The Precarious Pharmaceutical Supply Chain: To Reshore or Not to Reshore – Part 1

Part 1*

Discussion of vulnerabilities in the pharmaceutical supply chain is not new. The pharmaceutical industry, regulatory agencies, and governing bodies within the United States and across Europe have been well aware of the problem for many years now. For legislative bodies, the medical community, and patients, ongoing, and unfortunately frequent, drug shortages have been the most obvious manifestation of the problem. Occasionally, there has been a high-profile quality crisis, such as Baxter’s China-sourced heparin that killed four patients in 2008.¹

However, there is nothing like a supply chain–paralyzing global pandemic and geopolitical unrest to bring pharmaceutical supply chain risk front and center.

The industry knows the challenges — complex, just-in-time supply chains that concentrate the production of products and components in faraway geographies. Too often, single-source suppliers within these regions lack transparency and dedication to the quality levels that European and American companies demand of themselves. Given that we are dealing with medications that can be the difference between life and death, the high risk of supply chain failure in times of crisis is an issue requiring focused effort.

Where Are We and How Did We Get Here?

Because facilities must be registered and audited, the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) know how active pharmaceutical ingredient (API) manufacturing facilities are distributed around the world — USA, 28%; EU, 26%; India, 18%; China, 13%; and Canada, 2%.² However, what is not known is the quantity and assortment of active product ingredients being produced in a given plant or country.

It is commonly accepted that approximately 80% of the API — along with a high percentage of raw materials used to make drugs — in the United States, come from China and India. The European picture is similar.

We know that there are frightening vulnerabilities within our current drug supply. For instance, a recent U.S. Department of Commerce study that found that 97% of all antibiotics in the United States came from China, including common antibiotics like azithromycin, ciprofloxacin, and piperacillin/tazobactam that have been in high demand during the pandemic.³

In late 2019, the FDA reported on an analysis of 163 drug shortages that occurred between 2013 and 2017. Quality problems were responsible for the shortages 62% of the time. In France, according to the National Drug Agency, 538 medicines of “major therapeutic interest” faced shortages in 2017. During just the first six months of 2019, there were 2,044 impending or current drug shortages in the Netherlands.² 

Given that healthcare systems in both Europe and the United States rely on generic drugs to keep patient care costs at bay, it is understandable that drug manufacturing is heavily outsourced to lower-cost nations. The reality is, when using traditional pharmaceutical manufacturing technology, U.S.- or European-based facilities are not competitive.

Should the Reshoring Begin?

For obvious reasons, there is a strong rallying cry within both the United States and Europe to reshore drug manufacturing. However, the strategy of solely relocating operations closer to home is also fraught with risk. No country or region is immune to disruption, and drastically increasing the cost of drugs also increases the risk that some patients will not have access. A more realistic, and in the end safer, approach is to diversify operations and strategically spread facilities across a number of regions.

Ultimately, it is unrealistic for any country to manufacture all of its own medicines. Yet all countries should be able to make the most essential medicines, have the ability to rapidly scale the manufacturing of vital drugs, and have more ample national stockpiles of drugs, medical devices, and personal protective equipment for times of crisis.

Because restructuring the pharmaceutical supply chain will be a complex process, many ideas will be needed. 

*Part II of this piece, to be published in the Q4 edition of Pharma’s Almanac, will include interviews with industry experts offering thoughts on the path forward.

References

1. Tanne, Janice Hopkins. “Four deaths and 350 adverse events lead to US recall of heparin.” BMJ. 23 Feb. 2008. Web.

2. Lorin, Vincent. “The ‘irresponsible’ reliance of European Big pharma on China.” European Data Journalism Network. 11 Mar. 2020. Web.

3. Huang, Yanzhong. “U.S. Dependence on Pharmaceutical Products from China.” Council on Foreign Relations. 14 Aug. 2019. Web.