Mike's Blog

Affordability is on everyone’s tongue at the moment and is especially applicable and relevant for health care. One major component of health care costs that has received considerable attention is prescription drugs (and prescription-drug coverage). Medicare Part D is an approach at the national level to deal with drug costs. Direct negotiations with pharmaceutical companies over drug pricing are another arrow in the quiver. A separate but related concern is the resilience of the pharmaceutical supply chain. Currently, China and India supply roughly 70% of the drugs used throughout the US, but as a recent Council on Foreign Relations (CFR) article outlines, this dependence is increasingly being viewed as an unacceptable national security risk.

Pharmaceutical manufacturing grew out of the chemical and dye industries in the early part of the 20th century. While everyone recognizes that the FDA regulates products with regard to safety and efficacy, there is a third element which is quality (of the manufacturing process). Good Manufacturing Practice (GMP) for pharmaceuticals is more rigorous relative to other types of chemicals. The CFR article discusses in considerable detail the evolution of drug manufacturing from those early days through 1984 when Congress passed the Drug Price Competition and Patent Term Restoration Act, which established the generic drug industry with an abbreviated approval pathway resulting in cheaper generic versions.

As has been seen with consolidation across big pharma, a parallel consolidation among pharmaceutical wholesalers has occurred where price became the competitive advantage rather than quality. With the World Trade Organization (WTO) exempting pharmaceuticals from tariffs and China’s entry into the WTO, along with increased environmental risk assessments and regulations in the US and Europe, the opportunity for China to aggressively move into drug production was recognized along with a predatory industrial policy, such as low priced penicillin and vitamin C at the start of the millennium that drove most US based manufacturers out of the market.

China based its strategy along the same lines as their supply chain control of rare-earth elements where they control 70% of global extraction with 90% of element processing. As an example, China accounts for 20% of global antibiotics exports and, more importantly, 50% of global antibiotic ingredients exports. Amoxicillin is a commonly prescribed antibiotic with more than 60 million prescriptions annually in the US. Although there are numerous generic manufacturers around the globe, nearly all of them (including a production facility in Tennessee) rely on the active pharmaceutical ingredient (API) from China. Were China to stop exports of the API, US supply would be exhausted within weeks.

CFR goes on to discuss three broad areas that carry significant risks for the US from a national security standpoint:

1. Reliance on China for Raw Materials and Upstream Supplies for Generic Drugs
2. Erosion of U.S. Biopharmaceutical Manufacturing and Clinical Trial Capacity to China
3. Dependence on China for the R&D Infrastructure for Sensitive Biotechnology

They offer several case studies and highlight industrial policy tools that could address these risks.  All three areas are major concerns that need some serious attention. Operation Trialblazer is clearly an attempt to address #2. The CTSA Program should also consider ways to address #3.  
 

A slight alternative viewpoint has been offered by Stat. Interestingly, the author is a member of the CFR but was not involved with the CFR document. The Stat piece recognizes the same issues but argues that this can addressed more effectively by US regulatory reform. While the author is correct that drug manufacturing is distinct from commodities that rely on extraction, rather than an either/or scenario, more likely both avenues need to be vigorously pursued.

What I’m reading: The Decline in the Transmission of Scientific Ideas. This is an article from NBER (National Bureau of Economic Research) from July 2026 that argues that the diffusion of new scientific ideas beyond their field of origin has been steadily declining. They identify increasing specialization in scientific language as partly responsible for slowing diffusion. Basically, they are arguing that ‘translation’ has gotten harder because the multidisciplinary nature of translation necessary with today’s science increases the difficulty of communication and as such, better ‘translation’ skills are needed (which seems like something the CTSAs recognized twenty years ago).

The gadget’s trivial. It’s the network that’s useful. Not the gadget but the network.
- Robert Charles Wilson, Spin