Congress looks to address US dependence on China for APIs, KSMs

The United States must adopt an industrial policy aimed at addressing America’s dangerous dependence on China for active pharmaceutical ingredients (APIs) and key starting materials (KSMs), say members of a bipartisan House of Representatives panel.

U.S. reliance on Chinese production of APIs and KSMs is putting Americans at risk, according to House Select Committee on China Chairman John Moolenaar (R-Mich.), who held a hearing on Wednesday regarding the supply chain challenges facing this country.

“For most of American history, when a doctor prescribed a medication, it was made in our country or somewhere we trusted — that’s no longer true,” Moolenaar said, noting that about 90% of the prescriptions filled in the U.S. are generic medicines and the APIs that go into these drugs are largely produced overseas.

If China restricted API exports, U.S. hospitals and pharmacies would begin running short on essential medicines, Moolenaar warned, while pointing to a Washington University study which found that 83 of the top 100 generic drugs taken by Americans have no domestic source of key ingredients.

“The upstream chemical building blocks that feed these ingredients — key starting materials — are dominated by one country: China,” he said. “Decades of Chinese state subsidies, low environmental standards, and other factors drove Western competitors out of the market entirely.”

Risk environment is on the rise

Ranking Member Ro Khanna (D-Calif.) warned that when a geopolitical rival like China controls the supply of critical medicines, it creates unacceptable risks for the U.S.

“Over the past two decades, global pharmaceutical supply chains have become concentrated in China, especially the raw materials and chemicals that are used to make medicines,” said Khanna, who noted that 41% of KSMs used in U.S.-approved medicines come solely from China. “The situation with finished pharmaceuticals is similarly dire.”

According to Khanna, the U.S. relies on China for more than 90% of antibiotics imports, including penicillin and streptomycin, creating a “dangerous choke point” for this country.

USAntibiotics, headquartered in Bristol, Tennessee, is the last remaining end-to-end domestic U.S. manufacturer of amoxicillin — the most prescribed antibiotic in the country.

Patrick Cashman, president of USAntibiotics, testified Wednesday before the House committee about the strategic importance of domestic antibiotic manufacturing and the challenges associated with reliance on foreign supply chains for essential medications.

“One in three U.S. hospitals experienced severe effects from the 2022-2023 amoxicillin shortage, which resulted from routine supply chain fragility — not foreign interference,” Cashman said. “A geopolitically motivated restriction, as seen recently with critical minerals, would be faster and more severe.”

Funding needed to boost US production

Enabling economically viable domestic production of APIs and KSMs is critical to enhancing America’s medicine supply chain resiliency, according to Khanna. Pharmaceutical manufacturing depends on long-term investment and stable economic policy, he contends, and what’s needed is a comprehensive U.S. national strategy to incentivize production.

“If we are serious about de-risking from China, we have to be serious about rebuilding American strength,” Khanna said. “Addressing pharmaceutical supply chain vulnerabilities will require serious, sustained strategy to reduce dependance, rebuild capacity and ensure that medicines Americans need are made in secure, resilient, and trusted supply chains not controlled by Beijing.”

In his testimony, Cashman agreed that legislation like the CHIPS Act, signed into law by President Joe Biden in 2022 — which provided billions of dollars in subsidies to encourage companies to manufacture semiconductors domestically — could similarly bolster API production in the U.S.

“To have an investment here in the United States to produce API would be a relatively modest investment compared to many things we spend money on,” Cashman said.  

Marta Wosińska, senior fellow for economic studies at the Brookings Institution, testified that the “smart path” is to “reserve full end-to-end onshoring” for critical drugs for which the U.S. is likely to compete with China — and other countries — in a pandemic or major natural disaster.

“Figuring out ways to make the key starting materials here — either chemically or using synthetic biology — is the way to do this,” Wosińska said. “This is not going to happen on its own. There needs to be funding for this.”

According to Wosińska, federal industrial policy has focused far more on other strategic supply chains such as semiconductors, even though disruptions in the medicines supply pose more direct and immediate risks of harm to Americans.

“Any serious effort to de-risk from China will cost money — there is no free lunch,” she said in her testimony. “To make progress, Congress must be willing to allocate funding for a more secure chemical and generic manufacturing capacity.”