In response to whether the bill is feasible, the FDA once said, "If there is not enough data to calculate which APIs come from China, what proportion and how much impact, no one can guarantee that there will not be fatal drug shortages, and no one is willing to take such responsibility."

Now, the API industry base survey and assessment initiated by the U.S. Department of Commerce is a comprehensive survey of industry data, which means possible variables in the future.

According to reports, in July this year, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce officially announced that it would cooperate with the Strategic Preparedness and Response Administration (ASPR) under the U.S. Department of Health and Human Services (HHS) to conduct a comprehensive investigation and assessment of the U.S. active pharmaceutical ingredients, or API industry base.
The survey aims to understand the supply chain network that supports the U.S. pharmaceutical capabilities. It will investigate hundreds of U.S. API-related companies and is expected to start in the winter of 2024. The survey will collect industry information including: enterprise production capacity and process, raw material procurement sources and practices, customer distribution, supply chain disruption history and response measures, as well as human resources and fixed asset investment, research and development investment and direction, etc.
BIS will treat the survey information as commercial confidentiality to encourage companies to provide true and detailed information. The survey results will be summarized into a comprehensive report, which is expected to include: current status assessment of API industry foundation, supply chain vulnerability analysis, production capacity and emergency response capability assessment, and targeted policy recommendations.
BIS believes that these detailed information will help to fully understand the status quo and potential risks of the API industry, and will enable the US government to formulate more targeted industry support policies, optimize public health emergency preparedness strategies and improve the overall resilience of the US supply chain. It also points out that this is an important part of "national security".

Gad Vision learned that as early as the beginning of last year, Michigan Democratic Senator Gary Peters, Chairman of the Senate Homeland Security and Governmental Affairs Committee, and Iowa Republican Senator Joni Ernst proposed the "Drug Supply Chain Risk Assessment Act", requiring the U.S. Department of Defense, Department of Health and Human Services, and Department of Homeland Security to conduct a comprehensive assessment of drug supply chain vulnerabilities and security risks in related countries and regions, and formulate plans to reduce the United States' dependence on key drugs in other countries, targeting China. The API industry survey initiated by the U.S. Department of Commerce can also be seen as a response to the bill.
U.S. media pointed out that about 80% of active pharmaceutical ingredients in the United States are produced overseas, which will pose a national security risk if a national or global crisis occurs. The raw materials needed to manufacture drugs in the United States mainly rely on imports from China and India.A data shows that between 2010 and 2015, the number of Chinese manufacturers producing key ingredients for drugs more than doubled.Trump once said that if he was elected president, the United States would "phase out" its dependence on imported drugs from China within four years.
By 2024, China is the only source of APIs for about 20% of the most important drugs in the United States, and the market is highly concentrated. According to data provided by the U.S. API Innovation Center, about 45% of the key starting materials (KSM) required for pharmaceutical production come entirely from China, and China's overwhelming global dominance cannot be easily replaced.
The shortage of drugs in the United States during the COVID-19 pandemic (67 of the 156 critical and acute drugs were in short supply) amplified panic and brought insecurity to the United States, so it is understandable that it seeks to establish a flexible and diversified supply chain system. But now "political factors" dominate this urgent need. The United States has raised the reduction of excessive dependence on active pharmaceutical ingredients (API) imports to the level of national security, and has two attitudes towards the import of APIs from China and India. It suppresses China's decoupling, and although it also plans to introduce restrictive measures on India, it is "abnormally mild" in comparison.

The United States believes that as long as it supports local industries, it can solve the problem of drug shortages, including the "drug shortage" problem that continued to appear in the first three months of 2024, which was unilaterally attributed to the need to accelerate the high dependence on imported generic drugs and support local manufacturers instead. Under this appearance, some truths are concealed:
1. The United States cannot produce low-priced generic drugs, so the supply chain turns to and relies on India and China. This is the result of market choice, not a "security threat" to anyone.
According to disclosed data, the number of prescription drugs taken by Americans every day is as high as 131 million, of which generic drugs account for 90%, but the price of generic drugs is too low, accounting for only about 16% of the industry's revenue, which is in sharp contrast to the 10% market share of branded drugs that creates 80% of the industry's revenue. American pharmaceutical companies have money to invest in new drug research, production and sales in Europe and the United States, while generic drugs, which dominate consumption, have to transfer production lines to low-cost India and China due to lack of funds, and rely heavily on outsourcing.
2. The circulation and procurement rights of American drugs are highly concentrated in group purchasing organizations (GPOs) and pharmaceutical benefit managers (PBMs). They have long reached procurement cooperation and profit distribution with generic drug giants, which has led to a high concentration of the market, especially the dominance of Indian generic drugs. This market structure barrier is difficult for small and medium-sized pharmaceutical companies in the United States to break, and large pharmaceutical companies are more willing to invest in new drug research and development.

3. Since India obtains a large amount of APIs from China, China has also become the main source of US drug imports (mainly starting materials). This is also the result of natural selection in the market, and has nothing to do with "geopolitical factors". 4. The generic drug market is highly concentrated in suppliers in several countries such as India, but not China, which only accounts for 3% of the US generic drug market share, which is one of the direct causes of the "drug shortage". Researchers and policymakers believe that to completely solve the drug shortage problem, it may be necessary to change the business model of the US pharmaceutical industry, including taking measures to increase the price of generic drugs so that sales can support manufacturers and attract more companies. However, no relevant price increase measures have been introduced. According to a report quoted by the Hong Kong Economic Herald, the three major suggestions put forward by the current mainstream opinion in the United States are all aimed at "changing the upstream supply channels" rather than "promoting commercial changes in the pharmaceutical market." First, provide corporate tax incentives to pharmaceutical companies that invest in production facilities in the United States to stimulate US companies to invest in the production of APIs, finished tablets and injectable generic drugs. Second, establish a strategic reserve (SAPIR) of active pharmaceutical ingredients (API) and key starting materials (KSM) to create ways to reduce import dependence;

Third, cast a wide net and establish "concentric circles" starting from the highest-risk drugs, starting with risky countries with only one factory producing related drugs, and then gradually focusing on and expanding to drugs produced by multiple factories or multiple countries, as well as drugs that are currently in short supply. This is also the reason why the US Department of Commerce conducted a comprehensive survey of the API industry at the beginning of the previous article. Only with data can measures be introduced.
Industry analysts believe that after this comprehensive survey, the measures introduced by the United States may include encouraging the return of the API industry (old), strengthening the export control of US API-related advantageous technologies to China, etc. As for the extent to which the global pharmaceutical supply chain pattern can be reshaped, it remains to be observed what measures will be introduced later.The current economic and trade frictions between China and the United States can be foreseen to exist for a long time, with overlapping economic and political reasons. The Hong Kong Economic Herald pointed out that if the US side insists on significantly reducing its dependence on Chinese drugs regardless of market rules, it will inevitably bring new shocks to Sino-US economic and trade cooperation. In this regard, we have to plan ahead and guard against risks.

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