China vs. India: The pandemic exposes hidden war over global medicine supply

As COVID-19 cases surged in India and demand for medicines and medical supplies escalated, cargo flights from China were halted at the end of April. India needs the contents of those planes. They carry materials for India’s vast generic drug manufacturing industry to replenish the country’s supply of antibiotics, sedatives, and other medicines for survival.

Behind the scenes, a battle is being waged over control of the world’s supply of medicines.

While India is known as a generic manufacturing powerhouse, it cannot manufacture antibiotics and hundreds of other essential drugs because China has a chokehold on the global supply of starting materials to make them.

Last year at the height of the global pandemic, the Government of India reported that China supplies India with 69 percent of the materials for its generic industry. Any slowdown in imports will wreak havoc in India and reverberate around the world.

Here in the United States, India supplies 25 percent of the generic drugs used in hospitals, sold in retail pharmacies, and found in home medicine cabinets.

A prolonged period without Chinese imports of components to India will exacerbate existing shortages of antibiotics and thousands of other generic drugs in the U.S. where 90 percent of the medicines prescribed are generic.

A closer look reveals that China has been undermining India’s domestic production capability for decades.

Beginning in the 1980s, China’s industrial policy wisely fueled the construction of enormous antibiotic fermentation capacity. In a country with more than a billion people, it is strategically prudent to maintain a manufacturing base to produce medicines for infectious disease.

India also invested in antibiotic raw material production capability. China deployed its predatory pricing strategy and dumped penicillin raw material on the global market at below market prices to drive out competitors. This is why India no longer makes penicillin, a distinction shared with the U.S. whose industry suffered the same targeted onslaught.

Monopoly power over supply confers monopoly control over price that can be wielded at opportunistic moments. In the midst of the COVID-19 surge in India, China has reportedly increased the price of key inputs to make antibiotics and the pain medicine acetaminophen by 100 percent.

Meanwhile, India is being undermined in its push toward increased self-sufficiency. China is reportedly refusing to sell selected key inputs to India, which uses them to make the active pharmaceutical ingredients (API), the component of a drug that provides therapeutic value.

As China moves up the pharmaceutical value chain, it wants India to buy its higher value APIs and drive out Indian producers – just as it has done in the U.S.

The endgame is in sight: China overtakes India as a global generic drug powerhouse and fulfills its aim to become the pharmacy to the world.

The consequences for the United States are enormous: India’s 25 percent share of the U.S. generic drug market will gradually erode as imports from China supplant them.

A country that controls the world’s medicines controls the world.

Withholding medicines is an efficient way to destabilize a country and demoralize a population. Leverage can be exercised to extract concessions from geopolitical adversaries: go along or your population will die from infectious disease, untreated cancers, heart attacks, and strokes. Health care systems will collapse.

Companies that function in an economic system of market competition are no match against a strategic and well-funded government industrial policy.

For the U.S., a public-private partnership to produce essential generic drugs is an imperative. During World War II, the federal government and industry partnered to fast-track penicillin production in time for the D-Day landing on Normandy Beach. This joint capability was responsible for saving countless lives that would have been lost from infected wounds.

Fast forward to today when the federal government has spent billions on vaccines for COVID-19 for a viral infection. Preparedness requires more than vaccines.

During the 1918 flu pandemic, most of the 675,000 U.S. deaths occurred because of bacterial pneumonia after becoming sick from the flu. Today, pneumonia is treated by antibiotics whose inputs are produced mostly in China.

The pandemic has exposed the behind-the-scenes battle over the global supply of medicines. It is a battle that neither India nor the U.S. has begun to fight. They ignore it at their peril.

Rosemary Gibson is Senior Advisor at the Hastings Center and Author of China Rx: Exposing the Risks of America’s Dependence on China for Medicine