In the spring of 2020, Ryotaro Katsura, president of Japanese chemical company Katsura Chemical, fretted over a delayed shipment of an API in India. "Don't worry." Indian suppliers have been insisting on answering this sentence. After numerous urging phone calls and emails, Ryotaro Katsura finally found the source of the problem.
The chemicals for this API are produced by only one Chinese supplier, which cannot supply due to the outbreak. It can be seen that China's active pharmaceutical ingredients (API, which China calls active pharmaceutical ingredients as APIs, country stipulates that APIs do not contain intermediates, and there are no mandatory requirements for pharmaceutical production quality management standards for intermediates, but the US Food and Drug Administration requires Intermediates also need to be registered. The article defines China's APIs, including the market share of key raw materials and intermediates) and the dependence of the global pharmaceutical supply chain on China, and the epidemic has revealed this fact.
With the changes in the international situation, this state of the supply chain has made the West very worried, and some countries are trying to get rid of the influence of China's API supply.
Affected by the epidemic, the Indian government imposed export restrictions on raw materials for drugs such as paracetamol and clindamycin in April 2020. At that time, India had a great demand for these drugs, and the raw materials for these drugs, India needed to be imported from China.
On the supply of key raw materials, Bork Bretthauer, general manager of Pro Generika, said: "The production cost of key raw materials KSM usually depends on the quantity, the more the company produces, the lower the cost per unit of output. To obtain the cheapest quotation, The market has also been consolidating over the years.”
Katsura, the aforementioned Japanese chemical company boss, said that some Chinese manufacturers “may not know that they are the only ones producing certain key raw materials, while many ‘sole manufacturers’ are gradually withdrawing from the market due to low profitability”.
Supply chain concerns did not emerge suddenly with the COVID-19 pandemic. "Before the outbreak, the geographic concentration of the supply chain was the biggest concern for our company," said Andrew Gradozzi, head of API business at Italian pharmaceutical company Dipharma. Sometimes, it is true that a second reliable supplier cannot be found. Gradozzi said the company has sought to diversify its API sources geographically and has begun "producing raw materials in-house" to minimize the risk of shortages.
Even in China, API manufacturers are geographically concentrated. More than 40% of registered API companies in China are located in Shanghai, Zhejiang, and Jiangsu. The current epidemic situation in China has also profoundly affected the nerves of global pharmaceutical companies. "What if China stops supplying penicillin? India doesn't have a manufacturing facility and it's hard to find another source of supply," said Reji K. Joseph, an associate professor at the Indian Institute of Industrial Development.
Jens Ewert, head of Deloitte China's life sciences and healthcare practice, said China had realized the importance of locally producing APIs "not only to reduce costs" but also to ensure domestic supply. That also applies to the Covid-19 vaccine, Ewert said. "One of the key factors in China's rapid development of a new crown vaccine is that local pharmaceutical companies have direct access to APIs, while many other countries have to wait for imports."
Countries from the United States and the European Union to India and Japan are trying to wean themselves off this dependence.
A July 2021 RBI announcement titled "Drivers of Indian Pharmaceutical Exports" noted that India's focus on finished formulations over the past 20 years has led to neglect in in-house API manufacturing. According to reports from the Boston Consulting Group (BCG) and the Confederation of Indian Industry (CII), Chinese APIs imported into India mainly include pain relievers such as acetaminophen, anti-infectives such as amoxicillin, anti-diabetic drugs such as metformin, and Anti-ulcer drugs such as ranitidine.
In March 2020, the Indian government unveiled a plan to encourage domestic production of drugs such as APIs and key raw materials KSM, including a $900 million Production Incentive (PLI) scheme. The plan will provide a financial guarantee for manufacturers of 53 important APIs, KSM, and other drugs, which are highly dependent on Chinese imports.
In addition, the Chinese government encourages the production of patented APIs. According to Deloitte, China's current market share of patented APIs is only 9%, compared with 36% in the United States. “As the Chinese government encourages pharmaceutical companies to shift from traditional APIs to developing high-end, patented APIs, we see advantages in expanding the types of APIs in China,” said Deloitte’s Ewert. be further improved in coming years.
Source：www.sohu.com
