[NEW YORK] China has asked some of its state-owned drugmakers to study how they can reduce reliance on the US for pharmaceutical products and raw materials, sources familiar with the matter said, as Beijing prepares for a potential decoupling that threatens its medical supply.
Chinese drug regulator National Medical Products Administration conveyed the message to executives of state-owned drugmakers earlier this year, said the sources, who asked not to be identified as the deliberations are private. The directive was to assess the feasibility of replacing US-made healthcare products.
The goods identified for potential replacement – by either sourcing locally or from other countries such as Japan – range from ingredients and supplies used to make drugs to lab equipment and testing reagents, the sources said.
The discussion started soon after Donald Trump returned to the White House in January, and at least two Chinese state-owned drugmakers have since completed taking stock of their US exposure, the sources said.
The effort underscores Beijing’s broader plan to check vulnerabilities arising from its trade war with the US. The tit-for-tat escalation has seen both sides ratchet up tariffs on each other’s goods to over 100 per cent, threatening to wipe out commerce between the world’s two largest economies.
Separately, China’s health regulator National Health Commission also told some of the country’s top hospitals to study the feasibility of replacing US imported products with homegrown ones or those from other countries, according to one of the sources.
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China’s large hospitals are major buyers of advanced medical equipment such as Magnetic Resonance Imaging and ultrasound scans produced by American firms including GE HealthCare Technologies and Medtronics.
In addition to medical devices, hospitals in China also procure US-made reagents, drugs and other medical consumables for testing and treatments. Drugmakers also source antibodies, culture mediums, fillers and other ingredients used in clinical research and manufacturing from the US. China also imports blood products such as plasma and albumin from America.
There will not be any immediate substitution of US medical imports, as Chinese regulators will have to review any alternative supplies submitted by drugmakers to ensure such replacement will not compromise quality and safety, the sources said.
The National Medical Products Administration and National Health Commission did not respond to Bloomberg’s faxed requests for comments.
At the same time, there are signs that trade tensions could ease – Trump promised to be “very nice” in any trade talks with China while Beijing is reportedly considering suspending its 125 per cent tariff on some US imports. Still, the medical goods substitution plan marks China’s effort to not be held to ransom in the long run as its relations with the US have continued to deteriorate.
China’s retaliatory tariff against US imports is already taking a toll on hospitals and drugmakers. Without tariff exemptions, some imported pharmaceutical goods have seen prices hikes, local medical science online portal Dingxiangyuan reported on Monday (Apr 28), citing suppliers and researchers.
Some hospitals have 5 per cent of their drug supply coming from the US, which is now subject to China’s 125 per cent tariff, Michael Hart, president of the American Chamber of Commerce in China, told reporters during a briefing in Beijing on Friday.
While China has long pushed for domestic replacement of imported medical products and already manufactures most commonly used medicines and ingredients as well as essential medical equipment, Chinese drugmakers still import substantial amounts of raw materials from the US, due in part to lower quality of domestic alternatives.
Replacing cutting-edge medical gear from the US in the near term remains challenging, as domestic firms have yet to develop such technically sophisticated products. BLOOMBERG
