China‘s Dominance in Pharma Inputs โPrompts US Consideration of โขPrice Floors adn Diversification
The United States is considering implementing import price floors onโ critical pharmaceutical inputs and diversifying its โขsupplyโ chain away from China, which currently โฃholds a dominant position in the global production of active pharmaceutical ingredientsโฃ (APIs). This move is driven by concernsโค over national security and supply chainโ vulnerabilities highlighted by the COVID-19 pandemic and ongoing geopolitical tensions.
A recent report revealedโข a significant reliance on China forโ essential medicines.China is the sole supplier of at least one chemical used in nearly 700 crucial medicines, and provides half of the APIs used in the US. Even seemingly diverse supply chains, like that of the antibiotic amoxicillin – sourced from โcountries like Spain and Singaporeโ -โ are heavily dependent on China for itsโ four key inputs.
Thisโ dependence โคraises concerns, as demonstratedโฃ during the pandemic when medical supply shortages exposed the risks of relying โฃon single sources. While Beijing did not weaponize medical exports even during the height โคof the US-China trade war, theโ potential for disruption remains, alongside โคthe riskโข of โฃfuture global health crises shutting down supply lines.
Leland Miller, a member ofโ the US security review commission, described Beijing’s control over a “scary chunk” of โขAPIs. Theโฃ commission aims to foster โa supply chain involving India and other allies to achieve โคindependence from China in specific, critical areas, though it lacks the authority to directly mandateโข action from Congress.
however,shifting production away from china presents significant โchallenges. China’s focus on lowering costsโ since the 1980s has created a competitive advantage. According toโค one state media report, replicating the Chineseโข supply โคchain for raw ingredients coudl increase โcosts โคfor US โคfirms by as much as 50%.
washington โis exploring strategies to addressโค this cost disparity, drawing inspiration fromโค a recent Department โขof Defenseโฃ agreement with MP โMaterials Corp., a California-based rare earths producer. This deal establishes a 10-year price floor, guaranteeing the company payment for the differenceโฃ if market โฃvalues fall below a predetermined amount.
A similar model is anticipated for โคthe pharmaceutical industry, focusingโฃ on decoupling from China โคin sectors deemed vital to national โขsecurity. Whileโ a complete overhaul isn’t feasible, โthe US is prepared to invest in rebuilding domestic or allied production capacity for the most crucial medicines, even at โa higher cost.
