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Coronavirus Disruptions in China Beginning to Affect U.S. Drug Supplies

By Cory Renauer – Updated Feb 28, 2020 at 4:14PM

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The FDA says that China's COVID-19 containment efforts have led one pharmaceutical company to warn of a looming supply-chain problem.

China's efforts to contain the SARS-CoV-2 coronavirus are already taking their toll on the U.S. drug supply, according to a statement from the Food and Drug Administration.

The FDA requires more than 180 manufacturers of human drugs sold in the U.S. to provide warnings as soon as they anticipate a supply chain disruption. On Friday, FDA Commissioner Stephen M. Hahn warned the medical community that one of those companies has already raised the first alarm. 

A doctor with a hand over one eye.

Image source: Getty Images.

What we know

According to the FDA's latest supply-chain update, supplies of an active ingredient in an unidentified drug marketed in the U.S. are drying up because it is manufactured at a site impacted by the COVID-19 outbreak, leading to a shortage of the drug.

The agency was not specific about which drug it is,  nor did it say which company was first to break the glass and pull the handle. The agency did say there are alternatives available to the drug.

What's next?

It's impossible to predict which products will be affected by China's unprecedented lockdown, but we can safely say companies that are deeply embedded in the generic drug business, such as Teva Pharmaceutical (TEVA -1.98%), will be the most likely to raise the next alarms.

According to the FDA, China is the source of 13% of the active pharmaceutical ingredients (APIs) used to make medicines sold in the U.S. market. The vast majority of APIs sourced from China and sold in the U.S. are used to make generic drugs, which rely on economies of scale to reach any level of profitability.

Generally, companies that manufacture new medicines will be less likely to run into U.S. supply shortages related to international constraints. That said, AstraZeneca (AZN -3.07%) and Merck (MRK -0.83%) manufacture a lot of products in China for patients in that market.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
MRK
$86.78 (-0.83%) $0.73
Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
TEVA
$7.90 (-1.98%) $0.16
AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$54.58 (-3.07%) $-1.73

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