The global supply of pharmaceutical raw materials

In the article The risk of supply in the pharmaceutical supply chain, the issue of potential supply risks for EU companies regarding pharmaceutical raw materials was introduced. In this article, we will further explore the global supply of pharmaceutical raw materials and the ongoing changes in the structure of their international trade.

Customs codes of pharmaceutical raw materials

The first step was identifying the customs codes that refer to products used as production inputs in the pharmaceutical industry. This task was not easy, as the Combined Nomenclature (i.e., the classification used by the EU to group customs declarations from European companies) groups the various chemical products by their chemical composition, not by their intended use. This made it necessary to study each customs code on a case-by-case basis to determine whether the product in question is actually used as a production input in the pharmaceutical industry. The classification work is further complicated by the fact that many chemical products have multiple uses beyond the pharmaceutical industry. An example is propylene glycol, an important chemical intermediate used in the pharmaceutical industry as well as in many other industries.

This analysis led to the identification of over 100 Combined Nomenclature codes that include pharmaceutical raw materials. To facilitate the analysis, these codes were grouped into the following families:

• Alkaloids: organic compounds of plant origin with powerful pharmacological properties, such as morphine and quinine;
• Amino acids: the building blocks of proteins, used in the pharmaceutical field as supplements and for the synthesis of other drugs;
• Antibiotics: essential for the treatment of bacterial infections;
• Glycosides: natural compounds often found in medicinal plants, used in cardiotonic drugs and other therapeutic applications;
• Chemical intermediates: used in the intermediate stages of drug synthesis;
• Opotherapeutic agents: extracts of animal organs used for therapeutic treatments;
• Hormones: chemical substances that regulate many body functions, used in the pharmaceutical field to treat conditions such as diabetes and thyroid disorders;
• Active Pharmaceutical Ingredients (API): the main components of a drug, responsible for its therapeutic effect;
• Sulfonamides: a type of synthetic antibiotic;
• Vitamins: used to prevent and treat nutritional deficiencies and as supplements.

Top exporting countries

We then considered the major exporting countries of pharmaceutical raw materials: four Western countries (Ireland, the United States, Switzerland, Germany) and two Asian countries (China and India), and their exports for the different families of pharmaceutical raw materials listed above. The following table reports the export values in billions of dollars recorded in 2023. The rows of the table are ordered based on the export values of China.

Pharmaceutical raw material exports in 2023 (billion dollars)

China shares the podium with Switzerland and Ireland as one of the top exporters of Active Pharmaceutical Ingredients (APIs). The growth of its exports has been steady throughout this century, driven by the offshoring of lower value-added production by major global pharmaceutical companies to China.

With export values exceeding $4 billion, China holds a dominant position in the global antibiotics market. For this type of raw material, its exports are four times larger than those of the next two countries (the United States and India). In the case of certain specific antibiotics, such as tetracyclines, China’s share of the global market significantly exceeds 50%, making it an indispensable supplier to the European pharmaceutical industry.

China's position is even more dominant in the amino acids sector, where its exports account for three-quarters of total global exports. A key example of this dominance is lysine, already analyzed in the aforementioned article.

China is also the world’s leading exporter in the categories of vitamins, opotherapeutic agents, and, especially, glycosides, where it holds over 80% of the global trade share.

Lastly, it is worth noting China's leading position in the global trade of chemical intermediates for the pharmaceutical industry.

Conclusions

Over the past 20 years, there has been a significant reshuffling of the importance of different economies in the production of raw materials for the pharmaceutical industry. In this sector, China's role has grown considerably, giving the country a dominant position in many product categories.
In some cases, the European pharmaceutical industry is significantly dependent on imports from China, making the supply risk of these raw materials significant.