The biggest pharmaceutical companies in the world, known as “big pharma”, are American and European. The top five are Pfizer (US), Roche, Novartis (both Swiss), Merck (US) and GlaxoSmithKline (UK). Yet these companies – and the pharmaceutical industry as a whole – rely on global supply chains. And China and India play key roles in the supply of both ingredients and finished drugs.

Hopes for a vaccine or a medicine that will treat COVID-19 rest on this crucial sector. Yet the globalisation of pharmaceuticals and what some see as an over-reliance on products from China and India has been criticised in the US, the UK and the European Union.

Whether it be hydroxychloroquine (the “miracle” drug Donald Trump has admitted to taking), remdesivir (an antiviral drug used as an emergency treatment for the most acute cases of COVID-19) or a future vaccine, the physical as well as social and economic health of the world depends on pharmaceuticals. Production from China and India will be crucial if the pandemic is to be brought under control.

The supply chain

The pharmaceutical manufacturing supply chain involves two main stages. The first is the production of active pharmaceutical ingredients (APIs). These are the key parts of a drug which produce an effect. Such production is chemical-intensive, involving reactors for drug substance manufacture. The second stage is a physical process known as formulations production. Substances known as excipients are combined with APIs to turn a drug into a consumable form, such as a tablet, liquid, capsule, cream, ointment or injectable product.

For more than a decade now, China has been the largest producer of APIs in the world. The US, Europe and Japan produced 90% of the world’s APIs until the mid-1990s. But now it is estimated that Chinese manufacturers make around 40% of all APIs used worldwide and that China and India are the source of 75% to 80% of the APIs imported to the US. Janet Woodcock, the director of the Centre for Drug Evaluation and Research at the US Food and Drug Administration (FDA), told Congress in 2019:

The number of Chinese facilities producing APIs for the US market has increased over the past decade, as part of a massive movement of pharmaceutical production offshore. This movement is being driven by the pharmaceutical industry’s desire for cost savings and less stringent environmental regulations.

Pharmacy to the developing world

India plays a prominent role in the formulations segment of the industry. India is the third largest producer of pharmaceuticals in the world by volume. The country’s Department of Pharmaceuticals reported that it supplies 20% of global exports of “generic” drugs. These are drugs that are no longer under patent and are open to any company to produce and sell, and are thus usually priced at a relatively low level. India has the largest number of FDA approved plants outside the US and it is estimated to supply 40% of the generic formulations in America.

It was the absence of product patents in pharmaceuticals from 1972 to 2005, combined with foreign investment restrictions in the 1970s and 1980s that led to the development of a rare and successful manufacturing industry in India – a country more known for its services role in the global economy.

India is also the major supplier of medicines to countries in the global south. This led the humanitarian organisation Médecins Sans Frontières to dub the country the “pharmacy to the developing world”. Yusuf Hamied, then managing director of Indian pharmaceutical company Cipla, announced in 2001 that his firm would provide a year’s supply of anti-retroviral medicines for US$350 a year (and is now less than US$100 a year) – a fraction of the US$10,000 they had been provided for until that point in time by American and European companies.

Indian companies, led by the likes of Cipla, Aurobindo, Emcure, Hetero, Macleods, Matrix, Ranbaxy and Strides have played an enormous role in supplying anti-retroviral and anti-malarial medicines to the Global Fund to Fight AIDS, TB and malaria.

India is also a major vaccine producer. While the largest vaccine manufacturers in the world (in revenue terms) are GSK, Sanofi, Merck and Pfizer, India’s Serum Institute is the world’s largest vaccine producer by volume.

The Pune-based company makes 1.5 billion doses a year, 80% of which are exported and is UNICEF’s largest vaccine supplier (US$307.8 million worth in 2018). India also produces 65% of the World Health Organization’s requirement of DPT (diphtheria, pertussis and tetanus) and tuberculosis, as well as 90% of its measles vaccines.

Fear of dependence on China

This globalisation of the pharmaceutical industry has led to fears of over-reliance on particular sources of supply, especially China, for APIs. Such concern has been particularly prominent in the US. Last year a representative of the Defence Health Agency argued that “the national security risks of increased Chinese dominance of the global API market cannot be overstated”.

The state of America’s reliance on China for pharmaceuticals was documented in a book by health researchers Rosemary Gibson and Janardan Prasad Singh which highlighted that the last manufacturing plant for aspirin in the US closed in 2002, while the last acetaminophen (paracetamol) manufacturing plant in Europe closed in 2008.

India also gets most of its APIs from China – an issue of concern for its government, which has had a task force investigating this issue. The country once had considerable self-reliance in production of APIs, dating back to the establishment of two state-owned pharmaceutical companies in the 1950s and 1960s. But in recent decades there are stricter environmental controls, which many believe has limited this aspect of the industry in India. China also has cheaper land, electricity and higher volumes of production.

So now India relies on China for about 70% of its supply of APIs. And for some well known drugs, such as paracetamol, amoxicillin and ibuprofen, India is almost 100% dependent on China.

While the US, Europe and India have worried about over-reliance on China, Africa is most dependent of all on the global pharmaceutical supply chain. Effectively all APIs and 80-90% of the finished medicines consumed on the continent are imported – mostly from India.

There has been significant concern for some time regarding the globalised nature of the pharmaceutical industry and its vulnerability, even before the pandemic. Gibson and Singh explicitly articulated fears over the potential implications of this in their 2018 book China Rx:

The centralisation of the global supply for essential ingredients for drugs in China makes it vulnerable to interruption, whether by mistake or design. If disruptions occur for an essential ingredient made in China, the United States will wait in line along with Europe, India, and other countries to obtain it. If a global public health crisis occurs, China will likely keep its domestically produced medicines at home and stockpile them to secure access for its citizens before seeing to the needs of other nations.

Those were the fears before COVID-19, yet China has not acted in this way so far. And most of India’s export bans have been rescinded. However, the tensions between nationalism and globalisation have plagued the initial search for treatments.

Miracle drugs and geopolitics

Although China did not initiate an export ban on pharmaceuticals, tensions escalated in early March when India’s Ministry of Commerce and Industry announced restrictions on the export of 13 APIs including paracetamol, tinidazole, vitamin B1, B6 and B12, as well as any formulations made from those APIs. Reports emerged about concerns over drug shortages elsewhere in the world as a result, with European industry said to be “panicking”.

The Indian government also moved to address its own reliance on supply of APIs from China. On March 21, they announced a US$140m scheme, involving support for three bulk drugs parks as well as the manufacturing of 53 priority APIs, to “reduce … dependency on other countries for bulk drugs”.

Tensions escalated as hydroxychloroquine (and a similar drug chloroquine) emerged as a potential treatment for COVID-19. Long established as an anti-malarial, but also used for treating rheumatoid arthritis and lupus, research from the Méditerranée Infection University Hospital Institute in Marseille found a significant reduction of the viral carriage in 20 COVID-19 cases treated with the drug.

On March 14, the UK announced an export ban on hydroxychloroquine. Then, Donald Trump began touting it as a “game-changer”. The space and electric car entrepreneur Elon Musk also joined the hype.

Although US-based Mylan announced it would restart production of hydroxychloroquine in West Virginia, it was clear America and much of the world would require supply from India if this drug was to be effective in treating the disease.

India is estimated to produce 70% of the world’s hydroxychloroquine, with Ipca Labs and Zydus Cadila the two largest producers of the drug in the country. Ipca Labs accounts for more than 80% of India’s hydroxychloroquine supply, yet there was a problem for the US here.

The FDA had restricted Ipca’s exports from some of its facilities to the US, arising from problems found in quality control checks from 2014 onwards. But with hydroxychloroquine attracting such attention, the US lifted its ban on supply on March 23.