The Decoupling of American Pharmaceutical Supply from China Has Begun

The Decoupling of American Pharmaceutical Supply from China Has Begun

Many pharmaceutical pundits are commemorating the 5th anniversary of the covid lockdowns with their reflections.

I would like to use this time as an opportunity to note that one of the most disconcerting revelations during this time period was how heavily dependent the U.S. was on China for both finished pharmaceuticals and the active pharmaceutical ingredients used to manufacture essential medications. Estimates at that time indicate that China is the sole manufacturer of around 100 medications commonly used in the in this country, including critical antibiotics and blood thinners.

It was also the largest supplier of medical equipment such as gloves, masks, and syringes. As an example, this is a description of the situation published in The Washington Times at the start of the pandemic.

China, the newsletter reported Tuesday, “accounted for 95% of U.S. imports of ibuprofen, 91% of U.S. imports of hydrocortisone, 70% of U.S. imports of acetaminophen, 40% to 45% of U.S. imports of penicillin and 40% of U.S. imports of heparin, according to Commerce Department data. In all, 80% of the US supply of antibiotics are made” in China.

Even without a conscious boycott policy by the Beijing government, the disruption to Chinese domestic production caused by the pandemic is straining the global system.

“It was a blunder of epic proportions that we allowed the manufacture of penicillin to leave our shores,” said Rosemary Gibson, the author of the 2018 book “China Rx: Exposing the Risks of America’s Dependence on China for Medicine.”

Now international pharmaceutical firms are making moves to detach China from our medications. To begin with, AstraZeneca (a leading British-Swedish multinational pharmaceutical and biotechnology company) is making plans to manufacture drugs for the US and China markets independently from one another.

“We have a very large supply chain, and we are organizing ourselves so that we can actually supply the United States and Europe independently,” AstraZeneca CEO said in an interview with Bloomberg on the sidelines of the Boao Forum for Asia in China. “And we also are building our presence here in China, so we can actually supply Chinese patients independently.”

Soriot pointed to AZ’s recently announced $300 million cell therapy facility in Rockville, Maryland, following the company’s $1 billion acquisition of Chinese CAR-T biotech Gracell Biotechnologies.

I recently noted that Swiss pharmaceutical giant Novartis announced a landmark $23 billion investment over the next five years to expand its manufacturing and research footprint in the this country. Now another Swiss pharma giant will also begin increasing its production within the US, to the tune of $50 million.

Swiss pharmaceuticals powerhouse Roche announced Tuesday it plans to invest $50 billion in the United States over the next five years, creating 12,000 jobs.

The Basel-based company, whose array of products includes cancer medicines and multiple sclerosis treatment Ocrevus, said the investment would go toward high-tech research and development sites and new manufacturing facilities in places including California, Indiana, Massachusetts and Pennsylvania.

Some of the $50 billion in investments were already underway or planned for the next several years, Roche spokesperson Rebekka Schnell said in an e-mail, adding that the company was not specifying how much was announced for the first time on Tuesday.

The announcement comes as U.S. President Donald Trump has urged foreign businesses to invest more in the United States, and announced sweeping tariffs earlier this month on imports as part of hopes to reduce a large U.S. trade deficit when it comes to sales of goods.

Meanwhile, America’s Eli Lily Lilly announced plans to construct four new manufacturing sites in the U.S. These facilities will focus on active pharmaceutical ingredients, small molecule chemical synthesis, and injectables manufacturing. The goal is to strengthen the domestic supply chain and increase the production of medicines for cardiometabolic health, oncology, immunology, and neuroscience.

As with the Roche project, Trump’s tariff threats may have also been the inspiration behind this move.

The news comes off the heels of President Trump’s recent announcement2 that he would impose a tariff of 25% or higher on pharmaceuticals. No timetable has been set in terms of when that tax on imports would take effect, although he is providing manufacturers time to establish US-based locations to allow them to avoid the tariffs.

Three out of the four new plants are expected to prioritize the production of active pharmaceutical ingredients (APIs) and reshoring small molecule chemical synthesis services, along with solidifying the company’s overall supply chain. As for the fourth site, it will aim to expand Lilly’s parenteral manufacturing network that will be essential for the production of injectable therapies.

…The four locations are anticipated to create more than 3,000 jobs for highly skilled workers, such as engineers, lab technicians, operations personnel, and scientists. Additionally, the company anticipates that it could create nearly 10,000 construction jobs during the development of the sites.

Finally, Johnson & Johnson, another major American pharmaceutical company, has also pledged to increase its US manufacturing footprint. The company announced plans to invest $55 billion over four years to expand its domestic operations, which are also inspired by the tariffs.

This investment will fund the construction of three advanced manufacturing facilities and the expansion of existing sites within its pharmaceutical and medical technology sectors. The initiative, which includes a new biologics manufacturing facility in North Carolina, follows similar U.S.-focused expansions by Eli Lilly, Merck & Co., and Amgen.

These companies are aiming to mitigate tariff impacts and encourage the continuation of tax cuts introduced during the Trump administration.

It will be interesting to look back on 4 years to see if the tariff-seeds shown grow into a robust supply chain of actually useful medications and medical supplies.

Donations tax deductible
to the full extent allowed by law.