Pharmaceutical companies put a lot of stock in innovation. Indeed, it’s the very watchword of their existence. But it’s the innovation of chemists working in a laboratory creating lifesaving drugs, not of engineers working in a factory resolving production-line inefficiencies.
The industrial advances of the last twenty years – automation, 3-D printing, continuous manufacturing, big data, artificial intelligence, machine learning, the industrial internet of things, et al – have all gone largely ignored or underemployed by drug manufacturers. Even digitised documentation lies outside the reach of most operations.
To be fair, some legitimate reasons account for this, at least in the US, where a Byzantine, opaque and ever-shifting regulatory apparatus can hinder shop-floor upgrades. It’s why, despite tens of billions in government spending, our doctors’ offices still can’t email each other. It’s the source of that uneasy feeling when we notice that our physician’s business card includes a fax number.
But the profitability of offshoring production to countries with cheaper labour and lax environmental rules has also been a factor, easing as it does pressure to squeeze efficiencies from homegrown factories. Since joining the World Trade Organization in 2001, China has acquired much of this work.
Too much, way too much, cried our leaders, as the coronavirus (COVID-19) pandemic shuttered factories in the Hubei province. America suddenly remembered China controls a monopoly on supply chains providing the lion’s share of our active pharmaceutical ingredients (APIs), as well as many life-saving generic drugs.
Three US authors who sounded prescient warnings prior to the outbreak describe this longoverdue reckoning and how it might finally spur action.
Safety or shortage?
China is the world’s largest producer of APIs, the raw chemical components used to fashion end-product medicines. The lay press has been reporting that the US imports 80-90% of its APIs from China. That figure may be correct, but no one knows for sure because pharmaceutical companies are under no obligation to divulge raw material data. We can only guess based on the number of registered API factories.
Also uncertain is how many China-made APIs reach our shores via third-party, end-product manufacturers, for example, ones located in India. We do know that between 2010 and 2019 the number of registered Chinese API facilities more than doubled. All things considered, it’s safe to say we probably import the majority of our APIs from overseas.
An FDA study found that at least three WHOdesignated ‘essential medicines’ are made from APIs sourced only in China: capreomycin and streptomycin, both used to treat tuberculosis; and sulfadiazine, used to treat chancroid and trachoma. Penicillin and doxycycline, the latter used to treat Anthrax exposure, are no longer made in the US, and their components originate exclusively in China.
China manufactures slightly less than one in ten generics sold in America. And with about 40% of generics having only one manufacturer, supply chain disruptions could easily cause grievous shortages.
“This is a worldwide problem,” said Katherine Eban, an investigative journalist whose work has appeared in Vanity Fair and Forbes. “Most countries are getting the majority of their active ingredients from China and a certain percentage of their finished doses as well.”
Eban’s best-selling exposé, Bottle of Lies, describes how substandard manufacturing conditions traced to Chinese facilities led to drug recalls and patient deaths. High-profile examples include heparin, a blood thinner commonly used in hospitals, linked to 246 fatalities, and valsartan, a blood pressure drug found to be contaminated with a carcinogen once used in rocket fuel.
The valsartan recall was particularly dismaying because a year prior to that, an FDA inspector had reprimanded the facility for falsifying paperwork. But then the agency reversed that decision, allowing the company, Zhejiang Huahai Pharmaceutical Co Ltd, to fix the problem internally.
Moreover, Eban shows how the lack of diverse vendors forces US regulators to choose between two evils: either restrict negligent Chinese manufacturers and risk drug shortages, or let them off the hook and risk unsafe drugs.
Disconcerting picture
Home to some 4,000 drug manufacturing facilities, the Middle Kingdom lacks the regulatory capacity to oversee this sector ‘even if Beijing made such oversight a greater priority’, according to a report the US-China Economic and Security Review Commission gave to Congress last October.
The report paints a disconcerting picture of fraud, corruption and lack of cooperation vis-à-vis the Chinese pharmaceutical trade. Fake and shoddy documentation, deficient factory conditions, broken promises to reform and outright refusal to permit unannounced inspections occur regularly. In a tragicomic turn, Chinese firms sometimes pool their resources to build phoney ‘show factories’ where no drugs are produced but inspectors can be hoodwinked by pristine conditions.
Rosemary Gibson, author of China Rx and a senior advisor at the Hastings Center, a think tank that helped establish the field of bioethics, sees the situation in terms of geopolitical strategy rather than economics.
“There is absolutely an argument to have some basic manufacturing capability for essential medicines and their core ingredients here in the United States,” Gibson said.
Like Eban’s, her book views generics as the central vulnerability, especially antibiotics and medicines in the Strategic National Stockpile to be used in cases of health emergencies. “Who is the champion for generics?” she asked. “It’s the innovating, branded drugmakers that get all the air time, and they do great work. But [generic] drugs are the bread and butter that enable our healthcare system to function.”
She believes American manufacturers should be given long-term government contracts to produce generics. To enhance profitability, she suggested drugmakers adopt advanced manufacturing (AM) techniques.
Many hope AM will provide the key to reducing our nation’s dependence on foreign APIs. One example of AM is continuous manufacturing, in which the stop-and-go process of batch drug production is replaced by a constant synthesis of the active ingredients all the way through manufacture.
The US government has attempted to promote AM. For example, in 2014 it launched the Emerging Technology Programme (ETP) to offer guidance and regulatory barrier reduction. But by all accounts, enthusiasm and uptake have been scarce.
Silver lining
Reaction to the coronavirus crisis sheds light on fundamental shifts occurring in the US political landscape, according to Matt Stoller, research director at the newly created American Economics Liberty Project, which bills itself as a ‘cross-ideological movement to combat monopolistic corporations and the systems that entrench their power’.
In the $8.7bn Congressional spending bill to address the pandemic, Republicans supported greater transparency of drug supply chains and bailouts to small businesses – two proposals the staunchly free-enterprise, pro-market forces party would have probably rejected just a few years ago.
Stoller, author of Goliath: The Hundred Year War Between Monopoly Power and Democracy, sees this as a small but telling example of America’s growing disillusionment with the neoliberal economic orthodoxy that elevates markets and financialisation above all else, and that has defined our policymaking for more than 30 years.
An openness to economic populism and nationalism not seen in a long time will impact all industries, pharmaceuticals included. “The strategy prior to neoliberals, which would be prior to ’95 or so, would be you open up supply chains only with democracies or with military allies, as opposed to just any country,” he said. “So, for example, we never located factories in the Soviet Union. We just didn’t.”
One possible way forward is for the US to manufacture some of its own generic drugs, an idea put forth by former Presidential candidate Elizabeth Warren. During the Great Depression, this was called ‘yardstick capitalism’, Stoller noted, and it gives the government insight into proprietary data otherwise unobtainable.
With government support, US supply-chain ecosystems can be rebuilt, but only if lawmakers aggressively enforce antitrust laws and control private equity exploitation, he added. Further, manufacturers should rethink ultra-efficiencies like ‘just-in-time’ inventories that leave little room for emergencies.
‘There’s not a lot of good news these days, and I’m honestly kind of frightened,’ Stoller wrote in his weekly newsletter. ‘But the one silver lining is that it has become clear that the way we have been running our society for four decades is shortsighted and irresponsible. Hopefully the price we have to pay to learn this lesson won’t be too high.’