HQ Team
October 31, 2025: A new German study reveals that Europe is significantly dependent on China for essential medicines and their chemical components. This research, conducted by the German Economic Institute (IW Köln), aligns with concerns raised in a separate U.S. Pharmacopeia (USP) analysis, which found that over half of active pharmaceutical ingredients (APIs) for prescription medicines in the U.S. come from India and the European Union . Together, these reports paint a picture of a global pharmaceutical supply chain with concentrated geographical risks that could impact medication availability during geopolitical disruptions.
The German report, “Strategic dependencies on China for important medicines,” identifies heavy European reliance on Chinese supplies for antibiotics, diabetes medications, and antidepressants. This dependency extends beyond finished drugs to include Active Pharmaceutical Ingredients (APIs) and Key Starting Materials (KSMs), the basic chemical components needed to produce pharmaceuticals .
China’s dominance in the global generic API market is staggering, controlling approximately 80% of the global generic API supply chain as of 2023. This position results from decades of strategic industrial policy, including government subsidies, infrastructure development, and favorable regulatory environments that encouraged pharmaceutical manufacturing . Chinese manufacturers have achieved unprecedented economies of scale, operating massive production facilities that dwarf many Western counterparts, creating significant barriers to entry for competitors .
The U.S. supply chain perspective
The USP Medicine Supply Map, a data intelligence platform mapping where 94% of U.S. pharmaceutical products and their ingredients are made, provides a complementary perspective on global dependencies . Their analysis shows that:
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50% of APIs for prescription medicines in the U.S. come from India and the European Union combined.
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43% of branded pharmaceutical APIs originate from the EU.
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For generic drugs, which constitute 90% of U.S. prescription volume, APIs primarily come from India.
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China contributes 8% of the total volume of APIs analyzed for the U.S. market.
India’s role
India’s position in this supply chain is particularly crucial yet complex. While the country has rightfully earned the title “Pharmacy of the World” as the largest supplier of generic drugs globally, its manufacturing prowess rests on a fragile foundation.
India is the world’s third-largest producer of pharmaceuticals by volume but ranks only 14th by value, reflecting its focus on high-volume, low-margin generic drugs. The Indian pharmaceutical market has demonstrated robust growth, with its turnover reaching ₹4.17 lakh crore (approximately $50 billion) in 2023-24, growing at over 10% annually for the past five years .
However, this manufacturing giant faces its own strategic vulnerability: approximately 70-80% of India’s APIs and KSMs are sourced from China. This creates a supply chain chokehold where China’s primary competitor in generic drug manufacturing remains critically dependent on Chinese chemical inputs.
Policy responses
Both European and American policymakers have recognized these vulnerabilities. The U.S. has initiated investigations into whether pharmaceutical imports pose a national security risk , while the EU is developing trade strategies to manage supply chain dependencies.
India has launched several initiatives to reduce this dependency, including the Production Linked Incentive (PLI) scheme for pharmaceuticals and the Promotion of Bulk Drug Parks scheme to create domestic API manufacturing hubs . However, these efforts face significant challenges as Chinese producers have slashed prices for key ingredients by up to 50%, making it difficult for emerging Indian production to compete economically.
As the global pharmaceutical landscape evolves, these interconnected dependencies highlight the need for diversified supply chains that balance cost efficiency with strategic security. With India’s manufacturing capability deeply intertwined with Chinese inputs, disruptions in this complex network could potentially impact medication availability worldwide, underscoring the need for coordinated international policy responses.
