The World Needs to Change How It Trades Drugs

On Saturday, April 4, six weeks after Donald Trump enjoyed a resounding welcome in a whirlwind tour of India, the U.S. president called Indian Prime Minister Narendra Modi on a matter of urgency. India had just banned the export of an antimalarial drug which the United States wanted. But the call represented tensions that had more at stake than a bilateral dispute between two countries. It highlighted the downward spiral the world might plunge into if countries turned protectionist in the time of a pandemic. For if every country were to stockpile medical supplies, it would prevent products, including medicines, from reaching where they are needed most—and make each country vulnerable in an increasingly interconnected world with interwoven supply chains.

The coronavirus was infecting people across the United States. As the number of confirmed cases rose at an astonishing rate, some health experts claimed that hydroxychloroquine may offer a cure. Doctors prescribe the drug primarily to patients of malaria, as well as for autoimmune diseases such as lupus erythematosus and rheumatoid arthritis. But it has also shown some early promise in providing relief to some COVID-19 patients, although it is too soon to draw firm conclusions. India makes 70 percent of the world’s supply of the drug, and the United States gets nearly half its imports from India.

Trump found the idea of using hydroxychloroquine attractive, even though those promoting it were not physicians. The catch? As India anticipated a rise in the number of domestic coronavirus cases, the country’s Directorate General of Foreign Trade had banned the export of hydroxychloroquine. Trump had been talking up the drug—a view his personal lawyer Rudy Giuliani amplified—even though doctors remain skeptical of its effects on COVID-19 patients.Studies take time, and the world cannot wait, with the death toll mounting, markets tanking, and the economy comatose.

But studies take time, and the world cannot wait, with the death toll mounting, markets tanking, and the economy comatose. Trump’s impatience was understandable, especially in an election year. And so on that Saturday, Trump called Modi asking him to lift the ban; if not, as he told a news conference in Washington, there would be “a retaliation.”

India lifted the ban within a day. To give the reversal a veneer of respectability, India couched the decision in humanitarian terms—the drug would be offered to neighboring countries and to countries severely affected by COVID-19, a category that presumably included not only China, Italy, Iran, and Spain, but also the United States, which has now surpassed other nations with the largest number of deaths and the highest number of infected people in the world.

There are two wrongs here, and together, they don’t make anything right. First, Trump prematurely raised hopes about hydroxychloroquine among people haunted by the specter of death. But as his bullying of 3M and blocking of exports of medical equipment to Canada reveals, his pressure on New Delhi is hardly driven by his support for free markets. Second, India was wrong (like many other countries) in restricting exports of a drug that may be beneficial during a pandemic. Katherine Eban, whose award-winning book Bottle of Lies: The Inside Story of the Generic Drug Boom highlighted the problems with India’s pharmaceutical sector, told me: “Governments have a responsibility to secure drugs for their own people. But the pandemic has highlighted the complications of a globalized drug supply, both for exporters—who don’t know how much to hold back—and for importers, whose supplies now seem very uncertain.”

There are also real concerns about the continued supply of products and medicines, partly because countries may hoard drugs during a crisis, and partly because of the quality of manufacturing processes—worries that are not unique to India. The world depends on a few key exporters: China for personal protection equipment, India for medicines, Malaysia for gloves, other countries for critical parts in the making of ventilators. It is not easy to ramp up production quickly, and even if it were so, quality concerns can delay timely delivery of products. China recently imposed curbs on exporting masks and ventilators following complaints from importing countries on quality-control grounds. That has created problems in India, which was relying on China for antibody kits for speedy tests. Some countries are concerned about the situation and have begun imposing restrictions on exports of products they consider strategically important, disrupting global flows, although a few have since lifted the restrictions. As Mona Pinchis-Paulsen, a teaching fellow at Stanford Law School, has noted, by mid-March, some 54 governments around the world had introduced some coronavirus-related export restrictions on medical supplies, often to secure stockpiles.

While international trade law permits governments to restrict trade in times of health emergencies or other crises, such restrictions can have unintended consequences because the global economy is far too intertwined for any country to be self-reliant. As Switzerland discovered recently, Romanian controls on exports led to a shortage of a critical input, slowing down domestic production of ventilators.Trump is promoting a drug of unproven effectiveness which may even harm some patients.

To be sure, no one knows if hydroxychloroquine will work. It is a 65-year-old off-patent drug, which means many generic manufacturers can produce it, significantly lowering its price. In the United States, a bottle of 50 capsules costs $40. More than a dozen companies make it in India, where its equivalent price is around 300 rupees ($4). At present, India manufactures much more than it needs. Switzerland’s Novartis and France’s Sanofi also produce the drug, but their prices are much higher, and their capacity is not as vast as the collective capacity in India. Novartis has committed to donating 130 million doses of hydroxychloroquine, by working with the World Health Organization to identify locations around the world where patients need broad access to the medicine immediately.

In any case, Trump is promoting a drug of unproven effectiveness which may even harm some patients. Anthony Fauci, the immunologist who heads the National Institute of Allergy and Infectious Diseases, has described hydroxychloroquine’s effectiveness as “anecdotal.”  There are several other sources for doubts over hydroxychloroquine: A research trial of a closely related drug in Brazil was ended after coronavirus-infected patients who were given the drug developed irregular heartbeats. Unusually, the Centers for Disease Control and Prevention, which had earlier mentioned the anecdotal evidence about the drug being used on some patients, removed that guidance on April 7, adding that no drug is approved to treat COVID-19.

Even so, New Delhi’s sudden ban on the export of hydroxychloroquine unnerved the market. Dinesh Thakur, a public-health activist who has been critical of the drug industry’s practices, told me: “The Indian generic industry has taken a beating over the last decade rightfully for its problems with compliance and quality. The last thing the Indian government ought to have done is to undermine confidence in India’s ability to supply the product in a consistent manner.” Thakur said there are other important drugs India makes which were affected by the sudden ban, such as bronchodilators, which open the passageway for lungs to breathe and without which ventilators don’t work, and painkillers that help manage patients in intensive-care units.

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Besides policy uncertainty, there is the matter of quality. Two fundamental mismatches in the global economy have caused a range of problems in the global supply chain for medicines, according to epidemiologist Elizabeth Pisani, who has been researching the proliferation of substandard drugs internationally. She wrote recently: “First, we increasingly look to governments to ensure that demand for affordable medicines is met, while relying on profit-seeking companies to supply that demand. That leads to procurement and production practices that incentivize cost-cutting and undermine product quality. Second, we want both the price-lowering (and pollution-outsourcing) efficiencies of a globalized supply chain, while simultaneously demanding security of supply at the national level. As the current pandemic is teaching us, you can’t have it both ways.”

Modi is a highly divisive figure in Indian politics, even though he is widely popular. When India lifted the ban on hydroxychloroquine’s export, the prime minister’s critics pounced on him on social media, ridiculing him for caving to U.S. pressure. Some of Modi’s supporters claimed, without offering any evidence, that he had secured a promise from Trump that Indian pharmaceutical companies—such as Ipca Laboratories, which received a U.S. Food and Drug Administration (FDA) warning in 2015 for deviating from good manufacturing practices—that were under a cloud would be able to resume doing business with the United States. Ipca says the FDA has lifted restrictions it had placed on two of its plants and it can resume exporting hydroxychloroquine to the United States. Industry watchers dismiss the theory of a broader immunity for Indian companies.

The crucial question, Thakur said, will be which Indian companies provide information about how their drugs are made, processed, packaged and stored, as per their drug master files (a process by which active ingredients are made) and abbreviated new drug application (the process by which the ingredient is formulated into a tablet) if they want the generic drug approved. India’s manufacturing capabilities notwithstanding, U.S. authorities are unlikely to buy drugs from any foreign company that does not meet its criteria.New Delhi’s sudden ban on the export of hydroxychloroquine unnerved the market.

For the moment, India has more than adequate supply for its needs to combat malaria. (The season begins with the onset of monsoons, around June.) India’s annual production of 10 metric tons is set to rise up to 70 metric tons by May. Domestic manufacturers can produce 350 million tablets a month; local demand is expected to 100 million tablets, assuming there is no spike in demand to combat COVID-19. India exports the surplus.

Can India ramp up production sufficiently fast to meet global needs? The process isn’t hard, but Eban is cautious: “Expanding capacity is not an overnight thing. It can take months. And it can also impact quality. This is not just about getting lots of a drug, but about getting lots of a drug that is still being manufactured under good manufacturing practices. That is where the real challenge lies.”

Indeed, if COVID-19 cases spike in India, and if hydroxychloroquine is scientifically proved to be effective, then India will need the drug for its domestic market. That was New Delhi’s logic when it first restricted exports. But should countries stop trade in medical products during a pandemic? Pinchis-Paulsen added: “[Trade restrictions] may be legal, but that doesn’t make it the right response. In a pandemic, maybe the rules should push in the opposite direction. What if instead of an exception that permits discrete trade barriers … there was a provision that required all Members to make trade completely open to address the pandemic?”

A global pandemic is not the time to start a trade war or settle scores; pandemics don’t know borders, and nations can’t build walls to stop microbes from entering a country. Whether or not hydroxychloroquine can treat COVID-19, a fundamental shift in how drugs are made, sold, and distributed to those who need them is inevitable.