U.S. Leans On India’s Pharma Industry To Snub China. There’s Just One Catch

(Bloomberg) -- The Biden administration embraced a plan from India’s government last year to edge China out of its position as a leader in making ingredients for generic pharmaceuticals sold in the US. But a new report shows that much of those ingredients are likely still coming from China anyway.

America’s reliance on China for drug ingredients has raised alarm bells in Congress. House committees will hold two hearings Tuesday on drug shortages and the US Food and Drug Administration’s foreign inspection program, which has seen a large drop in visits to Chinese factories over the last few years, due in large part to the Covid pandemic.

The report put together ahead of the hearings by the Coalition for a Prosperous America, a trade organization pushing for tax breaks for domestic manufacturing, showed India-based Aurobindo Pharma Ltd. gets about 55% of its raw materials for ingredients from China. Aurobindo is a bellwether for the industry: It supplies the most generic drugs by volume to the US, and its $3.1 billion in 2023 revenue was second-highest among Indian drugmakers, according to data compiled by Bloomberg. The company’s 2022-2023 annual report said it has “a high dependence on the China market” for materials and ingredients used to make drugs.

“We did suspect they had ties to China, we just didn’t know how much,” said Nick Iacovella, a spokesman for the coalition. “This is really a red flag.”

President Joe Biden’s administration has focused its efforts on deepening its collaboration with India, where US relations are good in comparison with China. As tensions with the Asian superpower grow, so do concerns over how the US and the rest of the world count on the country for many pharmaceuticals, particularly the key ingredients used to make drugs.

Security Threat

US military officials have gone so far as to call vulnerabilities in the drug supply chain a national security threat, and the Defense Department has begun an effort to test generic drugs for safety and effectiveness. Meanwhile, the supply chain has never felt more tenuous: Drug shortages in the US peaked at 309 last year, the highest number in almost a decade.

With their low labor costs and lax environmental standards, China and India dominate generic drug manufacturing. Yet companies in those countries operate largely outside of FDA view. While the agency can easily make surprise inspections at US plants, they’re often announced ahead of the time in the two countries.

The report also shows Aurobindo is doing business with suppliers that have ties to China’s military industry, questionable track records on safety and are based in Xinjiang, where the US government has warned there is “evidence of widespread use of forced labor.”

Aurobindo didn’t respond to a request for comment, including a question about whether they use materials from the Chinese suppliers in drugs made for the US market. 

The coalition worked with experts and research analysts examining import and export data.

Suppliers’ Ties

One of Aurobindo’s suppliers in China last year was Zhejiang Huahai Pharmaceutical Co., according to the report. The document said Aurobindo ordered valsartan, a blood pressure medication, from Huahai. 

The drug went into shortage five years ago when a probable carcinogen, N-Nitrosodimethylamine, or NDMA, was found in ingredients used to make it that were supplied by Huahai. FDA inspectors found that the China-based company had ignored evidence that the ingredient was contaminated. 

Aurobindo does business with at least four suppliers that have ties to organizations under US sanctions for their connections to China’s military industry, the report said. One of the suppliers referred to in the report, Henan Topfond Pharmaceutical Co., Ltd., is controlled by China Meheco Group Co. Ltd. One of that company’s top shareholders is China Aerospace Science and Industry Corp., which the US government has determined “to be acting contrary to the national security or foreign policy interests of the United States.”  

India’s companies have their own quality issues to contend with, making the FDA’s efforts to oversee drug safety a game of whack-a-mole that the agency is far from winning. Inspectors have documented a host of issues at companies in India that haven’t improved over the last decade, including factories with unsanitary conditions, ignored contamination and made-up test results.  

Warning Letter

The FDA sent Aurobindo a warning letter in 2022 after an inspection of one of its factories in India found it failed to ensure suppliers could provide materials “of intended quality and purity,” according to an inspection document. Inspectors also found Aurobindo’s protocol for testing samples of drug-making materials it received was not “scientifically sound and appropriate” to ensure the products met US standards. 

Aurobindo said Friday it would halt production on some of its manufacturing lines at an Indian subsidiary, Eugia Pharma Specialities Ltd., after an FDA inspection. The company said it received an FDA report listing nine potential violations but didn’t say what inspectors found. 

“The company has already started working with the regulatory authority/third party consultants to accelerate the process and re-start production on those lines at the earliest,” Aurobindo said in a statement. “At this point in time, we don’t foresee any material impact on the business.”

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