China Rx: How the US Depends on China for Its Drugs

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A few years back, the punditocracy was in a tizzy because it had come to their attention that the US had become dependent on China for rare earths, which are critical to the production of high-performance magnets, low carbon products, diesel additives, lasers and many other goods. We pointed out then that rare earths were far from an isolated case. China has become the biggest supplier of ascorbic acid, which is widely used in food production to improve quality and stability.

A recent book, China RX: Exposing the Risks of America’s Dependence on China for Medicine by Rosemary Gibson and Janardan Prasad Singh, appears not to have gotten the attention it warrants. I learned about it thanks to reader Patrick F, who recommended a C-SPAN panel on the book with author Gibson plus other experts, such as former Clinton Administration official Patrick Malloy. If you go to C-SPAN, you can read a transcript auto-generated from the closed captioning. You can also listen Gibson describe some of the key points from her book in the interview below.

The big message of Gibon’s and Singh’s book is that the US relies on China for the production of active ingredients in drugs and in many cases, of the medications themselves, to the degree that we would have a public health crisis if supplies were interrupted. As Gibson said on C-SPAN:

Many people that we spoke to, both former government officials and some in industry said that if China shut the door on exports, within months, pharmacy shelves in the United States to be empty, and hospitals would cease to function.

And don’t assume generics king India would step into the breach. India gets many of the active ingredients for its pharmaceuticals from China. Gibson forecasts that China will overtake India in generics manufacture within a decade.

As Gibson explains, the US no longer makes its own penicillin, in part because China dumped penicillin in 2004, driving the last US plant out of business.

The medications where the US relies on China include heparin, a blood thinner that among other things is used for IV drips. No heparin, no IV treatments. Due to the difficulty in tracing the source of drug company ingredients, the authors could make only case by case investigations, but they China production to be critical for treatments for Alzheimer’s HIV, depression, schizophrenia, cancer, epilepsy, and high blood pressure.

Dependency is not the only risk. US drug companies shifted production to China not just to save cost but to escape regulation. The FDA has only limited access to Chinese factories, with the Chinese having well over 700, yet the FDA able to inspect only 15 a year on average. As Gibson said on C-SPAN:

The FDA is trying to get inspection on site in China. The Chinese have severely restricted the number of inspections that they will allow and the whole program has become completely ineffective.

And the Chinese are often less than cooperative. Gibson describes even then how the agency has been directed to a Potemkin facility, as in the goods were made somewhere else…and the FDA was not able to figure out where. Similarly, reports presented by the health authorities to the FDA is understood to be as reliable as Chinese economic data.

This picture is particularly troubling given China’s poor record on production quality and sanitation. And worse, the US can’t even afford to bar imports of all substandard products. Gibson again:

In 2015, the FDA inspected a plant in China. It did that because it was getting a lot of customer complaints, presumably industry complaints, about the active ingredients that they were getting from this plant. There was bacterial contamination, some of the products. They did not have full therapeutic value. If that’s an antibiotic or chemotherapy, that could be devastating.

So the FDA went in and they found what they called systemic data manipulation. This is a plant that had passed muster by the FDA, the Chinese FDA and other inspections over many years. So the FDA banned 29 different products from coming into the United States. But because the United States is so dependent, the FDA had to exempt 14 of those products from its own ban. Some of those included antibiotics or ingredients for antibiotics and ingredients for chemotherapies, because the FDA was concerned about drug shortages in the United States. That is how dependent we are as a country.

It’s telling with the trade battle of wills with China a daily news item for months, that this critical piece of the picture is absent from the debate. One has to assume that it’s because Big Pharma doesn’t mind.

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  1. vlade

    Chinese strategy for last two decades was to take in production lot of critical items. I believe the original goal was to get the IP (and not to have to pay for it), but it’s turning out that there’s an even bigger advantage – dependency creation as per above, and I wonder how much of the current state is driven more by the latter rather than former.

    1. vlade

      And at the same time, steel and aluminum gets “national security” tarrifs slapped on it. So 19th century..

      1. d

        Suspect that steel and aluminum wont cause as much trouble as doing the drugs, after all we already have price problems with drugs

        1. RBHoughton

          What we have known for two centuries is that the profit is in trading not manufacturing. All the old British Monarchy’s chartered companies make their money from Mocha coffee, Bengal cotton, Chinese silks, teas and ceramics.

          We resorted to making things ourselves only when suppliers ceased offering the goods.

    2. sgt_doom

      And let’s not even consider all those individuals (Chinese nationals) both in China, America, Australia, New Zealand and Canada who have been disappeared, like that pro-democracy journalist, Li Xin, disappeared from Thailand back to China in 2016, and those human rights attorneys, mass disappeared in 2015.

      1. Oregoncharles

        Uhhh – link on that? I haven’t heard of this before; seems like there would have been a fuss.

    3. oh

      The Pharma companies are so greedy. It’s not enough to have a lock on their pharmaceuticals and get tax breaks and be able to sell them at exorbitant prices, they want to produce them in China for the lowest cost.

      1. Tim

        yeah, why make that $10,000 piil for $10 when you can make it for $5 or less in China? It seems trivial.

        Then again, the profit as a percentage of the production cost still doubles per the example above. Greed knows no bounds.

    4. EoH

      I agree that the initial plan was to obtain foreign IP. It was also to obtain investment funds, manufacturing equipment and know-how, and to employ as many people as possible. China learned much from Japan’s MITI and its counterparts in what were known as the Asian Tigers.

      What China is obtaining, however, is an effective monopoly on manufacturing resources, know-how, and the people who have experience using it. The FIRE dominated West, Germany perhaps excluded, has happily given up such things, most especially the employment of people with that know-how, deeming their continued employment unhealthy to the immediacy of their returns.

      The FIRE dominated West would be loathe to reinvest in it, and slow to do it were it to overcome that resistance. Heavens, it might increase local employment!

      But it doesn’t matter who controls all the FIRE resources in the world if people cannot obtain necessary manufactured goods, be they essential pharmaceuticals or a forged hammer. Were that to happen, the last item people would ask the Chinese for would be a boatload of pitchforks.

  2. none

    The Mafia runs all kinds of drug labs to make stuff like heroin. Stuff like cancer drugs are even more expensive per gram than heroin. Is there some reason the Mafia can’t make that too, and undercut the pharma crooks? It’s probably harder technically, but they have resources, and they’d actually be helping society.

    1. BillS

      All you need to do is make them an offer they can’t refuse. ;-)

      They already have significant olive oil and “organic” food businesses. Why not cancer drugs?

  3. The Rev Kev

    The mind boggles at the thought of a nation of 330 million people, a fair proportion of which require drugs, having to go cold turkey. Trump could rant all he wants about it being a “national security” emergency but when your drug production depends on another country’s production facilities, there is not a lot that you can do. Three guesses who gets first call on those drugs.
    The present US trade delegation in China is mostly made up of old men going by a recent photo. Being old, a fair number of them would be under a drug regime. China could set their intelligence services to find out which ones and then the next time there is a meeting, the Chinese could have these drug tubes & packets sitting on the table if produced in China. Just to make a point.
    A partial solution would be to bring home a lot of the critical drugs for production like penicillin but I doubt that big pharma would have any interest in this. Not enough profit margin you see. The government could set up federal facilities to produce these drugs for America’s use but big pharma would never, ever let this happen. Such a move would not only be against their profit margin but they would be totally against this on ideological grounds. Yay, free market.

  4. PlutoniumKun

    The Chinese strategy of becoming a dominant player in strategically key products has been apparent for at least 2 decades to anyone paying attention. While everyone witters on about China’s dollar holdings or steel, it has quietly become to a range of unglamorous but vital products what Saudi Arabia is to oil. In the meanwhile, the US spends a trillion dollars on the F-35…

    Lenin wrote about how capitalists would sell you the rope you use to hang them. The Chinese have taken this to heart.

    1. lyman alpha blob

      That definitely seems to be the case – China and the US are playing out the ant and grasshopper fable. From the little I know of Chinese history, they seem to have been playing for the long game for centuries. At about the same time the Chinese decided to become dominant in key resources, US CEOs decided that short term profits were all that really mattered. Perhaps a better phrasing is that China decided to become dominant in key resources because the US focused so much on short term profits.

      The US better take care of all that topsoil in the midwest that’s been degraded through monoculture and other bad ag practices, because with China also buying up large swathes of arable land all over the world, food might become awfully expensive if we manage to turn the bread basket into a dust bowl again.

      1. Mike Mc

        Was fortunate enough to visit Japan for a ‘favorite son’s’ wedding (Japanese foreign exchange student who was much beloved by wife’s three boys when they attended high school together). Weirdly, the ‘Trump Bump’ in an old mutual fund made it possible for we flaming libs to go to the wedding and spend quality time in Kyoto* as well.

        My table mate was a peer of the groom, all bright young Millennials, who serves in the Japanese diplomatic corps. Much if not most of their work involves countering China’s economic moves as above – worldwide but especially in SE Asia. Under 30, he expects to be working at this for the duration of his foreign service career. (Job security!)

        *If you’ve ever wanted to visit Japan, by all means do so. We spent over a week in Kyoto then a few days in Nagoya for the wedding… if you are a 60 something like me, it may remind you of your childhood in America. The one where things worked, people dressed up everyday, many people were there to help you if needed (I think I want to be a Kyoto Station Bus Concierge when I retire in a few years), buses and trains ran everywhere and often, etc. Maybe the best country for Americans like me who had never traveled internationally before to visit.

      2. MyLessThanPrimeBeef

        It has not always been long game they played.

        While Europeans visited the Americas, they decided to stay. It’s been a few centuries, and this is home now.

        When Adm Zheng He finished with his sight-seeing tours, he took his groups home to the Middle Kingdom. That was not long game.

        The current long game Beijing is playing seems to have 3 elements (if not more);

        1. Nationalistic
        2. Dictatorship over corporations
        3. One leader staying around for a few decades.

        1. SufferinSuccotash

          15th century Ming China didn’t need the long-distance trade the way Portugal and other European countries did.

    2. RBHoughton

      Lenin’s quote was speculative but there was a real example of the Dutch inhabitants of a besieged town selling gunpowder to their besiegers. I think that was in Cromwell’s attempt to join the Netherlands to UK.

  5. Desai

    Indian government itself is concerned about Indian pharma industry’s dependence over China. Apparently Indian pharma imports more than 60% of its APIs from China. Now due to such high dependence, the Prime Minister’s Office has raised it as a security concern. However , this dependence differs for different kinds of drugs.

    From above article:-

    “The impression that India is totally dependent on China for APIs is true for old, low-value products. It’s not true for the high-value bulk drugs in new categories like diabetes, cardiology, nephrology…,” says Dilip G Shah, secretary general of the Indian Pharmaceutical Alliance. “Nearly 40% of ANDAs [Abbreviated New Drug Applications for selling generics] filed in the US are by Indian companies and those drugs are not dependent on China.”

    But the Chinese are close on the heels with their formulations and ambitions. “The day is not far when we have to compete with China [in generics], maybe within a decade,” says a senior executive of a mid-size pharma company in Pune which has a US FDA-approved zero discharge API plant, products of which are not sold on the open market.”

    1. ewmayer

      ‘The impression that India is totally dependent on China for APIs is true for old, low-value products.’

      ‘Low-value’ appears to mean ‘low profit margin’ – to blithely imply, as the article seems to, that that translates to ‘no worries about these, no one cares about them anyway’ is hugely misleading. Many of those ‘old fuddy-duddy’ expired-patent meds remain by far the best option for the conditions they treat, to say nothing of remaining the most-affordable treatments precisely because they are readily manufactured and low-margin. The Martin Shkrelis of the world target such ‘old, low value’ products precisely because they are critical for some subset of people and, once the PharmaBros have ensured sole-sourcing for such a drug, they price-jack it into low earth orbit, saying to folks who need it, ‘where else you gonna go?’

      1. Desai

        Article is titled as “Indian Pharma’s Perfect Storm – Chinese APIs” and does not even remotely suggest that ” no worries about these, no one cares about them anyway.” On the contrary it reports that Indian Pharma industry itself and Indian government are aware of dependence on China for API and is trying to mitigate it. That commment about “low value drug” was to point out that dependence on Chinese API is different for different kind of drungs.

  6. zagonostra

    WTF so we can’t import medicine from Canada and it turns out China is producing much of our drugs?

  7. TG

    As Alexander Hamilton once said as regards ‘free’ trade: who would console themselves to the loss of an arm, with the prospect of purchasing their shirts for 40% cheaper?

    One does wonder though: when are the rich going to get a secured dual supply of guaranteed pure pharmaceuticals? I mean, increasingly they don’t even fly out of public airports, but from private ones where they don’t need to hassle with security etc. They don’t send their kids to public schools. The live in gated estates where, unlike the US border, the rules against trespassing are rigidly enforced. So is there going to be a ‘premium’ line of pharmaceuticals? Or perhaps the rich just consider this an acceptable cost for being rich…

    It is certainly the case that even as the DEA is limiting the production of painkillers to prevent the masses from overdoing, they are restricting real needed uses of these products, but there will be no shortages for the Gates and Kochs etc. when they get sick, you can count on that.

  8. JohnnyGL

    Really good find!

    This is why we come to nakedcap….(among other reasons, but it’s still a good example)

  9. Big Tap

    As someone that worked for Big Pharma in the past this article is the truth. Many active ingredients in prescription and over the counter drugs are foreign sourced. Often an entire drug is manufactured outside the U.S. in Asia primarily or in Europe. For instance, check your expensive prescription bottle label or brochure where it is made you’ll be surprised. Always found disingenuous the concept that we can’t have drug importation from Canada or Mexico since the biggest importer of drugs and chemicals for drug manufacture in America is Big Pharm itself!

    1. sgt_doom

      And the book also covers all the R&D and jobs which have been offshored there as well.

    2. X-pertAssasin

      Very true, the API for the very last line treatments for MRSA infections all come from one single producer just outside Copenhagen. And the Western drug supply for most of the alternative treatments for MRSA also come from that one company because the quality of supply from India and China is rather rubbish.

  10. sharonsj

    I used to order Celebrex from Canada until it was taken off the market. However, after Congress made ordering from Canada difficult, I could still obtain Celebrex via Canada–they just mailed me the drug from some island in the South Pacific. I bet that practice still continues.

    Reading that China can control us simply by stopping the drug supply is frightening. I wonder if our Congress critters even realize what’s going on? Probably not.

  11. sgt_doom

    Came across this book review awhile back, which motivated me to read this fantastic book:

    From a speech by President Bill Clinton at the Johns Hopkins School of Advanced International Studies in 2000:
    For the first time, our companies will be able to sell and distribute products in China made by workers here in America without being forced to relocate manufacturing to China, sell through the Chinese government, or transfer valuable technology — for the first time. We’ll be able to export products without exporting jobs. Meanwhile, we’ll get valuable new safeguards against any surges of imports from China.
    No wonder the Clintons were worth a cool $100 million within a year after vacating the White House!
    Yet another exhaustively researched and outstanding book on how the traitor scum of Wall Street and the US Chamber of Commerce have sold out America – – a situation we’ve surely become used to in our present day.
    Speaking of the US Chamber of Commerce, a former director of the National Chamber Litigation Center – – the legal attack arm of the US Chamber of Commerce – – was in Seattle pushing his recently published book of nonsensical drivel to CYA, James Comey.
    For a great critique of Comey’s sorry book, please read Matt Taibbi’s article in the Rolling Stone.
    [Sidebar: The authors do a wonderful job skewering Bill Clinton, the Main Street killer, and Joseph Stiglitz. For those easily duped, let me be very clear: Joseph Stiglitz, Robert Reich and Paul Krugman are either complete idiots or pathological liars – – they are NOT any such thing as // liberal \\ economists. Krugman, ever since he was with the Reagan Administration, has been a member of the Group of Thirty [], the lobbyist group for the central bankers. The top two lobby groups in America are the Group of Thirty and the Bretton Woods Committee [which is the lobbyist group for the international super-rich] and, not coincidentally, they both use the same Washington, D.C. lobby office and phone numbers.]
    The one question this book invokes is to ponder which one spends the most money lobbying in North America: the Koch brothers, or the China lobby?????

  12. Phacops

    I was working for a contract formulaion/filling operation that got caught up in the Heparin adulteration scam by the chinese in 2008 where the deliberately adulterated drug substance killed 81 and injured over 700. I recognized in 2005 that the Chinese were running Potemkin facilities for inspection then, once licensed, moved production to substandard shops. This is SOP in China.

    This adulteration was not merely because of lax inspections, but because the FDA, through guidance, allowed abbreviated incoming drug substance testing for identity and assay with the receipt of a Certificate of Assay if three prior lots passed the full suite of testing. Knowing this, the chinese waited then substituted over-sulfonated protein for Heparin which would pass rudimentary identity tests and provide a good assay. * * * The chinese authorities responded that they are not interested in regulating drugs and devices for export. * * *

    Furthermore, the (export) product managers for devices hated me on their teams. Merely doing statistical analysis I could see that the poor manufacturing processes in china were being used with inspection of final product being done to remove items not meeting specifications – which contravenes Good Manufacturing Practice by not having processes designed to capably provide output meeting specifications for quality purity and safety.

    Indian manufacturing is little better when falsification of test results is a rather common practice there and parenteral (injectable drug) facilities there frequently are cited for lack of aseptic practice (sterility) or cleanliness.

    I cannot trust drug substance, drug product or medical devices from china or india.

    Given that the FDA is not up to the task of adequate foreign inspections wouldn’t it make sense to require 100% inspection of all exports before they can be moved out of our port facilities . . . paid for by the exporters? And for that I mean the breakdown and sampling of all containers to what is known as an LTPD (Lot Tolerance Percent Defective) sampling plan that controls consumer’s risk. That can create good jobs and is far better than tariffs in slowing down the flow of goods while creating acceptable quality for Americans.

    1. Oregoncharles

      My thought exactly. Of course, it would be deeply hypocritical: the US often accuses health regulations of being barriers to trade, when applied by other countries. Which they are, and should be.

  13. Patrick Donnelly

    Commenters are still thinking in “national” terms.

    The NWO exists at the top tiers, already. Too much $$$ and power for real change or threats to exist!

    So funny to read the comments when this has been taken on board: so many clever people, falling for the old paradigm! The owners invest in a corporate vehicle…. trans national. East India Company? “The Company”. “The Firm”!

    Private air transport: exempt security checks….

    Look at the reality!!!

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