China is a key provider of raw materials, chemicals for medicines popular abroad

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NEW YORK — Factory shutdowns across China because of the coronavirus have exposed an uncomfortable health-care reality: Many medicines rely on raw materials that are made in that country.

The U.S. Food and Drug Administration Thursday said one drug already has gone into shortage because of difficulties obtaining a raw ingredient from a site affected by the coronavirus. It didn’t disclose which drug or its manufacturer.

For several weeks, the FDA has been contacting more than 180 drug manufacturers, reminding them to provide notification of any expected supply shortages. That includes the makers of roughly 20 products the agency has identified as containing key pharmaceutical ingredients from China.

Most vulnerable are generic drugs, which make up some 90% of the medicines taken by Americans. Nongeneric, or branded, prescription medicines tend to have supply lines linked to other parts of the world.

Certain classes of drugs, too, are at special risk. China is a key supplier of the chemical and raw materials for popular blood pressure medicines and several older antibiotics that are no longer manufactured in the U.S., such as doxycycline and penicillin.

Big drugmakers such as Teva Pharmaceutical Industries Ltd., one of the world’s largest generic manufacturers, have said in statements before the shortage was announced that they were monitoring their supply chains and hadn’t experienced any disruptions.

On Thursday’s quarterly earnings call, Mylan NV said it continues to monitor the situation and noted the company’s diversified supply lines, but warned that shortages could occur in the future. The company’s president, Rajiv Malik, said, “Our whole industry is in one way or other way connected with China, but you would expect us to be much better placed.”

Experts believe China is also the only maker of key ingredients in a class of decades-old antibiotics known as cephalosporins, which treat a range of bacterial infections, including pneumonia.

“The antibiotic supply chain is becoming increasingly fragile, even without a global epidemic centered in the major manufacturing location,” said Dan Diekema, director of infectious diseases at the University of Iowa Healthcare, a hospital. “If we were to have major disruptions that caused shortages of several antibiotics at once, it would challenge our ability to adapt.”

Several generic manufacturers have seen prices on pharmaceutical raw materials grow by as much as 50%, including those for common products such as cholesterol-lowering statins, according to research by Sanford C. Bernstein & Co.

Drugmakers are adjusting, including by looking for alternative suppliers and raising prices, said industry experts and officials. Some Chinese firms stopped shipping to manufacturers in India, said David Light, chief executive of Valisure, an online pharmacy that works with advisers in India. The Indian generic-drug industry, which the FDA says supplies 40% of U.S. generic drugs, relies on China for much of its active ingredients.

With hundreds of manufacturing plants and other workplaces in China suspending operations in an effort to contain the spread of the coronavirus, more pressure on the pharmaceutical supply chain looms large. Yet details on the medicines supply lines into the U.S. are limited, hampering authorities’ ability to anticipate which drugs are most vulnerable.

China is recognized as the world’s biggest supplier of the raw materials — known as active pharmaceutical ingredients — that form the basis of medicines. That dependence on China makes shortages more likely should Chinese manufacturing be shaken, according to a 2019 U.S. government report. China’s dominance is growing: The U.S. imported $3.9 billion worth of pharmaceutical raw material from China in 2017, an increase of nearly one-quarter from the prior year, says IHS Markit.

Even before the outbreak of the Covid-19 disease, experts for years have warned that overreliance on a single region posed risks to the U.S. healthcare system. An explosion in 2016 at a plant in China led to a world-wide shortage of the antibiotic piperacillin.

“The pharma industry is pretty much bound hand and foot with manufacturers in China,” said Robert Walsh, whose company Samara Biopharma Consulting audits Chinese factories on behalf of Western drugmakers.

The industry has some cushion. Drugmakers tend to stock up in advance of China’s Lunar New Year holiday, over which factories typically close for two weeks. They also order raw materials in bulk and maintain about six months of supply, industry officials say.

“The question is, how far in time do these stockpiles go, and can we continue to rely as heavily as we do on manufacturing of these critical supplies offshore,” said Rita Numeroff, a health-care business strategist.

The intricacies of the supply chains for individual medicines — which companies keep under wraps for competitive reasons — remain hidden from the public. While the FDA requires manufacturers to report when there is a shortage of a specific product, companies that make the raw materials aren’t subject to such demands. Nor must they disclose the size, or timing, of shipments being made to the U.S., limiting the ability of hospitals and other providers to plan for potential supply disruptions.

The FDA says it has no way to track API volume out of China. “We technically have no idea what is actually manufactured in China,” said Soumi Saha, senior director of advocacy at Premier, one of the largest group-purchasing organizations in the U.S. contracting for drugs and other supplies for hospitals. “We’re missing that upstream visibility.”

Trying to shed light on the medicines-supply chain is Mike Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. He is leading an effort to map out the supply chains for around 150 of the most important medicines and medical devices in the U.S., by piecing together information from shipping records, company disclosures and FDA data. Although the project started around 18 months ago, he said the coronavirus outbreak has put it “on steroids.”

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