Majority of active pharmaceutical ingredients in US-consumed medicines is produced in the US

The US healthcare system relies on the domestic production of active pharmaceutical ingredients supplemented by imports. Avalere Health’s analysis finds that in 2019, the dollar value of active pharmaceutical ingredients made in the US accounted for a majority (54%) of the $86.5 billion of active pharmaceutical ingredients used in medicines consumed in the US. Total dollar value of active pharmaceutical ingredients made in European Union member states accounted for 26%. Ireland (19%), China (6%), Singapore (3%), the United Kingdom (3%), and Switzerland (2%) are the top 5 individual countries whose active pharmaceutical ingredients are used in medicines consumed in the US.

Recently, policymakers have focused on the US pharmaceutical supply chain and the role of active pharmaceutical ingredients that is produced outside of the US and used in US-consumed finished pharmaceutical products. Active pharmaceutical ingredients used in medicines consumed in the US enter the supply chain in three ways: domestically manufactured active pharmaceutical ingredients; active pharmaceutical ingredients imported from other countries that is used domestically to produce finished pharmaceutical products, and active pharmaceutical ingredients produced in other countries (non-US manufactured) that is used to produce finished pharmaceutical products imported by the US.

Avalere Health estimates (Figure 1) that 54% of the $86.5 billion of active pharmaceutical ingredients used in medicines consumed in the US are produced domestically. Direct imports of active pharmaceutical ingredients by US manufacturers to domestically produce finished pharmaceutical products account for 24% of the active pharmaceutical ingredients used for medicines consumed in the US, and 22% comprises active pharmaceutical ingredients that was produced in other countries that is used in finished pharmaceutical products imported to the US.¹

By summing the total dollar value of active pharmaceutical ingredients from each of the three categories by its country of origin, Avalere Health was able to estimate the top 15 countries that supply active pharmaceutical ingredients used in medicines consumed in the US (Table 1).

Overall, Avalere Health’s analysis found that the active pharmaceutical ingredients used to produce medicines consumed in the US are both manufactured domestically and imported from other countries. In 2019, the US was the largest supplier of active pharmaceutical ingredients by cost in medicines consumed in the US—producing nearly three times more than the next largest source (Ireland, at 19%). No single foreign country dominates the overall supply of active pharmaceutical ingredients for the US market.

Funding for this research was provided by Pharmaceutical Research and Manufacturers of American (PhRMA). Avalere Health retained full editorial control.

To receive Avalere Health updates, connect with us.

Methodology

Avalere Health analyzed international trade patterns between the US and other countries. In addition, Avalere Health analyzed US data on industry output and intermediate purchases to estimate the amount of active pharmaceutical ingredients in medicines consumed in the US that are made in the US. Domestically manufactured active pharmaceutical ingredients was calculated by estimating the dollar value of US manufacturers’ intermediate purchases of active pharmaceutical ingredients and the net of imported active pharmaceutical ingredients (imported for purposes of US finished pharmaceutical products production), plus US exports of active pharmaceutical ingredients that are then imported to the US in the form of finished pharmaceutical products.

Avalere Health analyzed data from the US Census Bureau’s USA Trade Online for 2019 to determine the top 15 countries, by US dollar value, that export active pharmaceutical ingredients to the US. To estimate active pharmaceutical ingredients in US imports of finished pharmaceutical products, Avalere Health used a combination of Census Bureau data and the United Nations Comtrade data. Census Bureau data were used to identify US imports of finished pharmaceutical products, both total dollar value and countries of origin, while UN data were used to identify active pharmaceutical ingredients imports for countries exporting finished pharmaceutical products to the US.

For each country exporting finished pharmaceutical products to the US, Avalere Health applied the country composition of their active pharmaceutical ingredients imports to their exports of finished pharmaceutical products. Attribution of imported active pharmaceutical ingredients dollar amounts to finished pharmaceutical products exports to the US was based on the percentage of each country’s finished pharmaceutical products exports to the US relative to their total finished pharmaceutical products exports. Avalere Health used US Industry Accounts data from the Bureau of Economic Analysis, US Department of Commerce, to estimate the amount of active pharmaceutical ingredients purchased by US manufacturers from domestic suppliers.

Avalere Health identified active pharmaceutical ingredients in the international trade data by defining it to include harmonized tariff system (HTS) Chapter 29 codes that had an end-use classification of pharmaceuticals (40100). For Census Bureau data, 10-digit HTS codes were used. For UN Comtrade data, 6-digit HTS codes were used. Avalere Health identified finished pharmaceutical products in the international trade data by defining it to include HTS Chapter 30 codes, except for 3005 and 3006, which include bandages and pharmaceutical goods.

Avalere Health used US dollars to value active pharmaceutical ingredients for this analysis because that measure, unlike measures like volume by weight, was consistently available across all data sources.

Notes

1. The US exports active pharmaceutical ingredients to many countries that manufacture medicines then imported by the US. Avalere Health estimates that in 2019 about 2% of the active pharmaceutical ingredients used in medicines consumed in the US were made in the US and then exported to another country for use in manufacturing finished pharmaceutical products that were then consumed in the US.