PharmaingredBy Vic Suarez - The COVID-19 global pandemic has underscored the critical need for resilient and secure supply chains, particularly in the pharmaceutical industry. As the United States grapples with near-all-time high drug shortages1 and the vulnerability of its supply chain, it has become a national security imperative to address the overreliance on imports for active pharmaceutical ingredients (API) to the United States. Today, China is the sole source for about 20% of the API of our most vital medicines.2 More dangerously, China’s overwhelming global dominance of the key starting materials (KSM) required to produce these essential medicines cannot be readily substituted due to the current levels of market concentration: approximately 45% of KSM, a vital subcategory of API, are solely sourced from China, according to the API Innovation Center.3 To be sure, this level of import dependence on any single nation poses a serious risk to the nation’s general preparedness and resilience, and could become devastating in a crisis.

Highlighting the issues the United States faces: drug shortages in the nation’s healthcare system consistently affected approximately 300 medicines throughout 2023.4 Moreover, during most of 2023, many operational military units could not get allocation for primary ketamine injection, commonly used for sedation and analgesia during deployment operations.5 Upon further investigation, the primary reason these shortages happen is when market forces drive too much concentration or consolidation in the global marketplace; this often leads to lack of focus and investment in current good manufacturing practices and the exclusive focus on drug cost without much regard to supply chain resiliency and product quality.

This briefer is based on a retrospective and prospective assessment of this strategic risk, along with numerous inputs from industry, academic, and government experts and reports. It also identifies and recommends several specific and feasible actions that can be implemented immediately to address the risk. Additionally, this document calls on policymakers, business leaders, and national security professionals to recognize that the domestic medical supply chain’s reliance on China is equally as threatening as our reliance on China for critical minerals and rare metals for the production of semiconductors, electronics, renewable energy hardware, supercomputers, and our most advanced weapon systems.

Notably, this issue is already garnering policy-maker attention. The risks of pharmaceutical supply chain dependence were underscored in the US House Select Committee on China Report dated 12 Dec 2023, titled “Reset, Prevent, Build: A Strategy to Win America’s Economic Competition with the Chinese Communist Party.”6 Congress also showed its attention to addressing import-dependence risks when it passed the 2022 CHIPS and Science Act, which made a $53B investment for manufacturing, research, and development, and workforce growth to revitalize the domestic semiconductor industry and reduce domestic reliance on overseas manufacturers. Within a year, this act incentivized the industry to pledge over $166B in investments to bolster domestic semiconductor manufacturing, highlighting the significance that initial priming and commitment from the government can have in boosting private markets to infuse additional capital.7

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