US Continues to Increase Its Reliance on Chinese Pharma Supply Chain

According to research from the Atlantic Council, pharmaceutical products have become a valuable part of the United States and China’s trading relationship, growing from 0.6% of the total trade to 3% in the past five years.

Using US Census Bureau data, researchers showed that the US had increased its import of Chinese pharmaceutical products by more than 600% since 2016 while also increasing exports to China by almost 400% during the same period.

The latest available data shows the US importing 6% of all pharmaceutical products from China, making them the country’s fourth largest supplier behind Ireland, Germany, and Switzerland. The most significant driver of growth is the import of ready-dosed drugs made in China, which increased from 1% in 2020 to 7.9% in 2022.

Active pharmaceutical ingredients (APIs), or the elements that make up drug compounds, have grown by 24% since 2020 but still make up around 17% of total API imports, consistent with import percentages from a decade ago.

The growth of US imports of Chinese pharmaceuticals is chalked up to Chinese industrial efficiency and the corresponding cost advantages. Pre-pandemic testimony presented to the House Committee on Energy and Commerce, Subcommittee on Health by former FDA Commissioner Janet Woodcock, MD, explained that fewer environmental regulations and lower costs of labor and raw materials garner India and China a 30­–40% cost advantage over US manufacturing.

“The pharmaceutical sector relies heavily on foreign sourcing for critical components, materials, and finished products. However, using foreign-sourced materials creates vulnerabilities in the US drug supply,” cited Woodcock in that testimony.

During the height of lockdowns, US reliance on Chinese pharmaceutical products resulted in major shortfalls in supply. Currently, the US is most reliant on China for antibiotic APIs, importing up to 36% of these products from Chinese manufacturers.

Experts suggest that the growth of the US and China pharmaceutical trade poses a serious risk as the adversarial relationship could result in supply chain closures. It’s not unrealistic that pharmaceuticals could be used as a weapon in a trade war, as was suggested in past Chinese strategic talks. Additionally, the FDA has less oversight over Chinese facilities, which generates questions about the safety of foreign manufacturers.

The US still manufactures the majority of its APIs by dollar amount domestically. And the relative majority of API manufacturing facilities are within US borders; however, that could change as India and China bargain for more manufacturing power.