Free Trade

Red-Pilled? Actually Most U.S. Drug Ingredients Are Made Here, Not in China

The Trump administration is spending big money to make sure America's drug supply chains aren't dependent on China. But that's not really necessary.

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Here's some good news for politicians fretting about how much of America's pharmaceutical drug supply comes from China: Most of it doesn't.

In fact, the majority of active pharmaceutical ingredients (APIs) consumed by Americans were produced right here in the United States, according to a recent report from the health care consulting firm Avalere. When it comes to foreign supply chains, about 19 percent of the active ingredients used in America's drugs come from Ireland. China accounts for just 6 percent.

That's a far cry from what you might have heard from some members of Congress, from the Trump administration, and from businesses looking to cash in on anti-China sentiment. Many of them have cited a widespread and misleading statistic to falsely claim that 80 percent of America's drug supply is imported from China. Leading conservatives such as Sen. Josh Hawley (R–Mo.) have called America's supposed dependence on Chinese-made drugs "inexcusable." And the White House has authorized a $765 million loan to Eastman Kodak as part of a bizarre scheme aimed at "bringing pharmaceutical manufacturing back to the United States," as President Donald Trump put it last month.

Through it all, little actual evidence has suggested that there's a good reason to panic over America's pharmaceutical supply chains. The most acute worry—that China would decide to cut off drug exports to the United States in the middle of the COVID-19 pandemic—has proven unfounded.

More generally, trade data suggest that America's pharmaceutical supply chains are robust and diverse. Of the nearly 2,000 manufacturing facilities around the world that are approved by the Food and Drug Administration (FDA) to provide pharmaceutical drugs to the United States, only 230 are in China. There are 510 in the United States and 1,048 in the rest of the world.

The United States imported more than $115 billion of finished pharmaceutical products in 2018, the most recent year for which the United Nations' COMTRADE database of world trade flows has complete data. Only $1.5 billion of that total came from China.

The Avalere report, which looked at APIs—the building blocks of finished pharmaceutical products—comes to a similar conclusion. China is the third largest provider of APIs to the United States, but "no single foreign country dominates the overall supply of API for the U.S. market."

"This report is another piece of evidence suggesting we're not wholly dependent on imports from China for finished pharmaceuticals and APIs," says Clark Packard, a trade policy counsel at the pro-market R Street Institute. "The key is we need more data and evidence before we radically remake this market, but unfortunately policymakers don't seem interested in a rational approach to this issue."

Indeed not. After heavy lobbying by Eastman Kodak, the Trump administration agreed to give the bankrupt camera company a massive loan for the purposes of producing API domestically.

The Kodak deal came just weeks after the White House handed out a $350 million contract to a relatively unknown Virginia-based pharmaceutical company, Phlow Corp., to compete with drugmakers in China. That deal happened despite the fact that Phlow Corp. doesn't have any history of mass-producing pharmaceutical drugs. Indeed, it appears to have been founded this year to cash in on Trump's protectionist politics. A Phlow spokesman told BioPharma Dive, a trade publication, that the company's leaders had been "communicating with government officials about the U.S. pharmaceutical supply for more than a year" and that Phlow's "stated mission" is "reducing the U.S.' dependence on foreign supply chains." And one of the company's board members has been making the rounds in media and congressional committee hearings to talk-up America's supposedly dangerous over-reliance on Chinese drugs.

Before risking hundreds of millions of taxpayer dollars on loans to companies with unproven track records of producing pharmaceutical drugs or their chemical components, you might expect the White House to assess the seriousness of the underlying problem it is hoping to solve. But so far, all the available evidence suggests that China is not responsible for making most—or even much—of America's pharmaceutical drug supply. Lobbyists and politicians are using a manufactured crisis to advance their own interests.

NEXT: California Lawmakers Want a Wealth Tax to Soak the Rich for Living There. Also, for Leaving.

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  1. In fact, the majority of active pharmaceutical ingredients (APIs) consumed by Americans were produced right here in the United States, according to a recent report from the health care consulting firm Avalere.

    Why do we keep saying “ingredients”… Is that a modifier here? Does the us produce the ingredients, then ship them to China (or the Philippines) and then manufacture the drugs there?

    1. I think they say this because we already produce most of our pharmaceuticals, and so the criticism then shifted to “Well, most of the actual precursors are made over seas”.

      1. At this point I really don’t give a fuck where my drugs are made or where they come from, as long as they are cheap and government stays out of my stash!

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    2. See my answer below. They are deliberately conflating raw materials, intermediates, and APIs. The raw materials and intermediates mostly come from China, and are made into APIs in Ireland, India, the USA, Japan, etc. APIs are basically a finished product, ready to be turned into pill or capsule form.

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  2. Leading conservatives such as Sen. Josh Hawley (R–Mo.) have called America’s supposed dependence on Chinese-made drugs “inexcusable.”

    And… NPR:

    Nearly three-quarters of the active ingredient manufacturing facilities for medicines sold in the U.S. are located in other countries. Only 28% are domestic, according to Food and Drug Administration figures.

    “Historically, the production of medicines for the U.S. population has been domestically based,” Dr. Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research, said in congressional testimony last October. “However, in recent decades, drug manufacturing has gradually moved out of the United States.”

    1. Notice how they shifted from quantities produced, to “manufacturing facilities”?

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  4. Here’s a handy chart from the FDA

    As of August 2019, only 28 percent of the manufacturing facilities making APIs to supply the U.S. market were in our country. By contrast, the remaining 72 percent of the API manufacturers supplying the U.S. market were overseas, and 13 percent are in China.

    Is the question here about China or is it the broader question of domestic manufacturing vs. off-shored manufacturing in general?

    1. It is also about the quantity produced, not the number of facilities.

      My bet is that there are a lot of precursors required. In the US, we produce a shit ton of the APIs that are still under patent- which will tend to be for the more expensive drugs that americans love to consume. This is why we produce the majority of APIs domestically, while having fewer facilities.

      As patents expire, the labor costs of other countries make producing generic drug precursors better over there. But at that point, we stop pushing those drugs and move on to something else that is patented.

      At the end of the day, I can see SOME argument against putting all our eggs in one basket by trusting China. But if we are getting APIs from all over the world, who cares at that point? If we get to a point where the entire supply chain from even our allies and countries adjacent, then we have a lot more to worry about, and even producing domestically wouldn’t help.

      1. I agree. I guess what I’m saying is that the picture isn’t as clear as it’s being presented in the article here. There may be an argument against shifting production from China, but it seems to me that quite a bit of manufacturing occurs overseas in general, and for what it’s worth, Trump did run on a platform of bringing back manufacturing into the states, so this seems in line with his administration’s stance, whatever one thinks of it. But it sure seemed in… April, the not-so-right-wing media seemed to be awfully concerned about it.

        1. I think an important point though is that there sure seem to be a lot of opportunistic cronies making false or misleading claims to get sweet money from the government.

          While I agree that Donald Trump ran on this platform, it is still important to note that protectionist platforms have a price- including a tax on the consumer as they pay more for a locally sourced product. And even worse, in this case, it appears that many of these products are already locally sourced, and we are just giving extra money to some friends of the government.

          1. Government contracts are actually a thing and won’t disappear any time soon. Many can include an element of cronyism, but it doesn’t mean contracts aren’t necessary or that they can all be similarly categorized because you find a few that you presume are cronyistic, or even because they in fact meet the definition.

            The bigger question is, if the government is going to contract for goods and has a duty to protect the health supply chain, then isn’t it also then responsible to take key components out of the hands of those who would use them against us. Yes, it may have an increased price tag of American labor vs some guy in China making $2/hr, but okay…. The government isn’t responsible for getting you Dollar Store pricing on your meds either. If there’s any responsibility there, it is to make sure they are available when you need them, not that you have them as cheaply as possible.

  5. “In fact, the majority of active pharmaceutical ingredients (APIs) consumed by Americans were produced right here”

    This is competely meaningless. A few very common drugs being made here could make this statement true but misleading. Need more context.

    1. There are so many levels of qualifying statements and subjective assertions here that it’s virtually impossible to track them all. This article isn’t meant to inform, but to make a bullshit argument for those who swallow anything.

      WTF does “majority” mean and why is some number greater than 50% relevant to the topic, even if accurate? And majority completely ignores weight of importance. Such a statement gives equal weight to aspirin and penicillin because they are both drugs. Neither does it suggest what can be produced here from start to finish. If a precursor is created elsewhere or if we are calling it a US product because they added blue food coloring here, then talking about it as a US produced product is just dishonest. It’s no more a US product than a car that is completely assembled elsewhere and just brought here to install the seats.

      Boehm is just categorically a dishonest man, but also quite transparent if you look at the way he carefully states his facts. He’s the adult version of the kid who says, “Mom, I didn’t take cookies with my left hand”. He can take any Trump statement, add his own qualifiers, carefully state selected stats, and couch it in vague terms…. cuz Trump is always wrong on everything.

  6. Your article just showed the weakness of the global supply chain. Low cost doesn’t mean reliable. TDS.

  7. The Kultur War is unwon until EVERY pill is made in God’s Own Country! 99% isn’t good enough!

  8. This is ridiculous. Ireland and India, and the US too, rely heavily on imports of bulk raw materials and intermediates from China which they use to manufacture the more advanced final ingredients they sell around the world. India is believed to get 80% of its raw materials from China, and Ireland is known to have “outsourced the early stages of the active ingredient synthesis cycle” as the McKinsey MBAs would say, including intermediates, to China.

    It should also be noted that the choice to weight the study by dollar value is a deliberate and utterly transparent ploy to disguise the fact that the overwhelming majority of generic drugs sold in the US are wholly manufactured in China.

    1. A citation here would be great. The only legitimate study I have seen backing up claims like yours ended up telling exactly the opposite story- that China was a minority supplier at best.

      1. I think that FB is correct and you can Google the question and find that China is a major supplier of raw materials and intermediary products. The question is the best method to address this concern. President Trump has talked about American supplier, but these raw materials are likely minimal profits and unattractive to US producer. They would rather purchase the raw material and produce the finished product which makes more profit. The answer here again is likely the TPP which would produce competition for Chinese companies.

      2. While my citations are awaiting moderation, I cited the European Fine Chemicals Group (efcg), the Bulk Pharmaceuticals Task Force of the Society for Chemical Manufacturers and Affiliates (BPTF), and the Indian Pharmaceutical Association. These representatives of API manufacturers say that Europe gets 80% of their raw materials from China, USA 80%, and India 60-70% of intermediates.

    2. But isn’t that where the advanced countries want to be: importing raw materials and turning them into finished goods?

  9. The cited study doesn’t quite lie, but it is an excellent example that you can get the outcome you want by the measuring standard you use.

    This one is based on dollar value, so the new, expensive brand drugs that are manufactured in the US weigh very heavily. However, 92% of the prescriptions filled in the US are for generics, and virtually none of them are made in the US.

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  12. I call shenanigans! There was no “reason” to censor my citations, except the obvious shame and embarrassment Eric Boehm feels at being caught lying.

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