[New Wave] Active Pharmaceutical Ingredients Are the Future of Sovereignty

In the era of COVID-19, pharmaceuticals and vaccines have become fields directly linked to national sovereignty and security, exerting significant influence not only as means to overcome diseases but also across politics, economy, society, and culture.

Pharmaceuticals are broadly divided into active pharmaceutical ingredients (APIs) and finished pharmaceutical products. To administer medicines to people, the core pharmaceutical components, APIs, are formulated with various excipients into finished pharmaceutical products such as tablets, capsules, syrups, and injections, depending on the characteristics of the ingredients, which are then prescribed or distributed. APIs are the essential components for making finished pharmaceuticals, and instability in their supply greatly impacts the availability of medicines.

Currently, most countries worldwide show a high dependence on China and India, which provide inexpensive labor, for APIs. In the past, the global supply chain of APIs was managed through international cooperation and division of labor to balance supply and demand. However, as the US-China trade conflict has escalated, trade norms have collapsed, ushering in an era that prioritizes national security and economy. Recently, amid the prolonged COVID-19 pandemic, India announced export restrictions on APIs, and supply issues related to China due to US-China trade frictions have become a contentious issue.

Meanwhile, South Korea’s self-sufficiency rate for APIs has been decreasing annually, with increasing dependence on overseas sources. According to the Ministry of Food and Drug Safety and Statistics Korea, South Korea’s API self-sufficiency rate dropped significantly from 35.3% in 2017 to 16.2% in 2019. Notably, dependence on China is the highest at 35.7%.

Observing the recent API supply situation, there is concern that it resembles the past circumstances of vaccine development. In early 2007, skepticism about the vaccine industry was widespread. At that time, the government drastically cut funding for vaccine research and development compared to the previous year, and companies regarded the vaccine business as unprofitable.

However, following the 2009 H1N1 influenza outbreak, the government began providing substantial funding for facilities and research and development, and with the advent of the COVID-19 era, the importance of the vaccine industry has become widely recognized.

As South Korea’s dependence on overseas APIs gradually increases and global trade norms change, ensuring a stable supply of pharmaceuticals has emerged as an urgent issue. Until now, APIs were considered an issue for individual companies rather than a national concern.

There was a time when medicines made from APIs produced by South Korean companies received preferential pricing, but now that system has disappeared. Meanwhile, API manufacturing facilities are regarded as major polluting industries subject to various environmental regulations and are not welcomed by local governments. Additionally, compared to China and India, it is challenging to secure global competitiveness in terms of price competitiveness. However, if we do not prepare for the future of API supply considering only the current situation, we may have to pay a huge opportunity cost in the future.

It is time for national support measures to increase the self-sufficiency rate of APIs, secure global competitiveness, and link it to exports. When using domestically produced APIs, preferential drug pricing should be reinstated, and tax and investment/loan support measures are needed to enable the establishment of eco-friendly factory systems. It is also urgent to prepare national R&D support measures such as developing high value-added pharmaceutical raw materials and manufacturing technology development for the commercialization of new drug candidates. Furthermore, to secure export competitiveness, support for international cooperation systems such as mutual recognition of API GMP between countries should also be considered.

Jung Yuntaek, Director of the Pharmaceutical Industry Strategy Institute