It’s the most well-known secret on Capitol Hill: China owns the American generic drug supply chain. Basic thyroid or blood pressure medications might finally be put into pill form in an Indian lab and sold under an Indian brand like Cipla. But the organic compounds, or key starting materials, mostly come from China. China is also a key supplier of active pharmaceutical ingredients (API). As a result, the U.S. generic drug market is a wholly owned subsidiary of Chinese and Indian drug makers.
“We are losing badly on pharmaceuticals,” said Michael Kuiken, a commissioner for the U.S.-China Economic and Security Review Commission. The commission held a day-long hearing on Thursday, Feb. 6 titled “Made in China 2025: Who is Winning.”
It seems in the pharmaceutical space that we are dependent, or nearly totally dependent, on China. I don’t see us leading in that space at all.
Kuiken said when it comes to sectors of the economy that China has made imperative to its Made in China 2025 goals, the U.S. surely lagged behind in one of them: basic pharmaceutical manufacturing. Last year, the U.S. recorded a $139.5 billion deficit in pharmaceuticals, up from a $102.3 billion deficit in 2023, according to Bureau of Economic Analysis figures released on Feb. 5.
David Lin, senior director for Future Technology Platforms at the Special Competitive Studies Project [Testimony], said that China’s lead is thanks to its manufacturing prowess. He did not mention pricing power. What stood out to Lin was that China can make things to scale and had the capacity at its labs to make API for their market, and ours.
“Pharmaceutical leadership in China lends itself towards their manufacturing advantages. There are a lot of global contract manufacturers who go there to make drugs and Chinese labs are used to build the API,” he said. The Special Competitive Studies Project is a non-profit and operates as a private foundation under The Eric & Wendy Schmidt Fund for Strategic Innovation in Arlington, VA.
Here, Lin focused more on the advanced side of biotech – the synthetic biologies of the future, where he said China could lead, yet again, thanks to its manufacturing base.
Turning China into a global manufacturing hub, which began with its ascension to the World Trade Organization in 2001, has made it an indispensable part of the American supply chain. That is now recognized as a risk to national security and the economic well being of the U.S. Removing them from key supply chains like pharmaceuticals is also a political risk because companies that depend on China imports are constituents, and donors, to members of Congress who legislate on trade matters.
It would be one thing if U.S. dependence on generics was spread nearly equally across global suppliers, but it is not. At the very least, the foundational ingredients of the U.S. generic drug supply are mixed by foreign labs, namely from India, who import organic and chemical compounds from China to make the API that gets turned into pills and liquid medications sold to the U.S. Not only are the clothes on your back made in China, but the medication in your body is, too.
Reva Price, Chairwoman of the Commission, singled out basic antibiotics; almost all Asian imports.
“Some 90% of our generic antibiotics come from China. What made us get to this place where we are now?” she asked Drew Endy [Testimony], a Stanford University professor who was part of the panelist discussions on Wednesday.
It boiled down to manufacturing capabilities, not price.
“China is very good at biomanufacturing,” he said. “When innovators want to bring their products to full scale manufacturing, they cannot find those facilities in the US. In China, you see significant investments in labs with access to cheap electricity, waste water treatment, so if you want to do that, you go to China and that affects basic generic drugs like antibiotics.”
None of this is a surprise to lawmakers. They have had hearing after hearing on this topic for years.
Congresswoman Claudia Tenney (R-NY-24) introduced a bill on this topic, called the PILLS Act, on October 26, 2023.
That same year, Sen. Thom Tillis (R-NC) said in a Senate Finance Committee hearing that we needed a CHIPS Act for generic drugs. “I think there is an analogy here about how we bring manufacturing of low-priced drugs back to the United States.”
European governments, especially the Irish government—one of our top five sources of the trade deficit—have used subsidies and tax breaks to lure global pharmaceutical giants to manufacture there. The result is that Ireland is the number one source by dollar value for U.S. pharmaceutical imports, even though India and China lead in volume. The intense pressure to lower prices of generic pharmaceuticals has led to a different global structure. Generic production has moved increasingly to India and China as the lowest-cost manufacturing centers in the world. Both countries have used government subsidies, export incentives, and other strategies to cut production costs and build domestic drug manufacturing centers and industry leaders.
Last February, House Ways & Means Committee Chairman Jason Smith (R-MO-8) said in a hearing that the U.S. needed “to incentivize the production of high quality drugs. We should be using tax policy and trade policy to make more medicine and API here in the United States.”
The Active Pharmaceutical Ingredient Innovation Center (APIIC), a consortium of biotechnology industry, policy and academic leaders, said in a whitepaper dated Jan. 24, 2024 that reshoring the manufacture of essential, life-saving pharmaceuticals was urgently needed.
The report, A Bold Goal: Reshoring 25% of Small Molecule API to the U.S. in Five Years, urged the public and private sectors to work together to overcome the price erosion, industry consolidation and manufacturing offshoring dynamics challenging Americans’ reliable access to essential medications. It said that at least 83% of the top 100 prescribed generic medications were imports, with antibiotics and antiviral drug imports being above that.
In the past decade, the number of U.S. labs that produce active pharmaceutical ingredients decreased by 61% (~1,950 API-facilities) in favor of contract manufacturers abroad, thus handing the domestic market over to Indian generic brand leaders like Sun Pharmaceuticals, Cipla, Dr. Reddy and Aurobindo to name a few.
“We need to learn how to push the go pedal as fast as possible,” Endy said.
Beyond generics and expensive branded drugs, Endy warned that in the new advanced biology space, America’s biotech industry “has an overwhelming dependence with contract research organizations, too, and I am not so sure you could disentangle that without causing our biotech innovation to go to near zero.”
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 “Owns” America’s Generic Drug Supply Chain, U.S. China Commission Says
It’s the most well-known secret on Capitol Hill: China owns the American generic drug supply chain. Basic thyroid or blood pressure medications might finally be put into pill form in an Indian lab and sold under an Indian brand like Cipla. But the organic compounds, or key starting materials, mostly come from China. China is also a key supplier of active pharmaceutical ingredients (API). As a result, the U.S. generic drug market is a wholly owned subsidiary of Chinese and Indian drug makers.
“We are losing badly on pharmaceuticals,” said Michael Kuiken, a commissioner for the U.S.-China Economic and Security Review Commission. The commission held a day-long hearing on Thursday, Feb. 6 titled “Made in China 2025: Who is Winning.”
Kuiken said when it comes to sectors of the economy that China has made imperative to its Made in China 2025 goals, the U.S. surely lagged behind in one of them: basic pharmaceutical manufacturing. Last year, the U.S. recorded a $139.5 billion deficit in pharmaceuticals, up from a $102.3 billion deficit in 2023, according to Bureau of Economic Analysis figures released on Feb. 5.
David Lin, senior director for Future Technology Platforms at the Special Competitive Studies Project [Testimony], said that China’s lead is thanks to its manufacturing prowess. He did not mention pricing power. What stood out to Lin was that China can make things to scale and had the capacity at its labs to make API for their market, and ours.
“Pharmaceutical leadership in China lends itself towards their manufacturing advantages. There are a lot of global contract manufacturers who go there to make drugs and Chinese labs are used to build the API,” he said. The Special Competitive Studies Project is a non-profit and operates as a private foundation under The Eric & Wendy Schmidt Fund for Strategic Innovation in Arlington, VA.
Here, Lin focused more on the advanced side of biotech – the synthetic biologies of the future, where he said China could lead, yet again, thanks to its manufacturing base.
Turning China into a global manufacturing hub, which began with its ascension to the World Trade Organization in 2001, has made it an indispensable part of the American supply chain. That is now recognized as a risk to national security and the economic well being of the U.S. Removing them from key supply chains like pharmaceuticals is also a political risk because companies that depend on China imports are constituents, and donors, to members of Congress who legislate on trade matters.
It would be one thing if U.S. dependence on generics was spread nearly equally across global suppliers, but it is not. At the very least, the foundational ingredients of the U.S. generic drug supply are mixed by foreign labs, namely from India, who import organic and chemical compounds from China to make the API that gets turned into pills and liquid medications sold to the U.S. Not only are the clothes on your back made in China, but the medication in your body is, too.
Reva Price, Chairwoman of the Commission, singled out basic antibiotics; almost all Asian imports.
“Some 90% of our generic antibiotics come from China. What made us get to this place where we are now?” she asked Drew Endy [Testimony], a Stanford University professor who was part of the panelist discussions on Wednesday.
It boiled down to manufacturing capabilities, not price.
“China is very good at biomanufacturing,” he said. “When innovators want to bring their products to full scale manufacturing, they cannot find those facilities in the US. In China, you see significant investments in labs with access to cheap electricity, waste water treatment, so if you want to do that, you go to China and that affects basic generic drugs like antibiotics.”
None of this is a surprise to lawmakers. They have had hearing after hearing on this topic for years.
Congresswoman Claudia Tenney (R-NY-24) introduced a bill on this topic, called the PILLS Act, on October 26, 2023.
That same year, Sen. Thom Tillis (R-NC) said in a Senate Finance Committee hearing that we needed a CHIPS Act for generic drugs. “I think there is an analogy here about how we bring manufacturing of low-priced drugs back to the United States.”
European governments, especially the Irish government—one of our top five sources of the trade deficit—have used subsidies and tax breaks to lure global pharmaceutical giants to manufacture there. The result is that Ireland is the number one source by dollar value for U.S. pharmaceutical imports, even though India and China lead in volume. The intense pressure to lower prices of generic pharmaceuticals has led to a different global structure. Generic production has moved increasingly to India and China as the lowest-cost manufacturing centers in the world. Both countries have used government subsidies, export incentives, and other strategies to cut production costs and build domestic drug manufacturing centers and industry leaders.
– “Surge in Pharmaceutical Imports Threatens U.S. National Security as India/China Dominance Grows,” by CPA Chief Economist Emeritus Jeff Ferry, March 2024.
Last February, House Ways & Means Committee Chairman Jason Smith (R-MO-8) said in a hearing that the U.S. needed “to incentivize the production of high quality drugs. We should be using tax policy and trade policy to make more medicine and API here in the United States.”
The Active Pharmaceutical Ingredient Innovation Center (APIIC), a consortium of biotechnology industry, policy and academic leaders, said in a whitepaper dated Jan. 24, 2024 that reshoring the manufacture of essential, life-saving pharmaceuticals was urgently needed.
The report, A Bold Goal: Reshoring 25% of Small Molecule API to the U.S. in Five Years, urged the public and private sectors to work together to overcome the price erosion, industry consolidation and manufacturing offshoring dynamics challenging Americans’ reliable access to essential medications. It said that at least 83% of the top 100 prescribed generic medications were imports, with antibiotics and antiviral drug imports being above that.
In the past decade, the number of U.S. labs that produce active pharmaceutical ingredients decreased by 61% (~1,950 API-facilities) in favor of contract manufacturers abroad, thus handing the domestic market over to Indian generic brand leaders like Sun Pharmaceuticals, Cipla, Dr. Reddy and Aurobindo to name a few.
“We need to learn how to push the go pedal as fast as possible,” Endy said.
Beyond generics and expensive branded drugs, Endy warned that in the new advanced biology space, America’s biotech industry “has an overwhelming dependence with contract research organizations, too, and I am not so sure you could disentangle that without causing our biotech innovation to go to near zero.”
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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