Trump leans on India to export his unproven coronavirus drug of choice—but it’s China that determines supply

Subscribe to Outbreak, a daily roundup of stories on the coronavirus pandemic and its impact on global business, delivered free to your inbox.The U.S. wants to import more hydroxychloroquine, a common anti-malaria drug that’s emerged as an unproven coronavirus treatment, but to do so, it will have to rely on a precarious supply chain from India and—ultimately—China.On Saturday, India banned all foreign exports of hydroxychloroquine, after previous export restrictions left some exemptions. Hours later, U.S. President Donald Trump called India Prime Minister Narendra Modi to request that India release the drug to the U.S., and Trump on Monday warned of retaliation if India upheld the ban.

On Tuesday, India announced that it would partially ease restrictions on exports of the drug for humanitarian purposes once domestic demand had been met. India also lifted restrictions on Tuesday of exports of 24 pharmaceutical ingredients and medicines first imposed in early March.

India’s escalating coronavirus crisis is squeezing the availability of the drug, as are hiccups in the drug’s supply chain. U.S. imports of hydroxychloroquine will certainly depend on India’s willingness to part with doses of the drug, but they also hinge on whether Indian suppliers can secure ingredients from China to produce it.

A ‘game changer’?

In the U.S., the use of hydroxychloroquine as a treatment for COVID-19 has set off a fierce debate within the White House over its efficacy, as Trump continues to promote the drug as a ‘game-changing’ treatment. Studies published in China and France have indicated that the drug is effective in slowing COVID-19 infections, though journal editors retracted the French study after it was published.

Other studies show that the drug is no more effective in treating the coronavirus than more conventional methods like bed rest. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, has said evidence for hydroxychloroquine’s effectiveness is essentially anecdotal, and other experts believe it is difficult to gain any meaningful insights from the initial studies since they did not include control groups. Demand for the drug in the U.S. is surging nonetheless.

Chain reaction

To fill much of its hydroxychloroquine demand, the U.S. relies on Indian manufacturers, which—in turn—depend on China for the drug’s active pharmaceutical ingredients or APIs.

In 2019, Indian drug makers supplied 47% of the U.S.’s hydroxychloroquine, according to Bloomberg. And up to 90% of the APIs used in India’s hydroxychloroquine come directly from China, Indian drug makers told India’s Business Today. (Overall, Indian pharmaceutical companies rely on Chinese suppliers to fill 70% of their API needs.)

Recent coronavirus lockdowns in China, which shut factories and froze workforces, have hammered the pharmaceutical supply chain, with disruptions reported at several API factories there in February and early March.

“India and China are interlinked…any disruptions in API supplies from China impact India’s ability to manufacture generics for their own market and for export,” said James Duffy, a lawyer with Reed Smith in New York with expertise in global pharmaceutical supply chains.

The supply chain crunch came as India’s own coronavirus cases ticked upward, and it prepared for a spike in domestic hydroxychloroquine demand. Together, the two factors made the shortage of API especially acute.

Indian makers of hydroxychloroquine contacted by Fortune did not return requests for comment, but several told India’s Business Today that API shipments from China had “virtually stopped” in recent weeks.

“India does appear to be facing API shortages caused by manufacturing disruptions in China,” said Duffy. “The most telling fact is that India has enacted export restrictions and strengthened them over the last month, which strongly suggest an inability to supply both the domestic Indian market and foreign markets.”

Easing the squeeze

At the same time, India’s loosening of export restrictions on Tuesday indicate that the supply chain disruptions in China were easing as Beijing continued its effort to restart its economy.

Ashok Kumar Madan, director of the Indian Drug Manufacturer’s association, told the BBC that API shipments have resumed, and Amitendu Palit, an economist at the National University of Singapore, said India’s lifting of some drug export restrictions signaled confidence in its ability to ramp up production.

“India wouldn’t have considered lifting the restrictions of exports unless and until it had been assured of recovery in supply chains, particularly supplies of APIs from China,” said Palit.

India’s decision on Tuesday to allow some exports is good news for those seeking hydroxychloroquine, which also treats lupus and rheumatoid arthritis, but India’s capability to manufacture and export the drug is a “fluid situation,” said Duffy, and is subject to change amid an evolving pandemic. New studies about the efficacy of the drug, developments in India’s own coronavirus crisis, and shifting geopolitics all have the potential to alter its availability.

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