U.S. Reliance on Foreign Sources of API

Active Pharmaceutical Ingredient (API) production is a complex and global process. APIs are the active biological or chemical components of any drug. The process of converting raw ingredients and turning them into APIs through various chemical, biochemical, or fermentation processes can be expensive and can lead to a considerable portion of the total drug cost. The production of APIs has been concentrated overseas to reduce costs, with 72% of those facilities found outside of the US. In the chart below, we can see the total production of APIs used in the US market.  Interestingly, although not unexpectedly, only 30% of the API facilities used for US drugs comes from North America.

API Sources Image 1
U.S. Food & Drug Administration. (2019, October 29). Safeguarding pharmaceutical supply chains in a global economy. U.S. Food and Drug Administration. Retrieved May 30, 2022, from https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-global-economy-10302019

The below graph shows the API sources of the top 100 brand name drugs in Medicare Part D in 2018.  Although this data is a few years old, we do not expect that significant changes in API origin have taken place since that time.

API Sources Image 2 Revised

*Multiple countries may be represented for a single API

Adapted from Levitt, G., & Mueller, L. (2022, January). Not Made in the USA: The Global Pharmaceutical Supply Chain and Prospects for Safe Drug Importation. Pharmacy Checker. Retrieved May 30, 2022, from https://cdn.pharmacychecker.com/pdf/Not+Made+in+the+USA+-+2022.pdf

Comparing the two charts above, a large discrepancy is noted for India and China.  While India and China account for over 30% of the API facilities for all drugs, they account for only 2% of the top 100 brand drugs.  The following table indicates that China and India account for 44% of the kilogram mass of pharmaceutical imports, yet only 11.7% of the dollar value (i.e., generics).  Meanwhile, Germany and Ireland account for 60% of the dollar value and less than 10% of kilogram mass (i.e., brands).

API Sources Image 3

Public Citizen. “China Is the Top Source of U.S. Pharmaceutical Imports, with India and Mexico Also Major Sources.” Public Citizen, 7 Apr. 2020.

The PharmacyChecker report focuses on top brands, and therefore China and India each only account for a single imported brand API.  These results make sense due to the high cost of single-source brand drugs.  Brand companies typically rely on high quality materials from trusted sources and labor to ensure continued supply to avoid disruptions and lost sales, oftentimes from the large number of registered API facilities in Europe.

These APIs, often imported from various countries, are critical to the development of drugs which enter the supply chain to be delivered to patients in healthcare facilities and pharmacies. Errors in containment, contamination, and other aspects of the supply chain can cause drug shortages in pharmacies and hospitals.  These shortages may delay treatment, potentially affecting hundreds of thousands of people. During the pandemic, supply chain issues were abundant. China, which doubled the number of registered facilities producing APIs between 2010 and 2019, has seen many disruptions in supply of its products. 57% of companies reporting worsened lead times in getting their products to the market to meet demand, according to the Institute for Supply Chain.

With supply chain issues being a continued and growing problem for American markets, the FDA suggests the use of new technologies in advanced manufacturing, such as continuous manufacturing or the Emerging Technology Program (ETP), to streamline processes and guarantee safety and efficacy or products. The FDA states that these innovations, “can be used to reduce the Nation’s dependence on foreign sources of APIs, increase the resilience of our domestic manufacturing base, and reduce quality issues that trigger drug shortages or recalls.” With the increasing production of APIs overseas, it is important to consider the supply chain and quality control issues that may arise.  Manufacturers may consider the use of homegrown production of APIs to combat those risks. Domestic supply and European supply of drugs and biologics can alleviate or lessen the risk for these products.

PHSL expects that more manufacturers, even commodity generic manufacturers, will have an increased emphasis on using US or EU-sourced API for their drugs in the future, if the cost is comparable.  The COVID-19 pandemic is a reminder that worldwide events can have a significant impact on Americans receiving their daily medications.

 

Posted June 28, 2022

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