Joel Zinberg for city-journal

The Virus and the Supply Chain

Coronavirus may or may not prove to be a health crisis in the U.S., but its impact on the production of pharmaceuticals could be serious.

Though the new virus is more transmissible than the related viruses SARS-CoV and MERS-CoV, which, respectively, caused the Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS) in 2002–2003 and 2012, the disease it causes is less dangerous. SARS had a case-fatality rate of 10 percent and MERS a case-fatality rate of 36 percent. The most recently reported case-fatality rate for laboratory-confirmed COVID-19, for hospitalized inpatients in China, was 1.4 percent; and since many more unreported, mild, or asymptomatic cases exist than the number of reported cases involving more severely ill or hospitalized patients, the fatality rate is likely much lower—perhaps as low as the 0.1–0.2 percent fatality rate of seasonal influenza. And unlike influenza, which has killed more than 125 children in the U.S. so far this season, COVID-19 appears to spare the pediatric population.

COVID-19 is more likely to harm Americans indirectly because the U.S. is increasingly reliant on drugs either directly sourced from China or made from intermediate chemicals called Active Pharmaceutical Ingredients (APIs), or their chemical precursors, manufactured in China. U.S. imports of Chinese pharmaceuticals increased 76 percent between 2010 and 2018. Similarly, imports of Chinese medical equipment increased 78 percent over the same period. U.S. producers source 80 percent of their APIs overseas, primarily from China; China is also the chief supplier of APIs for producers in other countries. This dominance is neither accidental nor the result of free markets—it is the consequence of Chinese government policies. The U.S.–China Economic & Security Review Commission recently concluded that “Government subsidies, a robust chemical industry, IP theft, lax environmental protections, and regulations favoring domestic companies contributed to China’s emergence as the world’s largest producer of APIs.”

While 90 percent of the finished drugs Americans take are generics, most are manufactured overseas, primarily in India and China. Even India, the world’s largest generics producer, relies on China for 80 percent of the APIs it uses in drug production. Nearly all the antibiotics used in the U.S. come from China. Some older antibiotics, like penicillin, are no longer made here; China controls worldwide penicillin production. In addition, a large amount of the personal protective equipment (PPE)—surgical gowns, gloves, masks and respirator protective devices—used to stop the spread of coronavirus and other infectious diseases are manufactured in China.

COVID-19 has resulted in massive disruption of Chinese manufacturing. It’s only a matter of time until this translates into supply disruptions for China-dependent customers. The FDA has just reported the shortage of a certain drug due to coronavirus-related disruption at a manufacturing plant that produces the API used to make the drug. The FDA is also monitoring 20 other drugs where the API or finished drug product is solely sourced from China. Unfortunately, unlike drug makers, medical-device or PPE makers are not required by law to notify the FDA of impending shortages or even respond to FDA inquiries.

Coronavirus has created concerns about not only the quantity of Chinese medical products available but also about the virus’s effect on quality. China does not effectively regulate Chinese drug manufacturers. Multiple episodes have cast doubt on the safety and efficacy of their products: In 2018, a Chinese vaccine-maker sold more than 250,000 substandard doses of the childhood DPT vaccine; Zhejiang Huahai Pharmaceuticals shipped the active ingredient for blood-pressure medicines, including Valsartan, that was contaminated with a cancer-causing chemical (NDMA) found in rocket fuel. In 2008, a contaminated Chinese API used to make the blood-thinner Heparin led to 81 deaths in the U.S. Now, due to limitations on travel to China because of the coronavirus, the FDA has suspended inspections of Chinese drug and device factories.

U.S. dependence on Chinese manufacturing in general, and medical products in particular, could, in emergency situations or periods of international strife, prove detrimental. It’s possible that Americans with diseases other than COVID-19 will face shortages and higher prices for the medicines they need to treat their illnesses due to manufacturing disruptions in China. The time has come for the U.S. to compile a list of brand-name and generic drugs (with their constituent APIs) exclusively produced in China but critical to the health and safety of Americans—and take action to ensure that these products get produced in the U.S. once again.

Joel Zinberg, M.D., J.D., is an associate clinical professor of surgery at the Mount Sinai Hospital in New York and was, until recently, general counsel and senior economist at the Council of Economic Advisers, where he specialized in health policy. The views expressed here are his own.

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