The generic drugs Americans take daily are not only made in labs overseas, but 90% of all antiviral and antibiotic medications are reliant on active pharmaceutical ingredients (API) not found in the U.S. America’s hyper-import dependent pharmaceutical market, especially for generic drugs, has led to numerous problems – from drug scarcity and in worse cases, even death.
The Active Pharmaceutical Ingredient Innovation Center (APIIC), a consortium of biotechnology industry, policy and academic leaders, said in a whitepaper released to the media on Jan. 24, 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, urges 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. Some 83% of the top 100 prescribed generic medications are import dependent, with antibiotics and antiviral drugs being in even worse shape.
The 46-page report is the result of a 15-member working group of subject matter experts from the pharmaceutical supply chain, representing the generic drug contract manufacturing business of Pfizer; medical device giants like Thermo Fisher Scientific; and three universities, to name a few participants. The report was developed as a response to the Biden administration’s stated goal to reshore 25% of APIs within five years.
Most of the generic drugs consumed in the U.S. come from India, Israel and parts of Europe. China is the lead supplier of key starting materials used to mix drugs in labs in India that eventually get shipped to the U.S. either as finished product, or sent to U.S. subsidiaries and commercial partners who repackage the drugs, sometimes turning the ingredients into pills and tablets, for example.
An economic analysis from the Coalition for a Prosperous America (CPA) found that “U.S. pharmaceutical imports have skyrocketed in the last ten years, with imports from China, India and Mexico leading the surge.In 2021, China was the leading source for U.S. pharmaceutical imports measured by weight, accounting for 190 million kilograms (418 million lbs) or 23% of total pharma imports.
The report argues that “[g]rowing U.S. dependence on China and India for widely-used generic pharmaceuticals creates serious risks to national security and patient safety. China now accounts for 95 percent of imports of ibuprofen, 91 percent of imports of hydrocortisone, 70 percent of imports of acetaminophen, and 40 to 45 percent of imports of penicillin. China’s and India’s dominance of the U.S. generic pharmaceutical supply chain is growing. These two countries account for 85% of filings for new active pharmaceutical ingredients, according to data from an industry watchdog.”
APIIC agrees, and states on its website that “our nation’s overreliance on China and India for most of our active pharmaceutical ingredients (APIs) is impacting the availability of essential medications in the U.S. As a result, our national health security is being compromised. The National Economic Council (NEC) Director and the National Security Advisor (NSA) called for a “new approach” aimed at guaranteeing Americans reliable access to essential medications.
From the APIIC report:
“The panel determined advanced manufacturing biotechnologies and biomanufacturing processes must be implemented. Advancements in synthetic chemistry realized through advanced technology can improve small molecule API manufacturing. The cost of implementing these technologies must be addressed. Price erosion and consolidation have had a major impact on the U.S. generic pharmaceutical industry, which in part has resulted in lower profit-margins. A public-private modernization model that establishes federally committed contracts and encourages private sector committed contracts is essential. These contracts should prioritize purchasing drugs produced using advanced manufacturing technologies and reliable supply chains. This public-private partnership could be administered through the new U.S. Health and Human Services’ Supply Chain Resilience and Shortage Coordinator. Regulatory barriers to implementation should also be addressed and additional “Made in America” incentives could help to enhance market competitiveness.”
Patients absorb 100% of the risk associated with the nation’s weak pharmaceutical supply chain. The Food and Drug Administration maintains a list of drugs in perennial short supply, including important drugs like amoxicillin, used primarily for patients with pneumonia. There is only one lab in the U.S. that makes the drug at this time, and it is only one type of amoxicillin.
APIIC said in their report that “improving our national health security requires significant mitigation of risk by creating a diversified manufacturing base and distributed buffer inventories that will guarantee Americans reliable access to essential medications.”
Although it is not known as a generic drug manufacturer, Pfizer’s CenterOne lab in Kalamazoo, MI manufactures API for Pfizer, and for other companies, as well. CenterOne has labs around the world, including in India and China.
Of the 103 sites worldwide that manufacture and sell over 30 API products, just four are in the U.S. and only 15 sites in the U.S. make more than ten API products versus nearly 350 outside the U.S. In comparison, India has more than 60 API sites capable of producing 30 or more APIs and China has more than 10 such sites. These foreign sites enjoy both a scale and cost advantage and a factor cost advantage over their U.S. competitors.
Stephen Schondelmeyer, a professor with the College of Pharmacy at the University of Minnesota stated in the report, “When I looked at the number of new API-facility
locations built to make API molecules in the world in the past decade, Taiwan had the
largest percentage growth with 326% (189 new API-facilities). India was second with
254% growth (3,676 API-facilities). Israel was third with 131% growth (142 new API-facilities).
China was fourth, having grown by 55% (531 API-facilities). Think about just these four countries with the largest percentage growth in new API-facilities: Taiwan, China, India, Israel. Do you see any geopolitical risks there?”
In the past decade, the number of U.S. API-facility locations has decreased by 61% (1,951 API-
facilities) in favor of contract manufacturers abroad, or turning over the market to Indian drug makers, primarily, in the case of generics.
“Other countries have made investments in API facilities; the U.S. is falling further behind,” said Schondelmeyer. “These countries present geopolitical uncertainties and concerns, leaving the U.S. vulnerable if we are dependent on their API production for our domestic pharmaceutical needs. We are moving in the wrong direction.”
Although the report singled out APIs, no API can be made without the key starting materials. These raw materials can be defined as a basic chemical compound that is used in the production of a drug substance and incorporated into the API itself.
But if the U.S. lacks API labs, KSM availability is in even worse shape.
Key starting materials almost exclusively use flow chemistry for their manufacture. The U.S. definitely has this technology and can produce KSM’s efficiently, but the infrastructure we once had to produce key starting materials in the U.S. sixty years ago has been offshored completely, said Matt Hancock, Director of Business Management API at Thermo Fisher Scientific. “Even if we focus on making APIs in the U.S., for the vast majority, it is only those last three to five steps in making APIs that would be done here. The key starting materials are still coming from outside the U.S. We really have even less momentum to produce key starting materials than we have in reshoring APIs.”
The U.S. has generic drug labs, most of them not household names, that can substitute imports.
Nearly 60% of the generic pharmaceutical manufacturers surveyed by the APIIC are already producing FDA identified essential medicines. These are medicines in short supply due to lackluster production at home, or problems in overseas labs. Many of these labs have the room to ramp up production. That available manufacturing capacity at the generic drug makers surveyed by the APIIC can be repurposed within one to two years to expand generic drugs manufacturing, allowing the FDA to meet most, if not all of their essential and critical medicine needs, report authors wrote.
As part of the deliverables of the White House 100-day pharmaceutical supply chain report, the National Forum to Secure America’s Supply Chain for Essential Medicines prioritized 86 medicines as most critically needed for acute patient care. Over 87% of the prioritized medicines are either injectable or oral solid dose, both readily produced by the generic manufacturers which participated in a separate APIIC study conducted with the Center for Analytics and Business Insights at the Olin Business School of Washington University in St. Louis.
Respondents indicated idle capacity could be immediately repurposed to begin manufacturing critical and essential medicines. Once manufacturing lines are repurposed, manufacturers indicated 57% of the generic pharmaceutical sites could be at full production within one year, and 86% within two years.
Last year, Rep. Claudia Tenney (R-NY-24) introduced a bill called the PILLS Act which may be of interest to the APIIC. The bill takes a similar approach to the domestic production tax credits in the Inflation Reduction Act (IRA), where producers are given tax credits for manufacturing in the United States. Tenney’s legislation would do the same for generic drug makers. The bill has four Republican co-sponsors from New York, West Virginia, North Carolina and Florida as of January.