Can’t Make It Here Anymore: The Outsourcing of Pharma Production

In this episode of SoundPractice, host Mike Sacopulos interviews Rosemary Gibson, senior advisor at The Hastings Center and a section editor for “Less is More,” in JAMA Internal Medicine. Ms. Gibson is an award-winning author, inspirational speaker, and advisor to organizations that advance the public’s interest in healthcare.

This transcript has been edited for clarity and length.

Mike Sacopulos: My somewhat admittedly free association here. Winston Churchill wrote While England Slept, which was published in 1938, and that book focused on Britain's lack of preparation for a German threat leading up to World War II. I was really reminded of this book when I sat down and spoke to our guest today, Rosemary Gibson. Rosemary Gibson’s new book, ChinaRx: Exposing the Risks of America's Dependence on China for Medicine, reminded me of a state of unpreparedness. Ms. Gibson has reported on the almost complete outsourcing of production of the active ingredients in antibiotics in several other mainline classes of medications. This is shocking to me. China is producing, and when I say majority, I should probably say vast majority. You'll hear from Rosemary that it's north of 80%.
I'm very excited about today's interview on a number of different levels. Now, Rosemary, when I began preparing for this interview, my son became ill. He's a freshman in college and he went to the student health services and was given some antibiotics. In all likelihood, where were the active ingredients of my son's medication produced?

Rosemary Gibson: Well, Mike, one of the discoveries I've made while researching for the book, China Rx, is that we can't make penicillin anymore in the United States. The last penicillin plant closed in 2004, and that's when I figured out from people who provided me with good data, that a handful of Chinese companies came in on the global market and drove out all the U.S. and Indian penicillin fermentation plants. So, we can't make it. And as for other antibiotics, Mike, I've been asking good people in the industry, do we have these big plants that do fermentation for antibiotics? And nobody can think of any in the continental United States.

Sacopulos: And this sounds like it dates back a while if it was '04, right?

Gibson: That's right. In fact, in 2001, a lot of your listeners will remember the anthrax attacks in New York and DC and in the post offices. And when the federal government needed to buy very large quantities of doxycycline, which is a known antidote for anthrax exposure, the U.S. government got it from a good company in Europe. I interviewed the CEO and he said he had to get the starting material from a plant in China. So, this happened probably in the late 90s and early 2000s, so that by all accounts, we've lost our ability to make really important antibiotics. So, to answer your question, the raw material to make the antibiotic probably came from China. I found one penicillin plant in Austria run by Sandoz. But the others are predominantly Chinese companies.

Sacopulos: And in your book, China Rx, I learned that it's not just antibiotics, is it, Rosemary? I mean, it sounds like there are a variety of medications coming out of China.

Gibson: That's right. In fact, I'm sure a lot of your listeners will be aware of a shortage happening. I think it's going to get really quite concerning, a shortage of heparin, this blood thinner, widely used in hospitals. And that's because China has a really dominant global market share of pigs. That's where the raw material comes from to make heparin. And there's a disease that's just wiping out huge numbers of the pig population there. And so already we're beginning to see companies that are carefully allocating, or dare I use the word rationing supplies of heparin. And this is going to be with us for a while, given the deep intensity of the loss of the raw material in China.

Sacopulos: And it seems to speak to the fragility of the overall system. If there is some kind of a swine problem in China, that jeopardizes medical care in the United States, would you agree?

Gibson: I agree. And what we've done is really allow a single country, whatever country it may be, to narrow, to centralize our global supply and the supply for our country in a single country. And we wouldn't do that with oil, we wouldn't do that with food. We wouldn't put all of our eggs in largely one basket, and we shouldn't do it for medicine. So, one of the recommendations in China Rx is we really need to diversify the sourcing of these products. And if we have to create new, I'm using my favorite term now, industrial base, new manufacturing capability in other countries and certainly here at home.

Sacopulos: Rosemary, my understanding that some in the pharma industry use the term finish-and-fill to denote the packaging of active ingredients of medications. For purposes of regulation in FDA oversight, does this concept matter at all?

Gibson: Well, what I'm hearing you say is the finish-and-fill, that sounds to me like the end work of a medication and getting it ready for market. It's taking the active ingredient and turning it into a finished drug, packaging it, and then preparing it for distribution. But what I did in China Rx, and I had no intention of writing a book on this subject, I just stumbled on it, is we have to go upstream. So, where the ingredients come to make these, the finished drugs, and it's not just the intermediate ingredients, where do the basic chemical molecules come from?

And to China's credit, they established a very robust industry in the pharmaceutical chemical space and the chemical space, generally. And U.S. companies just couldn't compete with lower prices and also lower regulation. But the one big discovery I made is that it's not just lower prices that has allowed this to happen. A handful of Chinese companies, really, they form cartels, small numbers of firms, and then they set the term is dumping, they dump it on the global market at a below market price, and they keep it low until their competitors can't survive and they leave the market and then they drive the price up. So, there's something else going on here besides just lower cost. There's a clear strategy and China's come out and said, "We want to be the pharmacy to the world." And they're very much on track to become that, including for us.

Sacopulos: So, I think you just anticipated my next question because I was interested if it was just lower cost of production or if the Chinese government had really taken an active role and incentivized firms within PRC for specific types of pharmaceutical production. And it sounds like that's what you're telling me.

Gibson: That's right, Mike. One of the discoveries that I made while working on this is a company in the United States or in Western Europe, they're really competing not with companies in China. They're competing with a Chinese government because the Chinese government is spending billions to subsidize its domestic industry. And that's a really hard thing to do for a company here in the U.S. or elsewhere to compete with that.

Sacopulos: I would agree. Are you aware of projected ramp-up times to make certain types of antibiotics in the United States? I'm thinking if we wanted to remedy the situations that you've been describing in China Rx, how long is it going to take to put something together?

Gibson: Well, I think there's something that can be done in the short term, Mike, and then medium term. Let's start with the short term. I've been following very carefully a non-profit group that was started by the Mayo Clinic and 1,000 other hospitals here in the U.S. and three philanthropies called Civica Rx. And they are formed to deal with the shortages that hospitals face every day and shortages of really life-saving medicines, including last resort antibiotics. So, within one year of their startup, they've delivered to their member hospitals a product that is really important in shortage, injectable vancomycin. And they've found a company in Europe, a Danish company, that agreed to make the core ingredient, the active ingredient. And then they're turning that into a finished product at a plant in Ohio. So, in this strategy, hospitals are looking for alternative trustworthy suppliers and they're doing something really smart. They're not paying a race-to-the-bottom price, they're paying a fair price, which is actually lower than the price you pay for a drug that's in shortage. Because when it's in shortage, it costs more. And if I'm a manufacturer, they're giving long term contracts to these new suppliers and manufacturers. So that's one way.

But there's a medium-term strategy that's needed that really looks at where do we get the raw material to make antibiotics like penicillin and to rebuild a fermentation facility. These are huge complexes, and it would take several years for them to be built and then get approved by the FDA. And this is for the raw material, which is needed to make the key ingredient, and then the finished product. So, I think there's a sequencing here of what we can do.

So, in the short term, we can have some really great wins, really important for patients and for doctors and those who care for them and frankly, those who lead hospitals, because these shortages are really, really troubling. But there are solutions out there that are emerging like this, but for the longer term we're going to need big investment and I think that'll have to be a public-private partnership.

Sacopulos: Agreed. What about items needed for healthcare other than pharmaceuticals? Does China have the market cornered on rubber gloves or needles or medical devices? Things other than pharmaceuticals?

Gibson: They do have a dramatic market share for a lot of healthcare-related products. A lot of people will remember the Ebola outbreak and patients coming here and being cared for in U.S. hospitals. And there was a huge demand for protective gear. And as I wrote in China Rx, there was a U.S.-based company, and it ramped up production in China to try to meet the demand. Now that's convenient, but in the long term, is that where we want to be if we have some national security or other type of event here, do we need to have some capacity to make those products here in the U.S.?

And I have to ask the question, who's checking the quality of those gowns and gloves? Are they really impermeable to fluids and made the way they should be? And we're also seeing China ramp up medical device production. If they're not here already, I anticipate that they'll be hip and knee implants coming from China into the U.S., and who's testing those? Are they being made the proper way? These are really big questions. And then China's ramping up production of CT scanners and I can imagine that eventually they'll be exported here to the U.S. The question is what will the quality be and who will be checking? The FDA doesn't do that, so who will be checking?

Sacopulos: It's a good question that needs to be asked. So far, Rosemary, we've been discussing production, whether it's of CT scanners, antibiotics, and so forth. But I now want to shift focus a little bit to research and development. Is China equally active in that area?

Gibson: China is ramping up very quickly in their R&D space and there's been billions of dollars from U.S. and other western companies that have been invested in R&D in China to serve that market. I will say in China Rx, I focused mostly on generic drugs, Mike, because that's 90% of our medicines, our bread and butter. But we are going to be increasingly seeing products from China or partnering with China because the government really wants to get into that space and become a global leader.

Sacopulos: All right. So obviously all of this has national security implications to the United States and our allies, remaining allies. Has medication security been addressed by NATO?

Gibson: I'm not aware if it has or hasn't been addressed by NATO, but I will say here in the United States, there was a hearing last week in the house Energy and Commerce Health subcommittee and the focus was on national security and our global supply chain with a focus on China. And without a doubt on both sides, members of Congress who participated in that hearing appeared to really see this as a very significant national security issue. Just think, if there's a global pandemic, any country that makes antibiotics would probably want to keep a lot of that for themselves.

Sacopulos: I agree. And arguably should, right? The first obligation is their own citizens.

Gibson: Sure. So, what are the risks of that? And look at the anthrax antidotes for anthrax exposure. Do we really want a single country to be the dominant producer of that? Or if there's a natural disaster, an earthquake, or a Fukushima-type event, again, we wouldn't do that for oil. We wouldn't have 80% of the world's oil refineries in a single country. It just doesn't make sense. So, we have to re-look at this, and I'm really pleased to see that there are a number of people in different parts of the U.S. government that have been reading China Rx and are quickly moving to see where our vulnerabilities are. But we need to put a system in place and frankly, a fasting and prediction system to know where we are at risk.

Sacopulos: Away from NATO, back to the issue of Chinese government, or at least firms selling at below production costs, dumping to drive out competition is what I understood. Has this been addressed by the World Trade Organization?

Gibson: No, it hasn't. And it really hasn't been addressed by our own U.S. government. And it's been fascinating to see that many people in both the executive branch and the legislative branch have not been aware of this vulnerability. But the good news is, and I'm grateful to China Rx and the reception it's had because it really is having an impact and people are beginning to look at what are these vulnerabilities? The U.S. Defense Department, they're dependent on China for the ingredients and some really important medicines. There was a retired lieutenant colonel who spoke at a U.S. China Commission hearing where I also testified in the summer, very distinguished gentleman, and he had different blood pressure medicines with rocket fuel compounds in them, that was the source of all the blood pressure medicine recalls. And he said, "If I'm getting it, then our active-duty military people are getting this." So that really sounded an alarm and really engaged people who are looking at this from a national security perspective, which is very welcome and a little bit overdue, but we're getting started, at least.

Sacopulos: Well, certainly, China Rx has been the fire bell in the night. Let's talk about cellular therapies because they hold tremendous promise for future of medicine. Does a more individualized approach to treatment using cellular therapies, stem cell treatments for example, offer speed bumps to China's approach to being the pharmacy of the world?

Gibson: That's an interesting question, Mike. I confess I haven't looked at those therapies or the implications of that for medicines that will be used in the future here in this country. But it's a great question. It would be great to hear people talk about the answer.

Sacopulos: Something to think about. Some commodities in the United States are so important that we stockpile them. For example, the strategic petroleum reserve. Is there an equivalent for medications?

Gibson: Yes, there is the strategic national stockpile that contains a lot of equipment as well as medications. And a question to begin to ask is, where does that come from, and if we need to replenish it, where does it come from?

Sacopulos: And who is in charge of that? The decisions that are made.

Gibson: That now comes under the Department of Health and Human Services and the Assistant Secretary Office for emergency preparedness. And that's really meant for regional, more localized events. It's not meant to be a substitute for this very large commercial supply chain we have for generic drugs.

Sacopulos: So, it's more of a stop gap deal with a regionalized epicritic problem where we need to focus in on one area but not a prolonged overall lack of a medication. Is that fair?

Gibson: That's fair, yes.

Sacopulos: Interesting. There seems to be, and maybe I'm wrong on this, and certainly correct me, there seems to be some resistance to naming countries of origins for medication. I know when I'm at my grocery store, when I'm buying food, it's required to be labeled where that food came from. The shrimp are coming from Thailand, for example. Why the opposition? Who's leading the opposition to the extent that it exists for identifying countries of origin for medication?

Gibson: There was a proposed country of origin legislation about 10 years ago here in the United States, but it didn't make it through. And there's a thought, well, these are trade secrets. But what we're seeing is that now Chinese domestic companies have about close to 9% of the share of all the generic drugs being sold here in this country. And I have photos of their labels and I use them in my presentations when I give talks. And China's very proud to put its name on these products and the company that made it and how it's distributed here. But we just don't see that here on the U.S. side. And I wonder if it's because the latest poll I've seen is about 95% of Americans don't trust medicines coming from China.

Sacopulos: And do you believe that that has to do with some of the other reports that have come out with things, maybe not medicinal in nature, but dog food that's been contaminated and so forth?

Gibson: The dog food issue really sticks in people's minds. When China Rx came out, I got a lot of emails and comments from the public saying, "I remember when thousands of dogs and cats died in this country because of an industrial chemical that was put in pet food that came from China." And people wonder now, well, why are we getting medicines from there? So, the trust issue is really quite pronounced. And I really have to say that in just 10 years, China got about 9% of the share of all the generic drugs being sold in the U.S. We're talking about HIV/AIDS medicine, birth control pills, medicine for Alzheimer's, Parkinson's, epilepsy, diabetes, Metformin. I predict in the next 10 years they'll be up to at least 20% share of all the finished generic drugs that are sold here. And that's only going to keep growing if we don't do anything.

Sacopulos: And that's finished drugs? Am I right to assume that if we talk about active ingredients in other medications that are perhaps assembled elsewhere, that the number could be higher than nine or 20%?

Gibson: Well, certainly in terms of finished drugs, it's 9% headed up to 20%, I believe. But there are thousands of medicines right now, generic drugs that might be made by U.S. and western companies that contain raw material and other ingredients that come from China. In fact, one of the really surprising findings, Mike, when I was researching the China Rx book, a lot of people know India as a really big generic producer and about 25% of our generic drugs are made in India. But the shocker was how dependent India is on China for the raw material and the chemical building blocks to make their generic drugs. So, if you think they're coming from India, if India's industry didn't get those products, their industry would collapse within weeks. So, all roads lead to China.

Sacopulos: In 1906, Upton Sinclair published The Jungle. You may remember it kick-started reform of the meat packing industry. And I have to say, I hope that China Rx is the modern incarnation of The Jungle. Since the publication in 2018 of your book, Rosemary, have you seen signs that our country has begun addressing the issue?

Gibson: I have been very heartened to know that members of Congress are reading the book, people in government agencies, in senior positions whose responsibility this is, they are reading it and asking questions. And that's a great start. And there's an urgency, not just national security, but understanding China. And some people may think, well, our trade kerfuffle and China could do something to us. I was talking with people in Europe. In fact, there's a Dutch documentary done by the local public television group there in the Netherlands. And a former industry person said, "Even here in the Netherlands, we're concerned that China could hold back supply of our medicines." And they're not in any trade kerfuffle.

So, when you control medicines, you really control the world. You go back and you look at history. Just in World War I and World War II, between England and Germany, food was used as a weapon of war. They wanted to starve people, and hundreds of thousands of people died in Germany because of a blockade by England. They remembered what happened during World War I when the reverse was true. Our medicines can be used in lots of ways that we never thought could be used. So, we need to really think about this and have some self-sufficiency.

Sacopulos: And it sounds like from your comment that China Rx has been picked up and read by, or is being read by, some members of Congress. That's heartening to know that well, one, that they read at all, and two, that they're actually reading China Rx. So, I'm looking for some good news here, Rosemary. I'll think of that as good news.

Gibson: Well, I do, too, Mike. It's a start. And I think, also, people who are leaders in healthcare. Now, these are the things that you need for the business continuity of your organization, and I hope that there's an opportunity in this community of leaders to come to know about this and do what we need to do as an industry so we're not cut short.

Sacopulos: Very well said. I think it's important to point out, as we're wrapping up here, Rosemary, to our listeners, that you have no financial incentive in this, correct?

Gibson: That's right. I'm glad you asked that, Mike. I spent three years researching this, and a year and a half writing it. And I don't take money from the industry or government. I saw this issue that is so important for the health of our nation, and we also donate proceeds to good causes. So, this is purely in the interest of all of us, and I trust that it's something that could bring us all together to fix and we've got to get going and fix it fast. I have faith. There's a lot of good signs that we can and will.

Sacopulos: All right. Well, let's end on a note of you giving us some recommendations or some game plans, something that listeners can feel like they can do to follow the issue and help improve the situation. Because what has been described is dire and requires action.

Gibson: It really is dire. Well, first, there's, for individuals who are listening, what can you do? There is an appendix in China Rx with information on how you might be able to find out where your medicines are coming from. And as a country, I think it's just raising awareness and read China Rx, share it with your colleagues. I know there was a group that shared it with their C-suite and their board. And then talk to their trade associations, their membership groups, learn more about this, and then engage with members of Congress and other elected officials in the executive branch and say, what do we need to do here and what can we do? And what's the role of us working together to fix this?

Sacopulos: Well said, it falls in the civic responsibility category for all of us, I think.

Gibson: It really does. That's nicely said, Mike. Thank you.

Sacopulos: Well, we have been speaking with Rosemary Gibson, author of China Rx: Exposing the Risks of America’s Dependence on China for Medicine. I cannot thank you enough for your time today, but even more so, for taking the time and doing such a thoughtful, well-written exposé of the problem of medications coming out of China. Rosemary Gibson, thank you so much.

Listen to this episode of SoundPractice.

https://www.amazon.com/China-Rx-Exposing-Americas-Dependence/dp/1633883817