Are the Ingredients in My Medicine from China or India? ... Why Pharmaceutical Companies Can't Give Up on Them

Pharmaceutical companies are increasingly dependent on overseas sources for the raw materials (active pharmaceutical ingredients) that serve as the main components in drug manufacturing. In particular, the proportion of inexpensive Chinese and Indian pharmaceutical raw materials among imports is steadily rising. When issues arise with these ingredients, it is difficult to quickly find substitutes for the active pharmaceutical ingredients. There are calls for the government to create an environment that encourages the use of domestically produced raw materials and diversifies supply sources so that pharmaceutical companies can reduce their dependence on raw materials from these countries.

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According to the Ministry of Food and Drug Safety and others on the 10th, South Korea's self-sufficiency rate for active pharmaceutical ingredients was 11.9% last year, a sharp drop to less than half compared to 36.5% in 2020. This is the lowest level ever recorded. According to a survey conducted last year by the Korea Health Industry Development Institute and the Pharmaceutical Industry Strategy Research Institute targeting domestic pharmaceutical companies, 65% of pharmaceutical companies responded that they use more imported active pharmaceutical ingredients than domestic ones. Additionally, 8.7% of pharmaceutical companies reported using 100% imported raw materials. China and India ranked first and second as the countries of origin for imported pharmaceutical raw materials, accounting for 15.4% and 14.2%, respectively.

The reason pharmaceutical companies use Chinese and Indian active pharmaceutical ingredients is that they are 20% to 50% cheaper than domestic raw materials. Although there have been no problems reported in South Korea so far, safety concerns have continued overseas. Since last year, there have been continuous reports worldwide of deaths linked to the use of medicines containing Indian raw materials, such as cold medicine and eye drops.

The industry views the decisive turning point for domestic pharmaceutical companies' reliance on imported active pharmaceutical ingredients as the implementation of the uniform drug price reduction system in 2012. At that time, the Ministry of Health and Welfare adopted the motto of "significantly lowering drug prices to reduce the excessive burden of drug costs on the public," applying the same insurance upper limit price to drugs with the same ingredients and lowering the maximum drug price from up to 80% of the pre-patent expiration price to 53.55%. The domestic pharmaceutical and bio industry, which has a high proportion of generic drug sales, began seeking cheaper raw materials to compensate for losses.

Han Ssang-su, Chair of the Active Pharmaceutical Ingredients Committee at the Korea Pharmaceutical and Bio-Pharma Manufacturers Association, said, "Pharmaceutical companies imported low-cost raw materials to compensate for losses, and these quickly dominated the domestic market," adding, "The government intervened in the free market economy."

There is a system that grants preferential drug pricing when active pharmaceutical ingredients are produced domestically and finished drugs are manufactured. According to the current drug pricing system, if a domestic pharmaceutical company uses its own active pharmaceutical ingredients to launch a generic drug, the price is set at about 68% of the original drug's price for one year. However, there are also opinions that this system is ineffective in increasing the self-sufficiency rate of active pharmaceutical ingredients.

An industry insider said, "Because it is practically impossible for a pharmaceutical company that produces active pharmaceutical ingredients to sell them to competing companies, the system is not considered a significant incentive for pharmaceutical companies that face difficulties achieving economies of scale." The pharmaceutical industry argues that implementing a preferential drug pricing policy for finished drugs using domestically produced active pharmaceutical ingredients is the most effective measure.

There is an urgent need to diversify the supply chain of imported active pharmaceutical ingredients, which is currently heavily concentrated in China and India. Jung Yoon-taek, Director of the Pharmaceutical Industry Strategy Research Institute, emphasized, "If dependence on active pharmaceutical ingredients is concentrated in certain countries, supply disruptions are inevitable in situations such as pandemics," adding, "Since the United States considers active pharmaceutical ingredients a matter directly related to national security, we should also expand the supply chain through cooperation with allies such as the U.S." In the U.S., the Office of the United States Trade Representative (USTR) and the Department of Health and Human Services (HHS) are increasing supply diversity through multilateral cooperation with allies including Canada, Europe, and Japan.

This content was produced with the assistance of AI translation services.