“When you control the supply of medicines, you control the world” is the mantra of Rosemary Gibson, Senior Advisor of the Hastings Center and co-author of the book “China RX – Exposing the risks of America’s dependence on China for medicine”. A suggestive sentence, which Gibson was not afraid to repeat in 2020 in front of the Congress. It conveys a sentiment running through the pharmaceutical field. Today, more than ever, it is important to assess the issues related to the sustainability of the API market.
After all, analysts are drawing up brilliant forecasts for the pharmaceuticals of the near future. In this scenario, the global API market will reach $ 245 billion by 2024, 63 more than in 2019. A CAGR in the period considered (6.1%) that, on the one hand, remains sparkling due to the constant increase in incidence of chronic diseases, the demand for biotechnological drugs and the use of generics. On the other hand, however, it is held back by the significantly lower costs of the latter and by the cuts in the overwhelming expenditure associated with public health.
These numbers are in any case subject to the satisfaction of the global demand on the API market in compliance with high quality standards and appropriate environmental sustainability requirements. All factors that contribute to the construction (or destruction) of the reputation of the companies involved.
When you control the supply of medicines, you control the world
A risky dependence
Massively relying on delocalized suppliers who meet other regulatory criteria than the European or American ones entails serious risks in terms of quality, environmental impact, safety and treatment of workers. Incidents or irregularities detected at one of the establishments producing drugs or APIs can have serious repercussions also on the reputation of pharmaceutical companies.
A major concern is related to the manufacturing practices employed by Asian suppliers. Recent detections of medicines from China contaminated with nitrosamines and hypersulfated chondroitin sulphate have increased fears in this area.
A production concentrated in a few specific locations creates the risk of high concentrations of toxic residues with impact on biological communities and potential development of drug resistance. This is particularly the case if the environmental requirements are permissive. In 2007, the concentration of ciprofloxacin measured in the Patancheru production center, in India, was equal to one million times that of municipal wastewater.
As noted by the European Commission’s pharmaceutical committee, another worrying point is the fact that in many cases the Marketing Authorisation Holders (MAH) do not have sufficient access to information on manufacturing and control processes, as such information is considered commercially confidential by API manufacturers.
Treatment of workers
Human rights and working conditions are among the most controversial issues in terms of relations with China. Over the years, several international organizations have documented violations regarding minimum wages, working hours, environmental requirements, and inappropriate actions on employees by employers.
Enhancing production without affecting quality
Making API manufacturing scalable to meet the fluctuating demands of the global healthcare market requires a deep understanding of process design. Furthermore, the production enhancement benefits the company’s reputation only if it safeguards quality standards at the same time.
This is why it would be important to be able to trace along the entire supply chain not only the finished product, but also its individual constituent elements.
In Europe, the MAH is obliged to submit a QP Declaration. This declaration certifies the compliance of assets with GMPs and detailed knowledge of the supply chain. The manufacturer is responsible for discussing with the API supplier the requirements necessary to achieve the necessary quality levels.
The same does not happen in Asian countries. In these countries it may happen that the production sites do not correspond to those declared, that some production steps are subcontracted without authorization or that GMPs are not fully respected.
From this point of view, the complete digitalization of the supply chain, for example through blockchain technologies, would allow traceability similar to that of finished drugs.
Safety in the API market: nitrosamines
The issue of the safety of active ingredients exploded in June 2018. At that time, the presence of nitrosamine residues in sartans was traced. These impurities, which can form following the use of certain solvents, reagents and starting materials, or through contaminated equipment, are classified as probable human carcinogens. EMA has published three papers with direct indications to companies for an effective management of the problem. Its indications require the AIC holders to comply with the aim of avoiding the risk of contamination.
However, the case of nitrosamines drew attention to the need for a chemical evaluation of the APIs during the production process and for continuous updating on the regulatory front. These are aspects that affect the procurement plans of raw materials and the process design of companies. Furthermore, they are essential for preventing reputational damage. As for nitrosamines, the industries involved are considering the possibility of suing API producers.
No APIs, no drugs
Obtaining the active ingredients strictly depends on finding the starting materials. In this field, China, with its nearly 1,500 production plants (out of the 3,350 around the world), holds the leading position. However, in a context in which the protection of corporate reputation conflicts with continuity in supplies, the inability to acquire raw and intermediate materials that would meet the necessary requirements generates interruptions in the supply chain. This, together with the increase in demand, is one of the main reasons behind the shortages that in recent months have shaken the already turbulent waters of the management of the health emergency.
The usually staid French Finance Minister Bruno Le Maire has harshly commented on the condition of our pharmaceutical industry. Lemaire called for a review of the very concept of globalization and described Europe’s excessive dependence on China as “irresponsible and unreasonable”. Moreover, at the end of January 2020, when COVID-19 had not yet assumed the proportions of the pandemic but the difficulties in supplies were already beginning to flash, even overseas the attitude was no longer relaxed, if Ed Silverman published a piece on Stat News with the ominous title “The time to worry is now”.
The release from this dependence is a process whose complexity has yet to be fully understood. India, defined by many as “the pharmacy of the world”, relies on China for the supply of APIs, starting materials and production intermediates. And all its attempts at emancipation have failed miserably. This is because, if labor costs are comparable in the two countries, the scale of Chinese production is unattainable. This is what keeps significant the price differential for APIs.
Sustainable production from the earliest stages
These are the global environmental protection concerns associated with the chemical-pharmaceutical industry. But in recent years, media attention has also become lively. Furthermore, citizenship has acquired a new sensitivity towards these issues, which have a decisive impact on the reputation of companies. And yet there is currently no specific regulation of the release of substances into the environment.
For example, no information is available on the environmental impact of APIs. The requirements to be monitored are insufficient. Furthermore, there are no specific limits on emissions from production plants. In some countries there is not even the obligation to declare environmental disasters.
The production of both the assets and the finished products is concentrated in specific geographical areas. Therefore, polluting emissions in these areas reach alarming concentrations. Concentrations that are toxic in themselves and, in the case of antibiotics, active in contributing to the global phenomenon of antibiotic resistance.
The environmental issue has prompted the Chinese government to raise production standards. More stringent requirements were therefore imposed, which in turn made the activity economically unsustainable for many companies.
We need to look at drugs as we used to look at strategic weapons
Andrew Badrot, CEO di C-squared Pharma
About 150 API factories went bankrupt between 2016 and 2018, with disruptive repercussions on the supply chain.
The introduction of the environmental tax, which dates back to 2018, will lead to an overall revenue from the Chinese active ingredient industry of approximately 50 billion yuan (approximately 7.68 billion dollars) each year.
Regulatory uncertainty, reduction in the number of plants and increase in production costs are destined to impact the API market by reducing China’s weight in world API supplies. Are we ready to take care of it?