American Pharmaceutical "Disease" as a Legacy of Globalism 2

In the previous article, we discussed the shortage and critical dependence on imported pharmaceuticals in the U.S. market. The core of the problem lies in the shift toward cheap foreign-made generics, which failed to ensure reliable long-term supplies while successfully displacing domestic American drug manufacturers from their own market.

Contrary to the myths of liberal globalization, instead of preventing shortages, the growing wave of imports contributed to their emergence—by undermining and eliminating domestic producers. American manufacturers were consistently pushed out due to surges in foreign drug imports, fueled by state subsidies, primarily from China, which controls up to 90% of key pharmaceutical chemical resources. The U.S. reliance on imported generics, among other things, led not to an increase in suppliers but to their reduction. Over the past decade, the market has consolidated, with about 20% of critical drugs containing API Active Pharmaceutical Ingredient, the therapeutic component of a medication sourced exclusively from China. Meanwhile, 40% of American generics have only one FDA (Food and Drug Administration)-approved manufacturer. This means a single disruption could paralyze national access to a drug.

This situation follows the laws of dialectics—"they meant well, but it turned out as always!" Indeed! By becoming dependent on cheap imported generics, the American healthcare system contributed to their price inflation! The push for expanded competition led to increased monopolization and higher prices. While Americans do pay lower prices for non-patented imported generics—especially those used in hospitals—compared to Europeans, this is because suppliers compete to offer hospitals the lowest possible prices, driving them down to a minimum. Over time, prices for many generics drop so low that other companies find it unprofitable to continue production and shut down. One such symbolic closure was the 2023 bankruptcy of Akorn Pharmaceuticals, a key domestic sterile generic producer, which abruptly ceased operations at all four of its U.S. plants, laying off 400 employees. The shutdown instantly removed dozens of products from the market, many of which had no short-term replacement.

Additionally, low prices do not incentivize manufacturers to invest in new equipment or other measures that could maintain high quality and prevent recalls or production halts. As a result, short-term affordability eventually leads to long-term cost increases—along with quality issues.

Imported generics are increasingly raising concerns over low quality and safety risks. The FDA has documented widespread noncompliance with good manufacturing practices in China and India, including falsified test results and unsanitary conditions. One investigation revealed that violations at an Indian factory were directly linked to eight patient deaths in the U.S. Similarly, China has a history of safety scandals, such as the 2008 heparin contamination—where tainted products killed dozens of Americans. These are not isolated incidents. A 2025 study found that Indian-made generics were 54% more likely to cause serious side effects than their American counterparts. Why? Because price pressure encourages cost-cutting—on safety, testing, and oversight. As a 2023 Brookings study warned, hospitals often have no insight into drug quality, and foreign manufacturers face no serious consequences for cutting corners.

In light of these facts, the U.S. Senate is discussing a proposal for the Department of Defense to produce medications for military personnel independently to ensure national security. The Pentagon spends over $5 billion annually on pharmaceuticals—about 2% of the total U.S. commercial drug market. At Congress's request, the DoD analyzed 12,917 specific drugs (roughly 10% of the U.S. market) to assess the military pharmaceutical supply chain from the FDA's essential medicines list. Only a quarter of the analyzed drugs have domestic manufacturers.

A November 2024 DoD report found that 27% of the analyzed drugs face very high risks, as they are either produced by Chinese manufacturers using Chinese ingredients or sourced from unknown origins.

The terrifying scale of U.S. drug dependence on China and India is reflected in the staggering growth of imports from these countries—35-fold and 165-fold, respectively, since 2002! Many drugs for the American market, even those manufactured in other countries (including the U.S.), rely on at least one production stage occurring in China. Even India's massive generic sector is deeply dependent on China, as Indian manufacturers typically source raw materials from Chinese plants. Thus, American industry leaders reasonably conclude that the crisis stems from a simple economic truth: China and India deliberately captured the U.S. pharmaceutical industry through industrial strategy and state subsidies, making generics too cheap to produce competitively in the United States.

Surprisingly, however, the largest exporter of drugs to the U.S. in recent years has not been the two Asian giants but ultra-modest Ireland, where nearly all major American drugmakers have production facilities—some for decades. One of Ireland's most attractive features for the industry is its tax benefits. Some manufacturers shift profits there to reduce tax bills. This led the outspoken Trump to claim Ireland "took our pharmaceutical companies." Commerce Secretary Howard Lutnick elaborated: Ireland engages in a "tax scam" exploited by U.S. pharma firms, and "it must end."

Historically, pharmaceuticals have been tariff-free under a World Trade Organization agreement aimed at ensuring patient access to vital medicines. Drugs were largely exempt from the global tariffs Trump announced on "Liberation Day" (04/02/2025), later partially delayed for 90 days. On April 14, the U.S. Commerce Department launched an investigation into whether drug and pharmaceutical ingredient imports threaten national security, in an attempt to lay the groundwork for possible tariffs on foreign-made medications.

Proposals from lobbying groups representing domestic U.S. drug manufacturers include measures such as:

• Implementing specialized and tailored import quotas and/or tariffs on generics, especially from rival nations or those with safety violation histories.
• Expanding domestic production through tax incentives, loan guarantees, and long-term federal contracts for essential medicines.
• Ensuring full supply chain transparency, including origin labeling for APIs and disclosure of manufacturing locations.
• Strengthening FDA enforcement abroad and banning imports from repeat violators.

A concrete step toward restoring U.S. "pharmaceutical sovereignty" is the "Incentivizing the Long-Term Manufacturing of Vital Medicines (PILLS) Act," introduced in May 2025 by Senator Tom Cotton (R-AR). A similar bill—the "PILLS Act"—was presented in the House by Claudia Tenney.

The PILLS Act includes provisions such as:

• A 35% production tax credit for final API and finished drug manufacturers, and 30% for other components.
• A proportional domestic content tax deduction of up to 20% for drugs with 100% U.S.-made components.
• An optional 25% investment tax credit for qualifying new manufacturing facility costs (instead of PBTC).
• A ban on tax benefits for any entity deemed a foreign entity of concern at any point during the tax year.

In summary, this pharmaceutical saga highlights fundamental geo-economic and geo-strategic issues stemming from decades of globalization. America is trapped in drug import dependence, which cannot be resolved without major structural reforms and a radical overhaul of global supply chains. Sharply reducing—let alone banning—cheap generics, which account for over 90% of U.S. prescriptions, is impossible. What's needed is a meticulous, long-term industrial policy to achieve acceptable (safe) levels of import reliance for both finished drugs and their components.