There is a Lack of Competition for API Manufacturers for Generic Drugs
(Thursday, February 23, 2023)
Under the drug pricing competition provisions of the US regulations, for the last few years FDA has implemented several programs to encourage multiple manufacturers for each generic drug product. However, these efforts are limited to the finished product manufacturers only and not to the ingredient suppliers. Lack of competition for API manufacturing creates a vulnerability for the finished product supply chain hidden from the regulators. A recent investigation found that there are far fewer manufacturers for the active pharmaceutical ingredients (APIs) for generic drugs than there are for the finished drug products. Almost a third of APIs for generic drugs are manufactured at only one facility, and another third are manufactured at less than three facilities. With two-thirds of all API originating from such a low competitive setting, the drug supply chains are highly susceptible to disruption. On top, about 86% of the API for US generic drugs is sourced from non-US manufacturers, with India alone manufacturing more than 62% of the generic drug APIs. This should not come as a surprise. Generic drugs are extremely price competitive to manufacture with multiple manufacturers offering finished drug products at low margins. These price competitive practices extrapolate to ingredient suppliers where the margins are even thinner. Hence, there is little business incentive for new API manufacturers. The authors of the report recommended that the US government incentivize competition in API manufacturing and encourage US-based API manufacturing, but that cannot be done without an inevitable increase in drug prices, for which there seems to be no political appetite. Lack of competition should be worrisome for the public but it always takes an adverse event such as major supply chain disruptions to create the political environment for tough expensive actions. Unfortunately, we will likely need to wait for such an event for things to change in generic API manufacturing for the US.
Dr. Mukesh Kumar
Founder & CEO, FDAMap
Linkedin: Mukesh Kumar, PhD, RAC