Why Governments Need to Invest in Local Pharmaceutical Manufacturing, Research and Development

With much of the world now reliant on China and India for pharmaceuticals and the raw materials needed to make them, the risks of this reliance are now coming into sharp focus. In the past year we’ve seen one supply chain disruption after another. What are the risks that we should be concerned about, and what can we do to address them?

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Thanks to the global COVID-19 pandemic, a spotlight has been shone on an issue that has been festering for quite some time. Much of the world is now reliant on China and India for the manufacture of pharmaceutical drugs as well as production of the Active Pharmaceutical Ingredients (APIs) that make these drugs effective—and this reliance poses a range of risks. To mitigate these risks, governments in the Americas need to invest in the necessary infrastructure to move away from globalization towards local production.


Just how severe is our reliance on these countries? The following statistics are quite telling: 

  • 31% of API manufacturing takes place in China and India combined.[1]
  • India relies on China for about 70% of its supply of APIs.[2]
  • In 2019 India imported 665,000 tons of active ingredients from China[3].
  • It is estimated that the US relies on China and India for 75 to 80% of its supply of APIs.[4]
  • There are 62 generic drugs that are produced only in India, including several antibacterial treatments and antivirals.[5]
  • India currently houses over 3,000 pharmaceutical companies and over 10,500 manufacturing facilities. It is also the third-largest seller of medicines in the world.[6]

Many see this “single point of failure” (or, technically, these double points of failure) in our pharmaceutical supply chain as a disaster waiting to happen.

Geopolitics and the Potential Weaponization of Medications

The most significant risk associated with reliance on China and India for pharmaceutical manufacturing is the potential weaponization of medications. As Rosemary Gibson, a senior advisor on health care issues at the bioethics-focused Hastings Center explains, “Medicines can be used as a weapon of war against the United States. Supplies can be withheld. ”[7]

Even without a war, at any point in time the Chinese or Indian governments can decide to stop medical exports to specific countries or vastly increase the cost of exported medications.

In June 2020, tensions between China and India provided an example of how geopolitics can impact pharmaceutical production. Movement from China to India of key chemicals used to produce APIs was delayed at ports and airports due to a decision by Indian customs authorities to closely scrutinize these imports. This supply chain delay was painful because, as mentioned earlier, India is dependent on China for about 70% of its supplies of APIs.[8]

Also worth considering, is the geopolitical situation in Asia. China is using the power it has in manufacturing to impose its will on neighboring countries. The recent military clashes with India[9], the power grab in Hong Kong[10] and China’s maritime claims in the South China Sea (which the US opposes)[11] are all examples of China flexing its muscles.

Pandemics and Nationalism

Wars and geopolitical tensions are not the only reason why the Chinese and Indian governments might choose to stop or slow exports of medications and/or the APIs used to make them. The COVID-19 pandemic has proven that a nation’s desire to put the needs of its own citizens first can also impact the global supply chain.

For example, motivated by the perceived need to protect its own domestic supplies, India has restricted exports twice since the COVID-19 pandemic began. The first time was in March 2020, when India chose to restrict the export of many common medicines and pharmaceutical ingredients.[12] This impacted all the countries that would normally import these medicines from them.

The second time took place more recently, in April 2021. As India faced a significant surge in COVID-19 cases, the Indian government banned the export of Remdesivir, a broad-spectrum antiviral medication which can help to shorten the duration of COVID-19 symptoms. Developed by US biopharmaceutical giant Gilead, Remdesivir is being manufactured under a licensing agreement with Gilead by companies based in India and elsewhere, for distribution to 127 mostly low- and lower-middle income nations.[13]

Countries have also taken other measures to protect their citizens from the coronavirus. For instance, on April 26, 2021, in response to India’s significant surge in COVID-19 cases, China’s state-run Sichuan Airlines suspended cargo flights to India for 15 days.[14] This adversely impacted the import of the raw materials needed by the pharmaceutical sector, creating a significant supply chain shock.

Drug-Resistant Infections Fueled by Harmful Environmental Practices

Another risk associated with our reliance on China and India to produce much of the world’s APIs and pharmaceutical products has to do with how these countries handle pharmaceutical waste.

In the US and other Western countries, strict regulations ensure that waste products from pharmaceutical manufacturing are not simply discharged directly into the environment. This, however, is not the case in China and India. Today, the pollution from antibiotics manufacturing facilities in these countries is one of the three primary factors fueling the global rise of antimicrobial drug resistance and multidrug-resistant infections. (The other two significant factors are misuse and/or overuse in both human medicine and farming).

 In fact, India has been referred to as the “Antimicrobial resistance capital of the world.” This is driven, in part, by waste from the pharmaceutical sector.[15]

To examine the extent of this problem, the investigative agency Ecostorm tested 34 antibiotics production sites in India. Of these, 16 were found to be harboring bacteria resistant to antibiotics.

Waste from antibiotic manufacturing migrates into the ground and/or water, where it goes into the livestock-rearing and human food chains. This, in turn, perpetuates the spread of multidrug-resistant infections. As Ecostorm reports, “The substantial quantities of antibiotics released from polluting factories, which frequently combine with runoff from farms and human waste in water bodies and sewage treatment plants, provide a perfect breeding ground for drug-resistant bacteria.”[16]

Antimicrobial resistance poses a significant health problem. According to the US Centers for Disease Control (CDC), each year antibiotic-resistant bacteria and fungi cause an estimated 2,868,700 or more infections in the U.S. alone, resulting in at least 35,900 deaths.[17]

Our continued reliance on pharmaceuticals made in countries that have lax manufacturing practices contributes to this problem. Ironically, as Ecostorm points out, the antibiotics made by these polluting manufacturers are sold directly to hospitals. This means that the public health services that are spending billions to treat people and fight the “superbug” infections are also indirectly channeling vast sums of money to the very companies that are contributing to this problem in the first place. [18]

What about Capsules?

The risks associated with our reliance on China and India extend beyond the APIs to other raw materials as well, including capsules. In 2020 the industry experienced the impact of a global gelatin shortage. One of the major causes of this shortage was that many countries shut down meat processing facilities in response to the pandemic. This, in turn, limited the availability of the collagen used to make gelatin, the key ingredient of gelatin capsules.

Many capsule companies do their manufacturing in India, and these organizations have faced significant supply chain challenges—both in terms of importing raw materials and exporting finished products—since the pandemic began. 

In this area, CapsCanada is proud to be an important part of the solution. CapsCanada owns the entire supply chain for its gelatin capsules, including the source of the gelatin supply. All materials used in the manufacture of the company’s gelatin and vegetarian capsules come from the US and Latin America. Furthermore, CapsCanada’s capsules are all manufactured in its private, state-of-the-art cGMP facilities in North and South America, with gelatin and vegetarian capsules made in separate facilities to avoid cross-contact. The company does not manufacture in Asia at all. Consequently, throughout the pandemic CapsCanada has been able to maintain ample capsule inventory to meet the needs of its clientele.

For quite some time CapsCanada has been the first-line capsule manufacturer for small- and mid-size pharmaceutical companies. Now larger global pharmaceutical companies are also appreciating the company’s ability to step in when supply chain problems arise with their primary capsule manufacturer. Having a reliable source reduces risk.

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The Solution Will Take a Concerted Effort

Pharmaceutical sourcing from China and India poses a number of risks, and the COVID-19 pandemic has served to bring some of these risks into sharp focus. The solution is to deglobalize the supply chain for pharmaceuticals, including APIs, capsules and other raw materials, while revitalizing these manufacturing processes to be more efficient and ecologically friendly.

Ideally governments in the Americas will make the necessary investments, and support private enterprise in making investments, to move the supply chain here. Steps are already taking place in this arena.

For example, recognizing the danger of the US’ reliance on other countries, President Biden recently announced a plan to strengthen critical supply chains, including pharma.[19] He proposes that the Department of Health and Human Services commit approximately $60 million to “develop novel platform technologies to increase domestic manufacturing capacity for API.” While much more is needed, this is certainly a welcome development.

The ultimate goal is to have API and pharmaceutical manufacturing take place in multiple locales around the world, including the Americas, to reduce the inherent risks for people everywhere. CapsCanada is proud to be part of the solution.

[1] https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-global-economy-10302019

[2] https://www.politico.com/news/2019/12/20/policymakers-worry-china-drug-exports-088126

[3] https://www.bloombergquint.com/politics/fda-misled-senators-on-china-s-role-as-key-u-s-drug-supplier

[4] https://theconversation.com/the-world-needs-pharmaceuticals-from-china-and-india-to-beat-coronavirus-138388

[5] https://www.bloomberg.com/news/articles/2021-05-05/drugmakers-warn-china-flight-halt-in-india-could-snarl-supplies

[6] https://health.economictimes.indiatimes.com/news/pharma/how-can-we-make-the-indian-pharma-manufactures-atmanirbhar-in-a-true-way/82453741

[7] https://www.politico.com/news/2019/12/20/policymakers-worry-china-drug-exports-088126

[8] https://timesofindia.indiatimes.com/business/india-business/key-covid-19-drugs-to-be-hit-by-customs-checks-at-ports/articleshow/76700469.cms

[9] https://en.wikipedia.org/wiki/2020_China%E2%80%93India_skirmishes

[10] https://www.npr.org/2020/05/29/863770112/4-takeaways-from-beijings-hong-kong-power-grab

[11] https://www.state.gov/u-s-position-on-maritime-claims-in-the-south-china-sea/

[12] https://www.thehindu.com/news/national/india-restricts-drug-exports-as-threat-of-coronavirus-rises/article30973338.ece

[13] https://medicalxpress.com/news/2021-04-india-export-covid-treatment-drug.html

[14] https://www.msn.com/en-in/news/world/chinas-airline-suspends-cargo-flights-with-covid-19-supplies-to-india/vp-BB1g5yRc

[15] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6563737/

[16] http://health21initiative.org/wp-content/uploads/2017/08/2016-Changing-Markets-Superbugs-in-the-Supply-Chain.pdf

[17] https://www.cdc.gov/drugresistance/biggest-threats.html

[18] http://health21initiative.org/wp-content/uploads/2017/08/2016-Changing-Markets-Superbugs-in-the-Supply-Chain.pdf

[19] https://www.cnbc.com/2021/06/08/biden-administration-announces-plans-to-strengthen-critical-supply-chains.html

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