COVID-19: China's role as a global ingredient producer has come under scrutiny, says Fitch Solutions

With pharmaceutical supply chains under immense pressure due to COVID-19, China's role as a global ingredient producer has come under scrutiny, Fitch Solutions has said.

As per the report, as trade war has heightened discussion over the national security implications of manufacturing new technologies abroad, COVID-19 has highlighted vulnerabilities in the medical manufacturing supply chain, most notably in the US.

"We believe that over the longer term, governments may aim to source more key pharmaceutical ingredients locally as opposed to the current heavy reliance on China, and to a lesser degree India," it said.

This provides an opportunity for the Indian government to escalate domestic production of pharmaceutical ingredients to counteract an over-reliance on Chinese imports now hampered by COVID-19 shutdowns.

Indian government has aggressively begun implementing a policy to ramp-up local output and emerge as an alternate to China, it said.

As well, growing political will amongst major developed economies could encourage governments to offer incentives for companies to re-shore some medical equipment manufacturing.

A large number of active pharmaceutical ingredients (APIs), or bulk drugs, that are used for the manufacturing of drugs are exported from China.

India for instance imports almost 70 per cent of its bulk drugs and intermediates from China.

India relies on bulk ingredients from China to manufacture a fifth of the global supplies of drugs that are off patents.

For India, the pandemic triggered raw material shortages and exposed its dependence on Chinese imports.

"Outside India, in the US as of August 2019, only 28 per cent of the manufacturing facilities making APIs to supply the US market were in the country. By contrast, the remaining 72 per cent of the API manufacturers supplying the US market were overseas, and 13 per cent are in China," the report said.

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