A medicine sold in an American pharmacy may carry the name of a US company and may have been manufactured in India. Yet the chemical journey of that medicine could have begun inside a Chinese factory.

This multilayered supply chain explains why reducing America’s pharmaceutical dependence on China is far more complicated than replacing one supplier with another.

The United States remains the world’s biggest pharmaceutical market and a leader in drug discovery. But it has outsourced much of the manufacturing of generic medicines, active pharmaceutical ingredients and the chemical materials used to make them.

According to a 2025 White House order, only about 10% of the active pharmaceutical ingredients, or APIs, used by volume in medicines consumed in the United States were produced domestically. The remaining requirement was met overwhelmingly through foreign supply chains. White House

The US Department of Health and Human Services has said that China and India together account for more than 70% of the APIs and key starting materials imported into the country. US Department of Health and Human Services

This dependence is now being treated in Washington not merely as a trade issue but as a national-security vulnerability.

How dependent is America on China?

It is surprisingly difficult to give one precise figure for America’s dependence on Chinese pharmaceutical ingredients.

A medicine has several stages of production:

• Key starting materials are the basic chemicals.
• These are processed into an active pharmaceutical ingredient.
• The API is then turned into a tablet, capsule, injection or another finished medicine.
• The finished product may be packaged and marketed in an entirely different country.

A Chinese company may supply the starting material to an Indian manufacturer, which makes the API or finished medicine before exporting it to the United States. In official trade statistics, such a product may appear to have come from India even though China remains embedded deep inside its supply chain.

The US Food and Drug Administration has previously acknowledged that it cannot calculate with precision how much Chinese API reaches the American market directly or indirectly through medicines produced in other countries. US FDA

Therefore, counting only medicines shipped directly from China substantially understates the real exposure.

China’s strength is not just cheap labour

China’s pharmaceutical advantage has been built over decades. It has an integrated ecosystem connecting chemical manufacturers, fermentation facilities, API producers, ports, logistics networks and large-scale industrial utilities.

Chinese manufacturers can produce many older, low-margin drug ingredients at a cost that companies in the US, Europe and even India find difficult to match.

This is especially important for antibiotics, painkillers and other generic medicines. These products are essential to hospitals but often generate very small profits. Buyers usually select the lowest-priced qualified supplier, discouraging manufacturers from maintaining spare production capacity.

China’s advantage, therefore, comes from scale, infrastructure, upstream chemical availability and aggressive pricing—not simply from the presence of pharmaceutical factories.

Why India is the obvious alternative

India is already deeply connected to the American healthcare system.

The FDA has reported that nine out of every ten prescriptions dispensed in the US are for generic medicines and that approximately 40% of those generic products are manufactured in India. US FDA

Indian companies have several major advantages:

• Extensive experience in manufacturing affordable generic medicines
• A large number of facilities supplying regulated markets
• Strong capabilities in chemistry and pharmaceutical formulation
• A skilled scientific and technical workforce
• Lower production costs than the US and Europe
• Long-established relationships with American distributors and healthcare companies

India does not have to enter the American pharmaceutical market from scratch. It is already one of its most important suppliers.

The US and India have also formally recognised this opportunity. Under the bilateral TRUST initiative announced in 2025, the two countries committed to encouraging investment in Indian manufacturing capacity, including production of APIs for critical medicines, both in India and the United States. US–India Joint Leaders’ Statement

The biggest obstacle: India also depends on China

India’s strength in finished medicines hides its biggest weakness.

Indian companies manufacture enormous quantities of tablets, capsules and injections, but many of the chemical ingredients required to produce them continue to come from China.

Indian government data published in March 2026 listed several APIs for which China supplied 70% or more of India’s imports during 2024–25. Dependence was close to 100% for some products, including rifamycin-related ingredients, methyldopa, norfloxacin, streptomycin, gentamicin and tetracycline. Press Information Bureau

This produces a serious paradox:

America wants India to help reduce its dependence on China, but India must first reduce its own dependence on Chinese pharmaceutical ingredients.

Simply moving the final stage of production from China to India would diversify shipping and manufacturing risks. It would not necessarily remove China from the supply chain.

Is India reducing this vulnerability?

There has been measurable progress.

India launched a Production Linked Incentive scheme to encourage domestic manufacturing of critical APIs, drug intermediates and key starting materials. As of December 2025:

• 38 greenfield projects had been commissioned.
• Production capacity of approximately 56,800 tonnes a year had been created.
• Manufacturing had begun for 28 identified critical products.
• The scheme had helped avoid imports worth approximately ₹2,192 crore.
• Actual investment had reached ₹4,814 crore.

These are significant achievements, but the programme covers only part of India’s enormous pharmaceutical raw-material requirement.

Three bulk drug parks are also being developed in Andhra Pradesh, Gujarat and Himachal Pradesh. Shared facilities for power, steam, testing and pollution treatment could help Indian manufacturers narrow China’s cost advantage.

Can India completely replace China?

Not immediately—and probably not by itself.

India can become the leading alternative supplier of finished generic medicines and gradually capture a much larger share of API production. It is particularly well placed to expand in complex generics, injectables, biosimilars and critical medicines.

But a complete replacement of China would require India to build competitive capacity across the entire chain—from basic chemicals and fermentation products to APIs and finished formulations.

New plants must also receive regulatory approvals, establish reliable quality systems and demonstrate that they can supply medicines continuously at competitive prices. The FDA’s expansion of unannounced inspections at foreign manufacturing facilities shows that quality oversight will remain central to any shift in production. US FDA

The United States will also have to decide whether it is prepared to pay more for supply-chain security. Indian manufacturers cannot be expected to maintain expensive reserve capacity while American buyers continue awarding contracts solely to the cheapest supplier.

Long-term purchasing agreements, assured volumes, common quality standards and joint investment will be more effective than tariffs alone.

What India must do to seize the opportunity

India should concentrate on a targeted strategy:

1. Identify the medicines for which both India and the US are dangerously dependent on China.
2. Prioritise domestic production of their APIs and key starting materials.
3. Offer long-term purchase guarantees instead of temporary incentives.
4. Accelerate bulk drug parks and shared pollution-treatment infrastructure.
5. Strengthen regulatory enforcement and manufacturing transparency.
6. Encourage Indian companies to establish production facilities in the US.
7. Move beyond ordinary generics into complex drugs, biologics and pharmaceutical innovation.

The realistic outcome: China Plus One, not China Minus One

India is unlikely to remove China entirely from America’s pharmaceutical supply chain in the near future. Nor would replacing dependence on one country with dependence on another create genuine security.

The more realistic model is a diversified network in which critical medicines and ingredients are produced across India, the United States and other trusted manufacturing locations.

India has the industrial base, scientific talent and market experience to become the most important partner in that transition. But it must first strengthen the foundations beneath its own title as the “pharmacy of the world”.

India can replace China in parts of America’s medicine cabinet. To replace it across the entire pharmaceutical supply chain, however, India must stop being merely the world’s biggest maker of affordable pills and become a major producer of the chemicals inside them.