In recent years, the Chinese Communist Party (CCP) has become one of the leading players in the global pharmaceutical industry. On the one hand, the Asian country is the world’s second-largest consumer of drugs, second only to the United States. Secondly, and more importantly, it is the largest producer of active ingredients and raw materials used in medicines produced and marketed worldwide.
This global dependence on raw materials produced in China to manufacture medicines has aroused some controversy among governments and businessmen, especially after certain specific events, such as the COVID-19 pandemic. The pandemic revealed deficiencies in the supply chain of certain medicines dependent on the Chinese industry, causing shortages throughout the world.
The CCP has placed the pharmaceutical industry among the priorities of its ambitious “Made in China 2025” development plan. It intends to expand its exports and continue to deepen the world’s dependence on its production.
As a state policy, the Chinese regime set out to become one of the leading producers of Active Pharmaceutical Ingredients (APIs), the basis for producing finished drugs such as pills, tablets, syrups, formulas, etc. It has done so.
At the same time, China became a major producer of alternative finished drugs exported worldwide at an advantage, firstly because they have a lower cost structure than developed countries due to the informality of the Chinese labor system. Secondly, drugs in the rest of the world must go through extensive and rigorous certification systems before being approved, which would not happen under the communist regime. In China, a production system based on quantity prevails over the quality of its results.
Development of the chemical and pharmaceutical industry in China
The CCP has bet heavily on the chemical and pharmaceutical sectors during the last decades, investing in technologies and infrastructure and financing projects to exploit this industry.
Just as China became the largest producer of technologies and clothing globally, mainly due to its low labor costs, something similar has also happened with their medicines and raw materials.
Thousands of Chinese-owned companies dedicated to the production of APIs and alternative medicines have developed in recent years in China. In addition, many international companies—some renowned—have also decided to move their production operations to the Asian country.
Many sources agree that China is the world leader in API production worldwide. However, the numbers are not exact since generally, drug producers outside China are obliged to indicate on their labeling the place where it was manufactured, but not the origin of their APIs.
The CCP’s strategy was not to establish the country as a leading drug producer; such positions already have a tradition in other countries where pharmaceutical oligopolies have already taken root, such as Bayer in Germany, Pfizer in the United States, and Roche in Switzerland. But it has managed to position itself as the foremost global manufacturing supplier through APIs.
Reports with data from 2017 show that China leads the ranking of the number of chemicals producing and distributing companies per country with more than 25 thousand firms, of which 5,000 are in the pharmaceutical industry.
Worldwide dependence on China’s APIs
The world’s overdependence on APIs from China has led to extreme vulnerability in health security. Even rulers of powerful countries such as the United States and other European powers have expressed their concern.
Some officials of certain countries have acknowledged the problem of dependence on the CCP to supply APIs and medicines for years without much success. But the global pandemic has demonstrated the gravity of the situation, which led to urgency in bringing the issue to the forefront, at least among some sectors of the international community.
“As of August 2019, only 28% of API manufacturing facilities to supply the U.S. market were in our country,” Janet Woodcock, director of the Food and Drug Administration’s (FDA) Center for Drug Evaluation and Research, said during a congressional hearing on Oct. 30, 2019.
The United States is one of the great examples of countries that, during the last decade, have been weakened, at least in this aspect. The U.S. has gone from being a sovereign country in pharmaceutical terms and producing “in-house” almost all the drugs demanded by its citizens to being almost dependent on the international market.
According to FDA records, registered facilities manufacturing APIs in China doubled between 2010 and 2019.
While many factors can explain this shift, the underlying reasons often cited include that most traditional drug production processes require large production sites, significant environmental liabilities, and a large proportion of semi-skilled labor. Those conditions are costly in the West.
A 2009 World Bank paper called: “Exploratory study on active pharmaceutical ingredient manufacturing for essential medicines” indicated that if a typical Western API company has an average wage index of 100, this index is as low as 8 for a Chinese company and 10 for an Indian company.
In addition, China has lower electricity, coal, and water costs while facing fewer environmental regulations regarding the purchase, handling, and disposal of toxic chemicals, leading to lower direct costs for these companies.
Chinese regime minimizes controls on drug production processes
Drug production, especially in developed countries such as the United States and other European producers, is subject to rigorous quality certification mechanisms that guarantee that the products administered to patients are adequate, thus avoiding adverse or unexpected effects.
When the active ingredients of the drugs come from abroad, it is much more complex to follow the production procedures and guarantee their quality. As a result, the quality of the finished products can be affected and even be dangerous for human consumption, as has happened repeatedly in recent years.
Many examples of drugs have had to be withdrawn from the market or have caused great inconvenience to the population because their primary components were adulterated, contaminated, or simply inadequate.
In December 2015, the FDA alerted drug manufacturers that specific batches of Baclofen APIs manufactured by Chinese firm Taizhou Xinyou Pharmaceutical & Chemical Co, Limited, could be at risk of contamination with toxic particles. As a result, they should not be used for mixing sterile injectable drugs. Taizhou manufactures APIs for repackagers and distributors, some of which sell these products to compounding facilities in the United States and other parts of the world.
The FDA contacted Taizhou, and the company confirmed that, after performing specific controls in the manufacturing process, the Baclofen API it manufactures was not suitable for injectable drugs.
Accordingly, the FDA recommended that Taizhou Baclofen API not be used to manufacture or compound any injectable drug products. The affected API could pose serious safety risks to patients who used or received injectable drug products compounded with the affected Baclofen, especially when administered directly into the spine (intrathecally).
In 2018, Spain suffered a record number of drugs removed from the market after more than a hundred anti-hypertension drugs with the active ingredient Valsartan were contaminated with a potentially carcinogenic substance.
These same drugs were also recalled in the rest of Europe and the United States, creating one of the most significant global pharmaceutical alerts in recent history. Moreover, months after the Valsartan incident, other drugs with the active ingredients Irbesartan and Losartan were also found to contain possibly carcinogenic impurities.
Although these drugs came from more than 20 different pharmaceutical laboratories, they had one key point in common: the active ingredients were manufactured by several Chinese pharmaceutical companies.
The European Medicines Agency (EMA) reported that Valsartan sold worldwide may have been contaminated by these impurities since 2012. The EMA estimates that as a result, “one new case of cancer could appear for every 5,000 patients” who have taken high doses of these drugs.
The U.S. Food and Drug Administration (FDA) has considerably increased the number of warning letters it has sent to active ingredient production plants in China.
In 2012 it had sent only two warnings, while in 2017, their number rose to 39 due to Good Manufacturing Practice (GMP) violations.
While Chinese API exporters must comply with strict requirements to market their products to Europe and the United States, controls during the production process are much more complex. As a result, the integrity of their information to demonstrate their safety and efficacy is generally questioned.
In addition, companies linked to the Chinese regime have become significant producers of alternative drugs, which are generally marketed to developing countries where high levels of corruption prevail, and quality requirements are minimal or non-existent.
Risk of drug shortages
Another significant problem due to the heavy dependence on APIs produced in China is the constant possibility of shortages of medicines and medical supplies in the rest of the world if the regime interrupts supply.
With the recent Wuhan Coronavirus health emergency, even countries like the United States suffered shortages of essential medicines and everyday supplies such as disposable masks and respirators.
Among the medicines were antibiotics and paracetamol, one of the most widely used over-the-counter painkillers globally.
“People hospitalized with Covid-19 will receive sedatives if hooked up to a ventilator. They will need antibiotics if they get a bacterial infection. And they will need drugs to increase their blood pressure if it becomes dangerously low. Ninety percent of the chemical materials to make all that come from China,” Rosemary Gibson, an industry expert, and consultant to the bioethics research institute The Hastings Center, told BBC Mundo at the height of the pandemic.
Another well-known case that caused drug shortages due to a Chinese supply failure and highlighted the seriousness of the dependence generated over the last few years was the case of the Chinese antibiotic manufacturer Qilu Pharmaceutical Company in 2016.
The manufacturer produced, among other things, the drug Piperacillin (used in the treatment of pneumonia) and recorded an explosion on Oct. 10, 2016, at its plant in Jinan, 250 miles south of Beijing.
According to witnesses and neighbors in the area, the explosion was felt strongly, and a white powder with a strong burning smell permeated the air, China Daily News reported the next day.
The incident generated environmental pollution in Jinan, with severe consequences for its population. Children and older people were exposed to a cloud of toxic dust for long periods. Still, it also had worldwide repercussions since it triggered a significant shortage of Piperacillin.
As the only source of this drug, it highlighted how the pharmaceutical industry concentrated drug production in a few countries with competitive advantages, increasing the risk of shortages in the rest of the world.
The CCP promotes intellectual property theft
Another concern regarding the growing trade dependency relationship with the CCP and its productive apparatus is the serious allegations against it for the steady increase in intellectual property theft against their overseas business partners.
Such is the case that the U.S. National Counterintelligence and Security Center launched a campaign in October 2021 to generate awareness in the U.S. business community about the dangers of doing business with Chinese companies. It said it was due to the close relationship with the CCP’s intelligence services and military that forces them to give over access to confidential information of their customers and partners.
The campaign aims to stop the theft of confidential information such as Americans’ personal data and intellectual property associated with multiple sectors, including the chemical and pharmaceutical industry, which empowers the CCP on the world geopolitical stage.
Beijing is “using a range of legal, illegal and quasi-legal methods” to obtain intellectual property and data on U.S. citizens that it could use to try to dominate critical industries, said Michael Orlando, who is the deputy director of the U.S. Counterintelligence Center, according to the Financial Times.
The massive development of China’s pharmaceutical industry is partly due to the so-called return of the “sea turtles,” a reference to an enormous number of Chinese researchers who returned home after gaining critical expertise and information at large firms abroad.
Major Chinese biologics companies that are now publicly traded and compete with long-established international firms, such as CanSino and Abogen, were created and run by these scientists/entrepreneurs trained in large firms such as Pfizer SANOFI, Merck, and others.
The rapid growth of China’s pharmaceutical sector has triggered accusations of technology theft from the United States and other countries with long histories in the field. In addition, several Chinese scientists have been accused of stealing materials and research from U.S. institutions and companies, including leading universities and institutes.
During the Wuhan coronavirus pandemic, hackers backed by the CCP were allegedly involved in spying on or stealing vaccine-related information from the United States, Spain, and India.
According to the allegations, the typical modus operandi of the CCP is to steal intellectual property, replicate it, replace the international company that originated that intellectual property in the Chinese domestic market, and even attempt to displace it from the global market.
Former U.S. President Donald Trump was one of the world’s leading political figures to denounce this strong tendency to rely on the Chinese regime to produce chemicals and medicines used around the world.
During his term, President Trump pledged to give tax incentives to American companies that bring back their factories from China to the United States as part of his plan to reduce dependence on the Asian country and create a more robust domestic industry Fox News reported.
“We’re going to create tax credits for companies that bring jobs from China to America and we’re going to impose tariffs on countries that leave America to produce jobs overseas,” the president said.
He also promised to do whatever it took to end the policies of his predecessors that favored dependence on China, assuring that America must manufacture its own critical drugs and supplies locally as it once did.
It is undeniable that conducting business with the CCP today seems an inevitable fate for all countries in the world, both developed and, even more so, those lagging.
But taking into account everything detailed above, it is also clear that there are several critical industries for the normal development of humanity, including chemicals and pharmaceuticals, which require special treatment and specific controls to ensure the quality of products and their availability when needed.
In this sense, giving a quasi-monopoly power in these matters to the Chinese regime accused of the worst human rights violations, accused of having the highest levels of corruption in the world, accused of stealing information from its business partners, and so many other atrocities, is, at the very least, controversial.
Therefore, it is necessary that those countries in a position to negotiate with the CCP can agree on and demand credible strategies of transparency with the Chinese regime and its large productive apparatus to guarantee a normal and equitable distribution of the global chemical and pharmaceutical industry.