Cutting America’s Dependence on Medicines

Dear Reader,

The spread of information and misinformation — like the coronavirus itself — is fast and unpredictable. 

Naturally, lots of people are confused about what is real and what is not, whether they should worry about coronavirus or whether they should not. And that’s why I’m writing about this topic today. 

Everyone is worried about getting sick with the coronavirus, but here’s what you should really be focused on: when the coronavirus pandemic struck earlier this year, the United States was forced to evaluate China’s chokehold on pharmaceuticals and other emergency equipment. 

The FDA put out a statement early on that it was forced to closely monitor the medical product supply chain, including disruptions to supply or shortages of critical medical products in the U.S. because many of the components for those in-demand products are manufactured in China. 

In a statement in February 2020, the FDA said:

“Since January 24, the FDA has been in touch with more than 180 manufacturers of human drugs, not only to remind them of applicable legal requirements for notifying the FDA of any anticipated supply disruptions but also asking them to evaluate their entire supply chain, including active pharmaceutical ingredients (the main ingredient in the drug and part that produces the intended effects, e.g., acetaminophen) and other components manufactured in China. 

Also, as part of our efforts, the FDA has identified about 20 other drugs, which solely source their active pharmaceutical ingredients or finished drug products from China. We have been in contact with those firms to assess whether they face any drug shortage risks due to the outbreak. None of these firms have reported any shortage to date. Also, these drugs are considered non-critical drugs.”

“Far too long, we’ve relied on foreign manufacturing and supply chains for our most important medicines and active pharmaceutical ingredients while placing America’s health, safety, and national security at grave risk,” said Peter Navarro, director of White House Office of Trade and Manufacturing Policy. 

During the 1960s and 1970s, President Nixon worked to open the doors to China. While I do support trade with China, it is worth mentioning that America’s dependence on China for its medicine is cause for concern. 

It Started with Penicillin

In the 1980s the Chinese government started investing large amounts of money in the fermentation tanks for which penicillin grows. This caused a major disruption in the market basically forcing other producers out of the market—including the U.S. 

In 1999, President Bill Clinton encouraged the admission of China into the WTO, the World Trade Organization. Clinton promised that opening trade with China would increase U.S. jobs and reduce our trade deficit.

He also said: “This is a hundred-to-nothing deal for America.” In 2001, China was admitted into the WTO. As you know, Clinton often has a problem with the truth. The deal turned out to be a hundred-to-nothing deal—in favor of China. 

Just like other manufacturing, drug manufacturing moved to China because labor and regulatory costs are far lower there. In 2004, the last plant in the United States to manufacture the key ingredients for crucial antibiotics like penicillin. 

The critical ingredients for most antibiotics are now made almost exclusively in China and India. The same is true for dozens of other crucial medicines, including the popular allergy medicine prednisone; metformin, for diabetes; and amlodipine, for high blood pressure.

Coronavirus 

China has become the second-largest exporter of drugs to the U.S. and the largest for medical devices so it is only natural that when the pandemic hit, and Chinese manufacturing stopped, the U.S. grew concerned about its supply chain. 

“If China shut the door on exports of medicines and their key ingredients and raw material, U.S. hospitals and military hospitals and clinics would cease to function within months, if not days,” said Rosemary Gibson, author of a book on the subject, “China Rx.”

In addition to the medicines used during the pandemic, the FDA also allowed 90 companies—many based in China—to sell Covid-19 blood tests that produced inaccurate results without formal federal review or approval.

“Tests of ‘frankly dubious quality’ have flooded the American market,” said Scott Becker, executive director of the Association of Public Health Laboratories.

It didn’t just stop with faulty blood tests either. When the world was scrambling to find personal protective equipment (PPE) for hospital and frontline workers, quality control became another theme for products imported from China. Inadequate filters and improper fit made many of the products unusable for hospital use. 

According to an article in the Los Angeles Times, in the U.S. “On March 12, officials at a State Council news briefing announced that authorities had seized more than 80 million counterfeit or faulty masks and 370,000 defective or fake disinfectants and other anti-coronavirus products in the prior month alone.”

Shutting the Door on China

When you look at the world, it is easy to see China is selling and the United States is buying. In other words, the United States buys more than it sells for the simple fact that anything that can be manufactured in the West can be manufactured in China for less.

But in May, The New York Times reported that the Trump administration announced one of the “largest-ever contracts to bring pharmaceutical manufacturing from abroad to a new plant in Virginia.” The company, Phlow, was awarded a $354 million, four-year contract to manufacture generic medicines and ingredients that are used to treat Covid-19. 

Although Phlow was only incorporated in January of 2020 it says that it’s been working on other medicines since last year to rid the dependence on China for pharmaceuticals but with the emergence of the coronavirus they switched gears and responded to a request for proposal to manufacture generic drugs in response to Covid-19. 

While this is big news for the U.S. and hopefully a turning point to bring home more production and supply chains it also isn’t all over for America’s dependence on China or other countries.

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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