Sun, Nov 30, 2025 page7

• China holds all the cards in global pharmaceuticals

  • By Juliana Liu / Bloomberg Opinion
  • • 
    • 
    • 

  The US and China may have called a truce on trade, but Beijing has other levers to pull should febrile relations deteriorate again. That is a potential supply chain chokepoint that Washington has overlooked: its strategic rival’s tight grip on the raw materials needed to make an array of medicines.

  The urgency of tackling pharmaceutical supplies lies at the heart of the US-China Economic and Security Review Commission’s annual report, published last week. It proposed that the US Congress immediately amend a 2020 law to expand the authority of the US Federal Food and Drug Administration (FDA) to require pharmaceutical firms to report on the volume and origin of the building blocks of modern drugs. It also asked the regulator to encourage the use of supplies from non-China sources.

  It was not the first time the body has brought up the issue. However, the speed with which the US essentially folded after Beijing expanded export controls on crucial rare earth minerals last month is a sign that this other glaring vulnerability can no longer be brushed aside.

  The US and other countries rely heavily on China to make the foundational ingredients for their medicines. Because of its enormous and commoditized industry, which began in the 1950s, China plays an outsized role in the global drug supply chain. It is a significant producer of compounds called key starting materials, which are used to produce active pharmaceutical ingredients.

  Still, definitive data on the exact level of US dependence are hard to come by. Major drugmakers have little incentive to spell out just how deep that reliance runs. The best estimates come from the US Pharmacopeia, a non-profit that sets quality standards for medicines.

  Looking into the drug master files that pharmaceutical manufacturers have submitted to the FDA, it found that China was not part of the landscape back in 1980. Twenty years later, it was submitting 5 percent of all files, outpaced by India at 19 percent. By last year, it had overtaken India with a 45 percent share of total filings. What complicates the picture is that the South Asian nation, the world’s top supplier of generic medicines, itself relies heavily on China for key starting materials, which is not reflected in the FDA filings.

  What is more, the non-profit identified a key trend: Half of the active ingredients used in the US came from just one source. China is the exclusive supplier of at least one chemical used in nearly 700 crucial medicines. For example, at first blush, the antibiotic amoxicillin — used to treat everything from bronchitis to urinary tract infections — appears to have a diverse array of sources from Spain to Singapore, but its four key inputs come almost entirely from China.

  As shortages of medical supplies during the COVID-19 pandemic demonstrated, it is a bad idea for countries to be so dependent on any single source, much less, in the case of the US, a rival. It is worth noting that not once during the height of the trade war escalation did Beijing threaten to withhold medical exports. However, geopolitics is not the only risk factor. Another global virus outbreak could also shut down the supply chain.

  US-China Economic and Security Review Commission Commissioner Leland Miller said Beijing controls a “scary chunk” of active drug ingredients.

  Although the group does not have the authority to give orders to the US Congress, the ultimate goal would be to create a supply chain involving India and other allies that would be independent of China in specific areas, he said.

  This would be a challenging enterprise, given the low margins and profits in making the starting compounds used to manufacture medicines. China began to liberalize production in the 1980s, along with the rest of the economy, with an emphasis on lowering costs for the local population.

  One state media report cited an executive as saying costs for US firms would jump by 50 percent if they were to try to replicate the supply chain for raw ingredients.

  That is exactly what Washington would have to try to do, at least on a limited or exceptional basis, for the most crucial medicines. There is already a blueprint in the form of the US’ agreement with MP Materials Corp, a rare earths producer with a mine in California. The deal includes a 10-year price floor, with the US Department of Defense promising to pay the the company the difference if the market value for their products goes below a certain amount.

  The scenario for the pharmaceutical industry is likely to be similar. China controls the spigots in many pivotal sectors — but the US would have to decouple in the areas deemed by Washington to be of national security priority.

  Juliana Liu is a columnist for Bloomberg Opinion’s Asia team, covering corporate strategy and management in the region. She was previously CNN’s senior business editor for Asia, and a correspondent at BBC News and Reuters.
• Most Popular

  • 1

    First person arrested as Danjiang Bridge opens

  • 2

    TSMC shares stumble on report, but losses minor

  • 3

    Navy needs 12 subs for modern fleet: CSBC head

  • 4

    Snake on a train spooks riders on Taipei MRT line

  • 5

    HIMARS to be deployed to islands