Debate: should countries bring critical drug production home?

The pharmaceutical supply chain is an incredibly complex network of developers, manufacturers and distributors that spreads across many countries. In recent decades, the manufacturing of active pharmaceutical ingredients (APIs) has increasingly been outsourced to India and China, two exporting powerhouses that have made pharma production a major focus.

Manufacturing facilities in these countries appeal to drugmakers for their reduced input costs and speedy delivery, but major quality control scandals have exposed regulators’ struggles with oversight and ensuring that every facility meets acceptable standards. To be clear, API manufacturing centres in the West are hardly exempt from these concerns, as Mylan’s West Virginia plant and its run-ins with the US Food and Drug Administration (FDA) make clear.

But the scale of certain failures, as well as the volume of regulatory actions being taken against Chinese and Indian API producers, is eye-opening. According to analysis by the Pharmaceutical Journal, 49% of the FDA warning letters issued between early 2018 and August 2019 went to manufacturers in India and China alone, while 64% of compliance notices sent by the European Medicines Agency (EMA) were issued to the two countries. This uptick in notices may be partly a natural result of the countries’ dominance in the area – around 40% of APIs for drugs sold in the US come from China, while Indian firms manufacture around a quarter of drugs marketed in the UK.

However, the global recall of valsartan in 2018 – primarily made in China and prompted by contamination with potentially carcinogenic chemical NDMA – and the frequent reports of deceptive and potentially fraudulent activities at some overseas plants raise questions about the security of supply for many of the world’s most-used generic medicines.

Given the added difficulties that regulators like the FDA and EMA have been having with oversight of far-flung facilities, it’s logical to ask whether such an intense concentration of supply from just a few countries is healthy. Diversifying sources of supply for certain key APIs – including repatriating manufacturing where appropriate – could help reduce the risk of the kinds of shortages the global markets saw after the valsartan scandal or the 2016 explosion at a Chinese factory responsible for producing the important antibiotic piperacillin-tazobactam. Germany and France are considering ways of boosting domestic antibiotic manufacturing, with a joint call for action on antimicrobial resistance last year noting that the two states would consider “possibilities for large-scale [antibiotic] production”.

And of course, for countries such as the US that rely on a steady supply of APIs from China, there are strategic concerns. In recent months, American politicians and security officials have voiced their concerns that, in light of the simmering trade tensions between the two countries, China could cut API supply or manipulate prices in retaliation for tariffs increases, with potentially disastrous effects for American healthcare.

The globalisation of API manufacturing has created greater competition and reduced prices for healthcare industries the world over, the trademark benefit of free-market economics. But in the face of recurrent safety lapses and a tangled web of oversight that regulators are struggling to keep up with, in countries that heavily import APIs from just a few sources it’s important to have the conversation about whether they should diversify the supply of key ingredients, or take over production themselves.

After all, choice is another hallmark of the free market, and concentrating supply in countries like China puts a limit on the market’s ability to choose. Global supply chains have delivered tremendous savings in pharmaceutical manufacturing, but it’s up to governments to ensure that these advantages don’t come at the cost of public safety.