Act for semiconductors. A companion bill is expected in the Senate, led by Tom Cotton (R-AR) and Peter Welch (D-VT).
The pharmaceuticals market, from pricing to safety and security, enjoys bipartisan support in both houses of Congress.
President Trump also has his eyes on this sector.
Early in the 2024 presidential campaign,Trump said he wanted more critical medicines made in the U.S. His tack is a bit different than the PILLS Act incentives approach.
“As part of my plan to obtain total independence from China, we will phase in tariffs and import restrictions to bring back production of all essential medicines to the United States of America where they belong,” he said, adding that he had signed an Executive Order on this issue in 2020, but it didn’t go anywhere after he lost the election. On Feb. 26, Eli Lilly said it will invest around $27 billion in an API facility.
Trump’s tariffs could work, if permanent and not part of a reciprocity agreement that would see tariffs decline once a country “reciprocated” in a way the White House deemed appropriate.
On Wednesday, the reports of Eli Lilly announcing more investments in new and existing labs was owed to Trump’s tariff threats. The planned facilities will be dedicated to producing active pharmaceutical ingredients and sterile injectable medicines, but it appears it will mostly be for its branded drugs like the popular weight-loss drug Mounjaro. Eli Lilly continues to produce some branded drugs that have gone off-patent and have generic equivalents now, like Humalog, a fast acting insulin lispro injectable for diabetes patients.
The U.S. has lost some of its generic drug making capacity to imports. Meanwhile, the FDA continues to produce annual lists full of critical, generic drugs in short supply. The mature generic drugs that have been off patent for many years might be a tough one to reshore. But generic drugs that have recently gone off-patent, andcritical drugs like amoxicillin that are often in short supply, should have a local supplier. For labs to invest in that expansion, they will need assurances that their investment will not be overrun by Asian imports.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
China Drug Exports to U.S. Rise as America Reaches a Crossroads in Its Own Supply Shortfalls
Over the last few years, Indian pharmaceutical manufacturers have repeatedly received Warning Letters and 483s from the FDA—documents that the FDA uses to highlight significant violations of safety regulations and good manufacturing practices. Other manufacturers have voluntarily recalled the drugs they’ve made due to efficacy problems, or higher than permissible levels of carcinogens in their medicines. But instead of signing long term purchase agreements with American labs, importers turned to China in 2024, according to a Special Report by Japanese news agency Nikkei. China labs are inspected even less by the FDA than Indian labs.
America’s dependence on foreign manufacturers for our drug supply has put us in a dangerous position. The U.S. is faced with two impossible choices: prohibiting drug imports because of failed and lackluster inspection results, leading to shortages. Or just keep importing them regardless of efficacy concerns to avoid shortages and fears of cost increases.
But there could be a third option that would actually benefit patients: Enact legislation that allows for long-term return on investment in the manufacturing of generics in the U.S., among other reforms.
In the past decade, the number of U.S. labs that produce active pharmaceutical ingredients used to make medicines decreased by 61% (~1,950 API-facilities) in favor of contract manufacturers abroad, or foreign pharmaceutical brands like Indian giant Aurobindo, which relies on China for its key starting materials to make drugs.
Not all Generics are Created Equal
Not all generic drugs are as equal as they are supposed to be.
A new 54-page report by professors from Ohio State, Indiana University, Brigham Young University and two Korean universities, examined the results of an empirical analysis of generic drugs and their serious drug adverse events and compared those adverse events (meaning negative reactions by the user) to where the drugs were made.
The results are shocking. The results showed that the number of severe adverse events for patients was 54.3% higher than that of drugs made in emerging economies.
Their analysis found that generic drugs manufactured in India, where a majority of emerging market generic drug companies are located, are associated with significantly higher instances of serious adverse events than their counterparts in the U.S., where a majority of advanced economy generic drug labs are located.
When an FDA inspector finds faults with a lab’s compliance to the FDA’s Current Good Manufacturing Practices, it does not ban the drug maker from selling into the U.S. More often than not, even in instances of contaminants found in drug samples, the FDA will err on the side of supply security. It rarely bans imports, unless the drug is found to be dangerous. Balancing drug shortages and safety is one of the FDA’s most difficult balancing acts. And so even foreign labs that have received Warning Letters from the FDA are still permitted to sell pharmaceutical goods into the U.S.
Even as the FDA may rigorously ensure generic drug interchangeability at the time of a lab’s approval to sell to the U.S., its post-approval drug quality assurance practices differ between emerging and advanced economies and these differences may be consequential as it pertains to drug quality, the report authors said. They highlighted important differentials like lab technician expertise, local regulations, and lab equipment.
Due to these quality concerns in our main supplier India, the U.S. was turning to Chinese labs, Nikkei reported last March 2024.
China's Rx: Imports Up 400%+
This dependence on foreign pharmaceutical imports began to raise national security concerns during the pandemic years.
In 2024, China and India accounted for 57.6% of total U.S. pharmaceutical imports by weight, highlighting the potential risks associated with such reliance. Growing U.S. dependence on China and India for widely-used generic pharmaceutical products creates serious risks to national security and patient safety when drugs are in short supply, or ineffective.
“Chinese and Indian manufacturers have demonstrated a pattern of repeatedly violating FDA regulations and inspections are ineffective at controlling quality standards at these facilities,” said Jeff Ferry, CPA’s Chief Economist Emeritus, in a March 2024 report.
“The rise of drug shortages, the unreliable quality of the output of Chinese and Indian facilities, and the increasing concentration of the industry to one or two manufacturers for many drugs or key ingredients raises real questions over the FDA’s ability to address the problem alone,” Ferry said. “Our import dependence is unsustainable.”
In 2023, then-FDA Commissioner Robert Califf warned that “there’s not enough reserve and supply” of generic drugs in the United States. Califf admitted that the stakes are too high and said the economics of the industry need to be altered to boost domestic production of generic drugs.
A CHIPS Act for Generic Drugs?
In the first half of 2024, the U.S. had 232 drugs in short supply; some of them critical, some of them basic medications like those used in IV solution bags in hospitals. Of that number, 58% of them have faced supply problems for a year or more, with 31% in short supply for 1-3 years, based on drug shortage analysis provided by Qyobo.
That was an unusually high number. The number is usually in the low 100s. The current count is around 98 drugs, including an injectable carboplatin, a widely used chemotherapy drug.
Last week, Rep. Claudia Tenney (R-NY24) reintroduced her Producing Incentives for Long-term Production of Lifesaving Supply of Medicines (aka the PILLS Act) in the House. The bill provides tax incentives to produce generic drugs in the U.S., similar to the CHIPS Act for semiconductors. A companion bill is expected in the Senate, led by Tom Cotton (R-AR) and Peter Welch (D-VT).
The pharmaceuticals market, from pricing to safety and security, enjoys bipartisan support in both houses of Congress.
President Trump also has his eyes on this sector.
Early in the 2024 presidential campaign, Trump said he wanted more critical medicines made in the U.S. His tack is a bit different than the PILLS Act incentives approach.
Trump’s tariffs could work, if permanent and not part of a reciprocity agreement that would see tariffs decline once a country “reciprocated” in a way the White House deemed appropriate.
On Wednesday, the reports of Eli Lilly announcing more investments in new and existing labs was owed to Trump’s tariff threats. The planned facilities will be dedicated to producing active pharmaceutical ingredients and sterile injectable medicines, but it appears it will mostly be for its branded drugs like the popular weight-loss drug Mounjaro. Eli Lilly continues to produce some branded drugs that have gone off-patent and have generic equivalents now, like Humalog, a fast acting insulin lispro injectable for diabetes patients.
The U.S. has lost some of its generic drug making capacity to imports. Meanwhile, the FDA continues to produce annual lists full of critical, generic drugs in short supply. The mature generic drugs that have been off patent for many years might be a tough one to reshore. But generic drugs that have recently gone off-patent, and critical drugs like amoxicillin that are often in short supply, should have a local supplier. For labs to invest in that expansion, they will need assurances that their investment will not be overrun by Asian imports.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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