China’s Hold Over America Is Getting Worse…
The Three Gorges Dam, the largest dam in the world, was close to hitting a breaking point and a failure at the site would result in a supply-chain crisis unlike the world has ever seen.
In our alert, we highlighted that the medical industry in particular would be hit the hardest, with a large amount of the world’s chemicals for drugs as well as medical devices and equipment being made downstream from the dam.
Diving deeper into this, though, you start to unravel something that turns to be a much bigger issue…
China has a stranglehold on the American pharmaceutical industry.
This isn’t immediately obvious when you’re walking down the aisles of a grocery store looking for ibuprofen, though…
The names of the painkillers are familiar — Tylenol, aspirin, etc. — but it’s what’s inside the pill that’s changed.
Or rather, not the chemical composition, but where it’s come from.
Getting an exact figure on what percentage of active pharmaceutical ingredients (API) come from China is difficult, as the figures get muddled down the line.
The graph below helps at least give a broad picture of the current situation…
It’s reassuring to think that the U.S. still leads China in terms of the percent of API facilities for marketed drugs.
But this doesn’t paint the whole picture.
Since 2000, China has slowly been increasing its share of the market, while the U.S. share has steadily decreased.
As you might expect, it’s cheaper to make drug ingredients in Chinese facilities.
One particular story illustrates this perfectly…
In 2004, the Bristol-Myers plant in Syracuse, New York, accounted for 70% of the world’s penicillin production.
Meanwhile, Chinese firms were investing in infrastructure, particularly in antibiotics, to be able to grab a share of this part of the industry.
Global production of raw materials for penicillin increased dramatically in part because of China’s plan.
They then dumped the materials onto the global markets at below-market prices and kept it low for years.
This forced out competition who couldn’t keep up, like those that worked at the plant in Syracuse.
Bristol-Myers threw in the towel and dramatically cut production at the plant. To put it in context, in 2000, the Syracuse plant employed more than 2,000 people… today the number sits at 650.
The FDA itself states that if something isn’t done, this trend will only continue.
And that is terrifying.
What Can Be Done
China now makes over 10% of our current generic drugs, and that number will continue to increase if something isn’t done.
On top of that, China has a hold on many of the precursors and raw materials needed to get these drugs on the market.
Just like with rare earth metals used in EVs, China has a chokehold on the key starting materials and chemicals to make our basic drugs.
What they did with penicillin they can do with plenty of other drugs, and they’ve continued to ramp up their production to slowly dominate the markets.
Nothing illustrates how bad this is for the U.S. than the recent COVID-19 pandemic.
If we have to rely on China for these materials to make the most basic drugs, then China can decide on a whim to cut off ties with the U.S. if they don’t get their way in foreign policy.
Lawmakers have only recently woken up to this reality. But fortunately, there have been steps taken to combat this by both Democrats and Republicans.
COVID-19 exposed the underbelly of the pharmaceutical industry, and a reshoring of our pharmaceutical production is a topic politicians are now talking about.
Legislation has already been pushed to investigate just how deeply we rely on China for our API.
Now, here’s the opportunity… Reshoring means benefits for American companies and producers of API.
We’re talking raw materials, miners, drug manufacturers… even those contracted to build out the infrastructure needed to make new drug facilities.
I’m on the lookout for the best opportunities that will give you a chance to capitalize.
Stay tuned in the coming weeks…
To a bright future,