Covid-19 has forced politicians to confront something they have up till now preferred to ignore: the fact that most rich countries have effectively outsourced large parts of their medicine production to a handful of other countries – notably China and India.
This is especially true for the active pharmaceutical ingredients (APIs) that are the building blocks of pills and injections.
The global medicine market is shaped like an inverted pyramid. Its base comprises APIs, made mostly in China. Many countries manufacture antibiotics, for example, but in 2018, the latest figures available, China was the origin of 82 per cent of all antibiotic ingredients used worldwide. And above that lies a layer of cheap generic medicines, a very high proportion of which are produced in India.
In 2021, calls to bring API production home, in the name of pharmaceutical security, will intensify, led by politicians in both rich and middle-income countries who lost credibility and millions of dollars panic-buying substandard personal protective equipment and medicines to deal with Covid-19.
It’s hard to predict how much of this production will actually be clawed back, especially to rich countries, as the move will be resisted by at least two powerful lobbies. The first are environmentalists, who will oppose API manufacture on their home turf. Making APIs is often a messy business, particularly at scale. Some pollutants from the process can threaten waterways and wildlife; others, such as waste antimicrobials, contribute to the spread of drug-resistant infections in humans and animals.
The second source of resistance will be the pharmaceutical industry itself. API production is a high-volume, low-margin business, which requires massive capital investment. Big “innovator” pharma has little interest in making these investments, hence the outsourcing of manufacture of APIs.
To the extent that onshoring does happen, it will have two effects. Firstly, since all competitors have a hard time matching China on price at any given level of quality, domesticating the production of medical ingredients will push up medicine prices across the board. Low-cost, high-volume generic medicines, many of them targeted at widespread chronic conditions such as heart disease, diabetes and psychiatric disorders, and which make up the core stock for many a national health system’s pharmacies, will be affected most, as active ingredients account for up to 90 per cent of their production costs.
The second effect will be an erosion of medicine quality, especially in lower- and middle-income countries where health budgets are already vastly inadequate. The need to scale up affordable healthcare while keeping medicine prices low will lead to producers cutting costs wherever they can.
As long as national medicine regulators keep a watchful eye on what is happening in their countries, cost-cutting should not erode the quality of medicines. But the Covid-19 pandemic has taught us that some national medicine regulators are easily bulldozed by politicians whose agenda is shaped by opinion polls rather than patient safety. If we are not careful, in many countries in 2021, we will see more domestically produced medicines – but they won’t necessarily work.
Elizabeth Pisani is a visiting senior research fellow at the Policy Institute, King’s College London