Nearly 25 years ago, America came to understand the importance of the antibiotic ciprofloxacin, commonly known as ‘cipro.’
Prescribed frequently for bacterial infections, ciprofloxacin has also been a critical first-line treatment for anthrax exposure.
In September 2001, just one week after the 9/11 terror attacks, the American public faced a new terror when anthrax was sent through the U.S. Postal Service to various media companies and congressional offices, leading to the deaths of five individuals and infections in 17 others.
Those with any potential risk of exposure rushed to receive treatment.
Today, anthrax remains a formidable biological weapon, being relatively easy to produce and exceedingly deadly.
However, it is alarming to note that approximately 80 percent of the U.S. supply of ciprofloxacin is still imported, with many imports relying on key ingredients manufactured in China.
This issue extends beyond ciprofloxacin; the United States exhibits a troubling reliance on imported medicines and their raw ingredients.
Over the past two decades, U.S. Census Bureau data indicates that pharmaceutical imports have seen an average annual growth of nine percent.
In the last year alone, the value of U.S. pharmaceutical imports surged by 40 percent, reaching $315 billion, positioning pharmaceuticals as the fifth-largest import category in 2024.
By volume, India and China serve as the largest suppliers of drugs and their constituents to the United States, providing various medications including common antibiotics and statins.
On the other hand, in terms of value, Germany, Ireland, and Switzerland dominate U.S. pharmaceutical trade through their exports of high-selling branded medications, such as Viagra and Keytruda, the top-selling cancer drug.
While the United States has been a leader in the production of innovative medicines, this market segment is now at risk, with reports indicating that in 2024, one-third of new compounds licensed by U.S. pharmaceutical companies originated from Chinese biotechnology firms.
The increasing reliance on imports for critical medicines and the geographic concentration of these supplies place Americans at risk.
In a recent testimony, a U.S. Department of Defense official articulated the national security risks associated with Chinese dominance in the global market for active pharmaceutical ingredients (APIs), underscoring that if China were to restrict deliveries of APIs to the United States, it could severely jeopardize domestic production and result in critical shortages across civilian and military sectors.
To counter this, the U.S. maintains stockpiles of strategic medications, intending that the supply of ciprofloxacin could cover 12 million individuals for 60 days.
Nevertheless, these emergency stockpiles are insufficient to address the ongoing drug shortages in the country, nor would they suffice during a sustained crisis such as a pandemic or geopolitical conflict.
President Donald Trump has recognized America’s diminishing domestic production of everyday drugs and has proposed imposing high tariffs on pharmaceutical imports, suggesting rates as steep as 200 percent to encourage pharmaceutical firms to shift production back to the U.S.
His administration is investigating the national security implications of pharmaceutical imports under Section 232 of the Trade Expansion Act of 1962.
Notably, products implicated under Section 232 are exempt from recent court decisions that curtailed reciprocal tariffs, offering a pathway for the Trump administration’s tariffs to endure.
Yet, a blanket tariff on pharmaceutical imports could exacerbate the issues stemming from the United States’ growing dependence on foreign-produced drugs and ingredients.
High tariffs could disrupt the supply of essential medications like chemotherapy agents and penicillin, which have complex production processes and low profit margins.
Despite the administration’s hope that the tariffs will incentivize domestic production, even an 18-month transition period is inadequate for establishing the necessary pharmaceutical manufacturing facilities, which can require three to five years to set up.
During this interim, patients would face difficulties accessing life-saving medications.
Addressing the underlying causes of U.S. reliance on foreign drugs demands a thorough understanding of the reasons behind the decline of domestic pharmaceutical production and the systemic vulnerabilities that now exist.
Additionally, effective policy measures must be crafted to reverse these trends, as tariffs alone will not provide a comprehensive solution.
Historically, pharmaceutical manufacturing in the United States flourished beginning in the 1930s, emerging from the dye and chemical industry and expanding significantly with antibiotics during World War II.
However, as manufacturing processes in other labor-intensive industries transitioned offshore seeking lower labor costs, drug and vaccine manufacturers largely remained within U.S. borders for decades.
This trend began to shift with the introduction of low-cost generic drugs in the United States.
In 1984, lawmakers established a streamlined pathway for the approval of generic medications through the U.S. Food and Drug Administration (FDA), allowing manufacturers to bypass the need for expensive clinical trials required for original drug approvals.
As financial incentives for the cheapest available medications were adopted by states, insurers, and pharmaceutical benefit managers, the U.S. witnessed a gradual shift toward lower-cost generic drugs.
It wasn’t until the early 2010s that the significant proliferation of low-cost generics became evident.
A generational opportunity emerged with the expiration of patents on many of the pharmaceutical industry’s historically top-selling drugs, leading to a surge in generic eligibility.
By 2016, generics made up 89 percent of prescriptions filled in the U.S., prompting drug manufacturers in China and India to enter the market rapidly.
As a result, many U.S. drug manufacturers either formed joint ventures in Asia or ceased certain product lines entirely.
This influx of low-cost imports transformed the landscape of the U.S. pharmaceutical market.
Despite the historical dominance of domestic production, today over 90 percent of all prescriptions dispensed in the United States are generics, with Indian companies supplying approximately 47 percent of these.
Alarmingly, around 70 percent of the active pharmaceutical ingredients used by these Indian firms are sourced from China, increasing U.S. vulnerability.
Environmental factors have also played a role in shifting the manufacturing of many generic drugs overseas.
For instance, the production of active pharmaceutical ingredients often entails toxic chemical processes that were increasingly scrutinized in the 2000s.
Reports highlighted environmental concerns, such as pharmaceuticals in river runoff affecting wildlife, prompting stricter regulations in Western countries regarding pharmaceutical manufacturing.
Conversely, China and India presented more lenient environmental regulations and cheaper input costs, along with the potential for higher economies of scale.
By 2021, China dominated global antibiotic exports, accounting for one-fifth of the market and nearly half of the active ingredient exports, leveling unprecedented demand with drastic capacity increases for products like amoxicillin.
Focusing on the case of heparin, a drug critical for treating a wide array of conditions, its shift in manufacturing to China stems from changes in sourcing materials due to health scares.
Initially derived from cows, the product’s source transitioned to pigs; given China’s status as the foremost pork producer, it subsequently became the dominant supplier.
However, fluctuations in China’s hog production and incidents of contamination have put U.S. supply at risk, with previously documented shortages impacting both hospitals and patients.
While the U.S. continues to lead in advanced biopharmaceutical manufacturing for cutting-edge treatments, increasing regulatory burdens and foreign competitors threaten the nation’s standing.
The FDA’s inspection process and approval requirements for clinical trials have become more cumbersome, resulting in the shifting of early-stage trials overseas.
In China, governmental support for biotechnology firms fosters a fast-follower strategy that allows for imitation of American innovations, further challenging the U.S. market.
As American pharmaceutical companies have redirected investments abroad, leaving behind a legacy of innovations developed with public funding, this trend leads to rising deficits and emergent foreign competitors with substantial workforces.
With bipartisan agreement on the national security risks posed by foreign dependencies in pharmaceuticals, the Trump administration’s approach through tariffs could wield significant influence.
The continued invocation of Section 232 by his administration lends potential for long-lasting impacts and signifies comprehensive scrutiny of the pharmaceutical supply chain.
Although several stakeholders, including patient groups and pharmaceutical firms, have expressed concern over the proposed tariffs, the administration appears resolute.
Strategically targeting tariffs to key starting materials and APIs allows for a more nuanced approach focusing on areas where China poses a tangible threat to U.S. national security.
Furthermore, recognizing the extended timeframe needed to build U.S. capacity in those areas is crucial to mitigating future drug shortages.
Such targeted tariffs could ensure that the demands of essential medicines do not inadvertently lead to increased prices for consumers or result in shortages in critical drug supplies.
Imposing overly broad tariffs on essential generics could lead to unintended consequences, forcing patients and healthcare systems to bear the brunt of rising costs, as these companies face inherent challenges in transitioning manufacturing to the U.S.
To truly address America’s vulnerabilities in the pharmaceutical supply chain, coordinated action across multiple government entities is essential.
Federal agencies such as the Department of Defense could bolster efforts through limited-term purchase agreements with U.S. manufacturers of critical generic medicines, ensuring supply security.
Moreover, investments in innovative technologies that promote efficient production processes for key starting materials and APIs are crucial.
The FDA’s role must also evolve, focusing on streamlining clinical trial approval processes while ensuring the enforcement of quality standards for generic medications to bolster domestic competitiveness.
To sustain and enhance the U.S. pharmaceutical industry’s innovation, federal support for research and development initiatives will be indispensable, preserving the nation’s leadership in life-changing medical advancements.
Diversifying and enhancing the pharmaceutical supply chain is indeed critical, but a comprehensive strategy that prioritizes innovation, collaboration, and strategic investments will ultimately secure America’s health and safety for future generations.
image source from：foreignaffairs
