Restoring American Self-Sufficiency in Pharmaceutical Production

To those who wish to make America great again, the health of industries related to national security is a subject of existential concern. Aside from the usual areas of focus, like defense hardware, shipbuilding, steel, and rare earths, America has fallen behind in its ability to produce basic medicines and pharmaceuticals, which are no less vital to the physical and economic security of the United States.

And just as U.S. capacity fell into a state of both absolute and relative decline, China achieved staggering gains. This essay will look at how this situation came about, the divergent policy choices made by policymakers in China and the West, and what options are still available for the United States to play catch up.

In the field of pharmaceutical supply, particularly the production of basic medicines, the United States and Europe have largely lost the capacity to manufacture their own active pharmaceutical ingredients (APIs), the key chemical inputs required for drug production. These medicines include not only treatments for common conditions such as colds, fevers, basic bacterial or viral infections, and inflammation, but also essential drugs for chronic and potentially fatal conditions such as diabetes, hyperlipidemia, and hypertension.

Although many finished drugs consumed in Europe and the United States are supplied by Indian generic manufacturers, these firms rely heavily on China for APIs and other bioactive ingredients. As a result, the Western pharmaceutical supply chain, filtered through European and American brand-name companies and Indian generic producers, remains fundamentally dependent on China for critical pharmaceutical raw materials.

Pharmaceutical inputs, in fact, constitute an especially powerful strategic lever. While consumers may be able to reduce discretionary activities, they cannot do without essential health-related substances. This applies not only to basic medicines, but also to nutritional inputs such as vitamins, shortages of which would affect human health as well as agricultural and livestock production. Despite this, China has not fully recognized or exercised the leverage inherent in its control over these highly sensitive “choke point” inputs.

As some Chinese industry practitioners have argued, China could exert severe pressure on the United States simply by restricting or suspending exports of key pharmaceutical raw materials used in the long‑term treatment of widespread diseases. If supplies of core drugs for conditions like diabetes and inflammation (e.g., metformin, insulin, glucocorticoids) were significantly curtailed, the U.S. health care system could face acute shortages and widespread panic within weeks. India would be unable to compensate for such a disruption, as its domestic API manufacturing capacity only began expanding in earnest in the early 2020s and remains far from sufficient to replace Chinese supply.

The Financialization of Western
Pharmaceutical Companies

Most health-related APIs are produced either through organic chemistry (fine chemicals) or through traditional biochemical methods like fermentation. From the 1980s through the 2010s, global production capacity for these APIs was radically redistributed.

This shift reflects a broader global reallocation of fine-chemical manufacturing, which is based on small, complex organic molecules that lie between bulk petrochemicals and advanced biologics. In the 1980s, production was concentrated primarily in the West but also in the Eastern bloc, particularly the Soviet Union. Beginning in the 1990s, however, and accelerating through the process of globalization, this capacity rapidly consolidated in China.

At the same time, the Western pharmaceutical industry underwent a profound transformation in both its industrial structure and business model. Put simply, Western pharmaceutical firms became “de-produc­tionized.” Manufacturing functions were progressively spun off, out­sourced, or separated into independent entities. From the 1990s onward, both the newly spun-off production firms and the outsourced manufacturers increasingly located their operations in China. This era saw vertical disintegration and the deindustrialization of Western pharmaceutical firms. This process was largely completed by the 2010s.

From the 1940s and into the early 1980s, pharmaceutical companies in the West (including Japan) closely resembled firms in other manufacturing sectors: A typical pharmaceutical company had a limited number of core products. Eli Lilly and Novo Nordisk, for example, were well known for insulin and other diabetes drugs. Such firms maintained inte­grated operations, encompassing research and development, production, and sales. Consequently, each industrialized country, and certainly the West as a whole, retained its own pharmaceutical and upstream chemical production capabilities. Several countries, especially Germany, Switzerland, and Sweden, were particularly strong in this regard. The situation in the Soviet Union was broadly similar. China, by contrast, was still at an early stage of pharmaceutical development.

From the 1980s through the late 1990s, large-scale mergers created a small number of multinational “Big Pharma” firms which doubled down on the deindustrialization trend. Concrete examples can be found in Sweden and Switzerland. Malmö, once a major Swedish industrial city with significant pharmaceutical and API manufacturing capacity, entered a long decline at this time. By the close of the millennium, its pharmaceutical production facilities had largely been separated from core firms, and today they function mainly as historical remnants of an earlier industrial era.

In Switzerland, alongside major pharmaceutical firms such as Novartis and Roche, a specialized manufacturing company, Lonza, came to the fore. Lonza identifies itself as one of the world’s leading CDMOs (Contract Development and Manufacturing Organizations), a concept that only emerged in the 1990s. Lonza’s trajectory is emblematic: it initially produced in Switzerland, later expanded to Oregon in the United States, and in 2003, established a major production base in the Nansha Bio-Industry Park in Guangzhou, China.¹ Notably, Lonza mass produced mRNA vaccines for Western markets during the Covid-19 pandemic in 2021. Similarly, Pfizer’s Covid-19 drug Paxlovid relied heavily on the chemical synthesis capabilities of Chinese fine-chemical firms, including China’s leading small-molecule pharmaceutical manu­facturers.

What, then, became of Western Big Pharma in the years since these developments took place? Contrary to common assumptions, they are no longer primarily engaged in either production or fundamental research and development. Since the dawn of globalization and especially into the twenty-first century, pharmaceutical R&D in the West has increasingly focused on fashionable biotechnologies, much of which originates in small biotech start-ups rather than within Big Pharma itself. Internal R&D departments have steadily contracted through layoffs, while large firms have repositioned themselves as purchasers of intellectual property and start-ups.

Once a promising invention is acquired, clinical testing is typically outsourced to Contract Research Organizations (CROs). Since the 1980s, increasingly complex FDA requirements have turned clinical trials into an expensive and often statistical exercise rather than genuine technological research. Chinese firms, such as WuXi AppTec and TEDA Pharmaceuticals, have risen rapidly by occupying this niche within the global division of labor. Manufacturing, as noted earlier, is then handled by CDMOs and Chinese API producers who synthesize pharmaceutical molecules and conduct large-scale production.

In practice, Big Pharma has evolved into a hybrid of investment firm and financial coordinator, combining elements of venture capital and private equity. Their activities center on investment, equity participation, staged acquisitions of start-ups, and eventual absorption of larger biotech firms. In the United States, a highly developed financial ecosystem has emerged around pharmaceutical innovation, structured less around manufacturing than around valuation and deal-making.

Compared with other sectors, the pharmaceutical and health industries are especially susceptible to this dynamic because of their close association with fashionable biotechnology. Venture capital, particularly in hubs like Silicon Valley and Boston, favors these fields, and valuation-driven financial logic penetrates deeply into decision-making. As a result, deindustrialization and financialization in pharmaceuticals have been especially thorough. Many firms need not generate profits through production at all, surviving instead through successive rounds of financing driven by rising valuations. This is particularly true of biotech start-ups, which often ignore manufacturing considerations entirely. When products approach commercialization, production is simply outsourced to China, perpetuating China’s central role in the global supply chain.

This financialized division of labor is socially dysfunctional. Over the past two decades, drug approval in the West has slowed markedly, while the nominal “R&D costs” of new drugs have soared. Much of this increase reflects speculative valuation dynamics and clinical trial expenses rather than genuine scientific breakthroughs. The result has been extraordinarily expensive new drugs, often costing around $500,000 per patient per year before insurance coverage, targeted primarily at “popular” or fashionable diseases. By contrast, treatments for common diseases still rely on older chemical or biochemical drugs, with little substantive progress for decades.

Big Pharma actively promotes new therapeutic concepts tied to fashionable diseases to boost stock prices, while simultaneously divesting from “unsexy” but essential medicines. Pfizer’s 2020 spin-off of its off-patent and routine medicines division into Viatris is a prominent example of this trend.

Yet the everyday health needs of Western societies are overwhelmingly met by these ordinary, standardized drugs. Paradoxically, Western pharmaceutical companies impose persistent price inflation on these medicines, often exceeding general inflation rates, while benefiting simultaneously from reduced production costs through outsourced API manufacturing and intense competition among Chinese suppliers. This dual advantage has made their business models unusually comfortable.

Outside the West, the other former pole of the Cold War, Russia, experienced an almost complete collapse of its pharmaceutical industry in the 1990s amid economic and social upheaval. The Soviet system of self-sufficient pharmaceutical, vitamin, and biotechnology production disintegrated and largely vanished.

In sum, the global pharmaceutical industry has undergone a comprehensive vertical reorganization. What was a vertically integrated manufacturing industry in the 1980s had, by the 2010s, become a system dominated by financial coordination resembling a “VC + PE” model. In this process, API production has been fundamentally restructured: Western capacity has been hollowed out, while China has emerged as the primary production base for the vast majority of the world’s pharmaceutical raw materials.

How China Secured Global Leadership in APIs

The process by which China achieved dominance in API production can be divided into three phases. The first occurred when Western companies set up production subsidiaries in China. The second took place when Western corporations partnered with companies in China, initially some town- and village-level chemical factories; these indigenous biochemical partner firms would grow dramatically through the 2000s and 2010s until they eclipsed the Chinese subsidiaries of Western companies to become the largest global producers in their field. The third stage took shape when some newer technology companies (chemical and biochemical) were founded by Chinese technicians who returned from education and work opportunities in the United States. By the second decade of the millennium, the progress made by Chinese researchers in Chinese labs and universities outpaced efforts by their counterparts in in equivalent Western institutions. As a result, almost all industrially viable chemical innovations in the global pharmaceutical API sector were concentrated in China.

This trajectory closely resembles that of other outsourced manufacturing industries, such as home appliances and electronics. The key difference is that pharmaceutical and biochemical production involves higher levels of pollution and environmental risk, making industrial policy and regulatory coordination far more consequential.

This domestic process began in China in the early 1990s. After a decade of growth from the period of liberalization, China’s township enterprises had accumulated basic industrial capabilities, and the country as a whole was eager to accept export-oriented manufacturing orders. At the same time, economic globalization was accelerating. Regions such as Taizhou in Zhejiang Province and Taizhou in Jiangsu Province (despite sharing the same English spelling, they have different city names in Chinese), as well as several inland provinces, began to take on pharmaceutical and chemical manufacturing tasks. These enterprises were either privately owned, municipal, or county-level state-owned firms, many of which were later privatized in the early twenty-first century.

The pace of this transformation accelerated as Chinese local governments implemented increasingly sophisticated industrial “standardiza­tion” policies. Beginning in advanced provinces such as Zhejiang and Guangdong, high-pollution industries, including chemical and biochemical production, were systematically relocated into designated industrial clusters and chemical parks. Prior to this, small chemical factories were scattered, uneven in quality, and a major source of environmental complaints. In response, local governments undertook comprehensive planning to concentrate these activities geographically.

A prominent example is the “88 Strategy” promoted in Zhejiang Province under the leadership of then provincial governor Xi Jinping, which emphasized leveraging Zhejiang’s cluster-based industrial strengths, accelerating the development of advanced manufacturing, and pursuing a new path of industrialization. In practice, this strategy required the relocation and consolidation of certain industries into specialized industrial parks. In the pharmaceutical chemical sector, this often meant either expanding the footprint of large pharmaceutical firms into adjacent areas to form dedicated chemical parks, or creating specialized parks into which smaller, scattered producers were relocated. Each such park was equipped with centralized wastewater treatment and environmental management infrastructure.

This approach created a favorable industrial environment that allowed China both to attract foreign pharmaceutical manufacturers and to support the growth of domestic firms. For example, Lonza’s Nansha facility is larger than its Oregon facility in the United States and comparable in scale to its historic base in Visp, Switzerland (which itself involved joint investment with the Dutch firm DSM).

Such systematic planning enabled China to avoid the prolonged environmental hurdles and political gridlock that often impede the development of chemical and biochemical plants in other countries. Their system is an informative case study for the United States and its allies as they attempt to rebuild their capacity to supply basic medicines in the future. The results of this model are evident across major API product categories:

Statins. The primary drugs used to treat hyperlipidemia, these are produced through biochemical fermentation processes. One of the world’s major producers is Blue Treasure Pharmaceuticals, a Canadian-Chinese joint venture established in 1994 and located in Qingyuan City in northern Guangdong Province, a relatively underdeveloped region. It was among the earliest foreign-invested pharmaceutical production bases established in cooperation with local Chinese firms. Its technology partners include leading fermentation specialists from Canada and Switzerland. Another major Chinese statin manufacturer is Apeloa Pharmaceutical. This company, located in Hengdian Town, a wealthy town in Zhejiang Province, has been the second largest API exporter in China for many years. It produces a wide variety of products, including intermediates for amoxicillin, one of the most common antibiotics.²

Glucocorticoids. Among the most widely used anti-inflammatory drugs, these represent another key category. Since cortisone was first introduced in 1953, there has been little substantive innovation in this class of drugs—partly because newer, potentially safer alternatives are inexpensive and thus unattractive to Western capital markets. Of the major dominant global producers today, four of them are Chinese companies: Tianjin-based Tianyao Group, Zhejiang-based Xianju Pharmaceutical, Shandong-based Sito Biotech, and Hubei-based GoTo Bio-Pharm are all domestic Chinese steroid drug manufacturers that rose to prominence in the twenty-first century with new production methods that enjoy low-cost advantages. The remaining European companies (mainly older chemical companies in the Netherlands, France, and Germany) import intermediates from the aforementioned four Chinese companies for the final processing of their API production capacity.

Vitamins. Global production of the most common nutritional supplements is overwhelmingly concentrated in China. The biggest Chinese vitamin D producer is Huayuan Group, based in Huayuan Village, Jinhua City, Zhejiang Province, a village that has become notably affluent as a result.³ Vitamin C production is dominated by several long-established firms in northern China: Shiyao Weisheng, a nutrition subsidiary of Shijiazhuang Pharmaceutical Group, and Northeast Pharmaceutical, the owner of China’s first modern pharmaceutical factory.⁴ Shandong Luwei and North China Pharmaceutical are other notable vitamin C producers. The same pattern holds for vitamins A, B-complex, E, and K. In U.S. supermarkets, the vast majority of health supplements contain ingredients sourced from China, even though domestic Chinese consumption remains relatively low due to regulatory restrictions imposed by Chinese authorities on the finished supplement industry.

Chinese firms are the core suppliers of “ordinary” medicines and supplements for major European and American pharmaceutical brands. Between 70 and 90 percent of the APIs they produce are exported, positioning China’s chemical and fermentation-based pharmaceutical sector as a global supplier rather than a primarily domestic one.⁵

For most products, production in China tends to settle into an oligopolistic structure. Chemical and biochemical manufacturing involves significant technical barriers, limiting the number of true API producers for any given compound to perhaps two to ten firms (though many intermediaries obscure the identity of the actual manufacturers). China’s oligopolistic competition differs from that of countries such as the United States or Russia: competition among Chinese producers is exceptionally intense, often driving prices to extremely low levels.

These persistently low prices have discouraged entry by producers in the West and in most other non-Chinese countries. In recent years, India has emerged as a partial exception, capitalizing on China’s tightening environmental standards by tolerating far weaker environmental protections. India’s capabilities in most organic chemical synthesis products remain weak, however. Nonetheless, the cycle of full outsourcing, industrial dominance, fierce internal competition, and sustained low prices has further entrenched China’s role as the global API supply base, making it the undisputed center of pharmaceutical manufacturing.

Over the past two decades, a clear pattern has emerged: once a new drug is developed, production is transferred to China within five to ten years, a timeline that has since shortened to two or three years. Today, even advanced molecular design and synthesis production processes increasingly rely on Chinese firms. Complex production processes are distributed among specialized Chinese enterprises, with different firms supplying precursor compounds and performing final molecular assembly. In effect, the entire pharmaceutical manufacturing chain, from molecular design to large-scale production, can now be coordinated almost entirely within China.

The Emergence of Green Chemical APIs in China

During the earlier stages of industrial transfer, China largely absorbed the most highly polluting segments of the pharmaceutical and chemical industries. For many years, this was the trend; around 2010, however, a significant shift took place. A new cohort of highly trained Chinese American scientists returned to China and began developing green fine chemicals, including large-volume products used in medicines and nutritional supplements.

In the early stages of China’s fine-chemical development, most enterprises grew out of township and village industries. These firms were typically led by non-technical entrepreneurs: individuals willing to take risks but who lacked formal scientific training. As a result, while they were effective at scaling production, they were generally incapable of fundamental technological innovation.

At the same time, pharmaceutical chemistry gradually lost prestige among American students. Since the 1980s, American university chemistry departments increasingly recruited Chinese students, many of whom later became U.S. citizens and joined major American pharmaceutical companies as R&D scientists. Some founded contract research or development firms that provided outsourced R&D services to large pharmaceutical companies; others founded independent technology R&D firms to set up new factories in China.

Many of these professionals became geographically concentrated in New Jersey, where the R&D centers of major pharmaceutical companies such as Pfizer and Merck were located. Over time, this formed a distinctive Chinese pharmaceutical chemistry community in that state.⁶ But since the late 1990s, members of this group began returning to China, sometimes at the invitation of the Chinese government, sometimes driven by entrepreneurial opportunity, and often in response to structural forces reshaping the global pharmaceutical industry. They established their own companies and production bases or partnered with Chinese township enterprises by contributing technology and expertise while local partners provided fixed-asset investment and facilities.

The defining characteristic of this group was its genuine capacity for innovation. These returnee scientists developed new chemical synthesis methods that dramatically reduced pollution, primarily by increasing the conversion efficiency of raw materials. In chemical manufacturing, such improvements yield a dual benefit: they reduce environmental harm while simultaneously lowering costs. As a result, Chinese producers gained structural advantages rather than merely cost-based ones.

A representative example is Nenter Technology, founded by Dr. Cai Dongwei, a member of this New Jersey-based talent circle.⁷ In 2006, Dr. Cai launched his venture in China’s Hubei Province, focusing on a novel method for synthesizing vitamin E. After navigating multiple setbacks, Nenter Technology sold a controlling stake to a ceramics company in Fujian to secure financing, becoming a subsidiary while retaining its technological core.⁸ It subsequently emerged as a major global supplier of vitamin E.

Upstream, Nenter’s key partner was Amyris, one of the few commercially successful firms in Silicon Valley’s much hyped “synthetic biology” sector. Together, they created a farnesene–vitamin E production chain; between 2018 and 2022, the Dutch chemical giant DSM entered into a significant equity investment partnership with Nenter and Amyris while coordinating with other major global vitamin E producers, including BASF’s vitamin E unit and Zhejiang Xinhecheng.⁹

In the late 2010s and early 2020s, DSM pursued an ambitious strategy to consolidate the global vitamin E industry. As part of this effort, it divested its legacy engineering plastics business and repositioned itself as a “nutrition and life sciences” company. The logic was straightforward: by that time, vitamin E had become the most valuable category within the vitamin market, largely because of its exceptionally high unit price.

The surge in energy costs following the Russia–Ukraine war in 2022 forced DSM (now DSM-Firmenich) to reconsider this strategy. DSM’s remaining European vitamin E capacity—together with BASF’s European production line—relied on outdated technology, while DSM’s equity stake in Nenter Technology in China was the only part of its vitamin E portfolio based on advanced green chemistry methods. By late 2024, DSM-Firmenich signaled its intention to exit the vitamin E business altogether. In July 2025, it completed this retreat by selling its equity stakes and related joint venture plants back to Nenter Technology.

A similar pattern can be observed in biochemical and fermentation engineering. It is difficult for many in the West to grasp that, during the Covid-19 pandemic, virtually all global vaccine production equipment, whether for mRNA vaccines, protein subunit vaccines, adenovirus vaccines, or traditional inactivated vaccines, was supplied by a single manufacturer, Zhong-Xing Biotechnology. This company is located in Huangshan, a small, quiet inland city in central-eastern China and was founded around 2010 by scientists who had returned from overseas study.

Because this firm specializes in producing vaccine manufacturing equipment rather than vaccines themselves, it arguably possesses deeper practical expertise in vaccine production than many vaccine developers. It deliberately avoids participation in vaccine manufacturing, however, in order to remain outside the complex web of commercial and political interests surrounding vaccines.

It is important to note as well that these returning Chinese scientists did not always receive strong institutional protection when operating in China. In practice, their intellectual property rights were often violated. A key underlying issue is the persistent undervaluation of intellectual property in parts of contemporary Chinese society: village and township entrepreneurs are frequently reluctant to pay for intangible knowledge, leading to cases of fraud, unilateral contract termination, and disputes over the ownership of innovations.

As a result, many of these high-tech returnees became embroiled in legal battles with their local partners. A few, however, learned how to navigate China’s complex power structures surrounding intellectual property.

One notable example is Dr. Liu Xiucai, founder of Cathay Bio and another member of the New Jersey circle, who successfully leveraged legal and political mechanisms to defend his interests in intellectual property disputes. Liu Xiucai’s dispute was once among the most prominent IP infringement cases in China. His ability to secure protection was reportedly linked to his close ties with the political network of former Premier Zhu Rongji. The infringement itself began in the 2000s, in a prefecture-level city in Shandong Province, but Liu later received strong backing from local governments in Shanxi Province and Xinjiang to continue with his work.

Together, these developments mark a qualitative transition in China’s pharmaceutical and fine-chemical sector: from pollution-intensive scale manufacturing toward cleaner, innovation-driven production with greater technological sophistication.

Why Reshoring Has Stalled in the West

Once the basic global pattern was established—China supplying the world’s essential pharmaceutical ingredients—the obvious question became: why has the West been unable to reshore this sector?

The answer has two components. First, prices for core pharmaceutical inputs (APIs) have fallen to levels so low that they undermine any economic incentive for Western producers to reenter the market. Second, the West has largely lost technical familiarity with these fields, while nearly all health sector investment has been redirected toward fashionable biotechnology areas, such as “synthetic biology,” that lack genuine large-scale manufacturing competitiveness.

Since the Covid-19 pandemic, China’s domestic API market has experienced yet another round of price declines. Price competition within China’s real economy has intensified since 2022, driven by what Chinese policymakers now describe as “involutionary competition.”¹⁰ Starting in July 2024, the Political Bureau of the CPC Central Committee began to notice excessive competition in many industrial sectors and started emphasizing anti-involution policy coordination. However, by early 2025, the effects of this anti-involution policy had not yet become apparent in many industries. It wasn’t until mid-2025 that various industries began to slowly see stabilization after reaching their price lows.

At the same time, China has aggressively reduced the prices of finished medicines through its centralized drug procurement system. As a result, the entire value chain—from APIs to finished pharmaceuticals—has been squeezed in terms of profit margins, even as absolute production volumes have remained stable or increased slightly. This has sharply lowered health care costs in China for ordinary medicines without reducing overall consumption levels.¹¹

In fact, the current prices of many basic pharmaceutical substances produced in China are so low that even a five- to tenfold price increase would barely be noticeable to downstream users.

Consider levetiracetam, the gold standard drug for epilepsy. A typical patient requires one gram per day. The Chinese-produced API currently costs less than three U.S. cents per gram, meaning a patient’s daily API cost is under three cents. Yet Keppra, the branded levetiracetam product sold by UCB using Chinese APIs, is priced at roughly two U.S. dollars per day—around sixty times the API cost.

A similar disparity exists for vitamin C. The raw chemical material costs approximately 28,000 RMB per ton, or about 0.4 U.S. cents per gram. By comparison, vitamin E was once sold for 300,000 to 1.5 million RMB per ton before 2022.¹² (In practice, prices for these nutrients can be set quite arbitrarily at the ton level because per-person consumption is extremely small.) The cheapest vitamin C tablets in China, produced by Northeast Pharmaceutical, contain roughly four U.S. cents’ worth of raw material per bottle, yet retail for around two RMB (about twenty-eight U.S. cents). Even within China, such prices are considered extremely low. In these cases, the most technically demanding step is chemical synthesis; conversion from raw material to tablets or capsules is technologically simple.

Another example is taurine, a core functional ingredient in energy drinks and a high-volume nutritional substance globally. Its price has long been suppressed at around 30,000 RMB per ton or even lower. As a result, a standard 250-milliliter can of Red Bull, containing roughly 0.8 to 1 gram of taurine, embeds only about 0.4 U.S. cents’ worth of taurine, while the retail price of the drink is typically one to two U.S. dollars.¹³

These extremely low prices, combined with the fact that Chinese producers have already adapted, often painfully, to razor-thin margins, create another strategic effect: if the Chinese government chose to intervene, it could subsidize producers at minimal fiscal cost. In other words, Beijing could compensate firms for halting exports of specific APIs to the United States, paying them an amount equal to or greater than their normal operating income, while still incurring modest overall costs. Such a policy could be maintained until concessions were extracted on unrelated geopolitical or economic issues.

China has already demonstrated this model in the rare earth sector. Because rare earths represent a small share of final product value, especially at historically low export prices, Beijing can afford to subsidize production while sharply restricting exports, forcing Western importers to accept prices several times higher than before.

The second obstacle is the nature of the remaining real economy investment in the West. Venture capital, now the dominant source of new investment, has become heavily oriented toward fashionable themes rather than industrial production capacity.

As noted, in health care, nearly all new investment flows into “innovative biologic drugs,” overwhelmingly concentrated on treatments for diseases favored by popular investment narratives and trendy therapeutic approaches. Cancer therapies (especially targeted therapies, immunotherapies, and cell-based treatments), autoimmune diseases, diabetes, Alzheimer’s disease, and rare genetic disorders have dominated investment narratives since the 2000s. Meanwhile, basic and ubiquitous health problems, such as inflammation, remain neglected. As a result, medicine still relies on glucocorticoids like dexamethasone, first introduced over seventy years ago and unchanged for decades. Alzheimer’s research, meanwhile, has remained locked in questionable paradigms.

Even within organic synthesis, the only area to attract substantial new funding in recent years has been synthetic biology, which became a major investment theme around 2022. The hype has been so intense that some established Western chemical companies have rebranded themselves around synthetic biology and invested in new equipment. Yet the results have been underwhelming.

On the issue of rebuilding the West’s own API supply, a revealing example comes from the adjacent field of food flavorings. By 2024, the market for vanillin, a widely used flavoring agent, has become almost entirely dominated by Chinese producers, placing severe pressure on traditional European suppliers.¹⁴ That same year, anti-dumping measures were imposed by the International Trade Commission against Chinese vanillin in the United States at the request of Belgian chemical firm Solvay.¹⁵ Solvay subsequently regained roughly one-third of the Western market, but at prices three times that of Chinese vanillin. Despite producing vanillin via synthetic biology, European producers still struggled to achieve profitability.¹⁶

In practice, the synthetic biology products with real long-term prospects are not fashionable new drugs, but rather established mass-market substances: ordinary pharmaceuticals, food additives, nutrients, and certain materials—precisely the domains overlapping with fine organic chemicals.

Overall, synthetic biology production costs are typically three to ten times higher than those of conventional fine-chemical processes. In fully competitive markets, such as polymer-based packaging materials, synthetic biology is simply uncompetitive. Inevitably, many such ventures become “pet industries”: once fashionable, heavily funded by venture capital, but unable to scale, surviving only in niche markets to preserve a sense of relevance, much like earlier waves of hype surrounding products such as artificial meat.

Taken together, these two forces, structurally low prices and a deeply financialized, fashion-driven investment culture, have effectively blocked any serious reshoring of pharmaceutical manufacturing in the West, even as China’s has continued to consolidate its dominance.

Rebuilding America’s Production Capacity

Given the current situation, in which China dominates pharmaceutical manufacturing, does the United States still have any realistic path to restoring self-sufficiency in basic medicines?

The answer is yes. The United States can rebuild its capacity to supply essential medicines, and it does not require massive capital investment to do so. What is needed instead is a strategic use of existing innovation capacity, directed toward the right productive actors, and institutional support for industrial reconstruction. If executed correctly, such a strategy would not lead to significant domestic price increases. On the contrary, it could substantially reduce overall health care costs in the United States.

The key lies with a specific and underutilized group: genuinely innovative green chemistry and biochemical synthesis experts who are naturalized, fully integrated U.S. citizens and who possess substantial industrial experience gained in China. If the United States were to actively support and protect the intellectual property rights of these Chinese American innovators and use economic policy tools to help them scale rapidly, they could combine their technological breakthroughs with practical manufacturing experience to spearhead the revival of basic pharmaceutical production. This would follow the natural logic of technology and knowledge transfer.

Consider the case of Dr. Hu Songzhou, a chemist who belongs to the aforementioned New Jersey-based network of Chinese American scientific talent. Dr. Hu, a graduate of Princeton University, has been regarded since the 1990s as one of the world’s leading innovators in organic chemical synthesis. He holds patents or new synthetic methods for more than one hundred products (molecules) in green chemistry, covering basic drugs and nutritional substances, including several with extremely high industrial value.¹⁷ Among his most significant achievements was the development of a fully green, 100 percent conversion process for taurine, a core nutritional and functional compound.¹⁸

This invention easily became an object of infringement, however. The dispute surrounding Dr. Hu’s taurine technology became the first Section 301-related lawsuit involving an individual inventor following the 2018 Sino-American trade conflict, with Dr. Hu representing the American side. After years of legal struggle, under the context of deindustrialization in the United States, and with the infringing Chinese companies able to exploit loopholes in American law, the outcome proved disastrous to the U.S side.¹⁹

In August 2025, nearly one hundred of Dr. Hu’s clean taurine patents were auctioned off by a U.S. court for a mere $100,000 to a single bidder, who was widely believed to be acting on behalf of the primary Chinese infringer, Qianjiang Yong’an Pharmaceutical. Almost simultaneously, the infringing Chinese firm’s stock price surged. The auction price was only a fraction of the administrative costs Dr. Hu had in filing and maintaining those patents. In practical terms, the inventor gained nothing, and the fruits of a decade’s worth of hard work were effectively expropriated.

Had these patents remained under Dr. Hu’s control and been managed strategically, they could have potentially generated tens of billions of dollars in long-term cash flow.²⁰ Even a modest share of that revenue would have been sufficient to rebuild domestic production for dozens of critical APIs and nutrients, fundamentally addressing U.S. pharmaceutical supply and security concerns.²¹

At the same time, China’s persistent underpricing, driven by intense internal competition, creates an opportunity rather than an obstacle. By enforcing intellectual property protections and restricting imports from infringing low-cost suppliers, especially those violating the rights of American citizens, the United States and Europe could allow compliant American-controlled firms to gain market share. Through rational repricing, large economic surpluses could be generated, enabling rapid profit accumulation and reinvestment into expanded production across a wider range of essential medicines.²²

A feasible approach would be to focus on several high-volume, strategically important basic medicines and nutritional supplements. The most scalable varieties should be prioritized. With coordinated investment from the United States and Europe or other allies, a controllable green chemistry production base could be established quickly. In the initial phase, China’s existing industrial capacity, particularly facilities already financed by American capital, could be utilized as a transitional step. Parallel technology transfer and workforce training programs would then support the construction of new green chemistry production bases in the United States and allied countries.

This strategy aligns closely with the policy orientation of the current U.S. Health Secretary, Robert F. Kennedy Jr. Kennedy has emphasized nutritional interventions over excessively priced “fashionable” drugs as well as criticized regulatory bottlenecks that delay drug development and inflate costs. His approach includes restricting harmful food additives linked to metabolic disorders, accelerating approval pathways for rare disease treatments, and advocating nutritional therapies for widespread conditions associated with metabolic syndrome, such as diabetes, polycystic ovary syndrome, and Alzheimer’s disease.

Nutritional interventions are typically far cheaper than cutting-edge pharmaceutical therapies and remain accessible to ordinary Americans. Crucially, nutrients and basic medicines form the backbone of any rebuilt domestic medical supply system. Even if the current low Chinese supply prices were raised by ten to twenty times, the impact on consumers would be negligible. For instance, if the price of vitamin C rose twentyfold, to roughly $70,000 per ton, the per-person daily cost would still be only two to three U.S. cents, easily absorbed at the retail level.

The same applies to taurine. As Austrian firm Red Bull GmbH can accept $30,000 per ton in 2022, today, even at a price of $60,000 per ton, the taurine content of a standard energy drink would only be worth roughly six cents—again, insignificant relative to retail prices (though such products would benefit from reduced sugar content). Each of these repriced products could anchor a highly profitable domestic industry based on advanced, low-pollution technologies, many of which originate from Chinese American innovators.

In the transition phase, allied countries, particularly those with existing industrial bases, could play strategic roles. Because the United States has been deindustrialized for decades, a learning and capability-rebuilding process of at least five years is likely. Technology transfer hubs are therefore essential.

A country like Hungary could play a particularly distinctive role. It is not only an ideological ally of the American MAGA movement but also maintains relatively good relations with China.

In practical terms, Hungary is well positioned to serve as an intermediary between China’s chemical sector and a future reindustrialized American chemical industry. It retains a strong domestic foundation in chemical manufacturing and has absorbed substantial Chinese investment over the past fifteen years, including production facilities operated by major Chinese chemical firms. This has helped sustain a skilled industrial workforce that could absorb green chemistry methods and support technology transfer. Over time, Hungary could also develop into a high-value supplier within the European market.

Compared with sectors such as advanced machinery, chemical manufacturing is relatively straightforward and easier to reshore. As such, rebuilding domestic production of basic pharmaceuticals represents one of the most achievable real economy goals for the U.S. administration and one of the fastest ways to deliver tangible results to voters.

Success ultimately depends on political will and execution. While China has shown no inclination to initiate a direct confrontation in this domain, typically responding only when challenged—as seen in the rare earth export restrictions introduced in April 2025—the failure by U.S. authorities to act during this window would leave the country exposed to long-term external control over one of its most vital and vulnerable supply chains: basic medical materials.

This article originally appeared in American Affairs Volume X, Number 1 (Spring 2026): 51–70.

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