Chart of the Week – US Dependence on China's APIs

Summary of Key Points from the Conference Call Industry Overview - Industry: China Healthcare [8] - Focus: The dependence of the global pharmaceutical supply chain on China's Active Pharmaceutical Ingredients (APIs) [8] Core Insights 1. China's API Supply: China supplies approximately 30% of the world's APIs by volume, making it a critical player in the global pharmaceutical supply chain [8] 2. US Dependency: Chinese imports account for about 17% of the total US API market and 6% for formulations, highlighting significant reliance on Chinese production [8] 3. Surge in Drug Master Files (DMFs): There has been a notable increase in DMFs from Chinese manufacturing sites under the US FDA from 2021 to 2023, indicating a growing recognition of China's role in the pharmaceutical sector [8] 4. Impact of COVID-19: The pandemic increased China's prominence in the global pharmaceutical supply chain, leading to heightened scrutiny from Western governments regarding supply chain vulnerabilities [8] 5. Stockpiling Programs: In response to supply chain risks, various national stockpiling programs have been initiated by Western governments [8] 6. Global API Landscape: Among the top 40 global listed API and generic companies surveyed, all but two are based in India, with China supplying about 70% of India's APIs [8] 7. Formulation Imports: By production site, China ranks as the fourth-largest importer of formulations to the US, following Ireland, Germany, and Switzerland [8] 8. Tariff Implications: Proposed tariffs appear to target specific categories with political agendas, such as opioids, rather than broadly impacting the entire API sector [8] Additional Important Information - Export Growth: China's pharmaceutical exports increased by 8.5% year-over-year from January to October 2024, reflecting a recovery in demand post-COVID-19 [30] - De-stocking Cycle: Following the pandemic, pharmaceutical companies experienced a de-stocking cycle that ended in mid-2024, indicating a shift back to normal procurement practices [28] This summary encapsulates the critical insights and data points discussed in the conference call, emphasizing China's pivotal role in the global healthcare landscape and the implications of potential tariff changes on the industry.