The pharmaceutical supply chain continues to grow in complexity. The more intertwined this global web becomes, the more susceptible it is to disruption. The pandemic made this painfully evident. Beyond COVID-19, other disruptions like natural disasters, cyberattacks and internal trade disputes can also cripple pharmaceutical supply chains. Around 80% of the world’s Active Pharmaceutical Ingredients (APIs) come from China, India and a handful of other countries. Even minor shocks, like a temporary shutdown of a factory in China, can have ripple effects that impede the productivity of a pharmaceutical company in the United States. And, with the FDA reporting that 72% of drug products are made abroad, it is no surprise that the United States is actively seeking to decrease its dependence on foreign countries by bringing biotech manufacturing to its home soil.
The U.S. Government’s Push for Strengthened Pharmaceutical Supply Chains
The decision to transition from offshore to onshore production is primarily due to national security concerns and to ensure that products are available within the country as per requirements. The government believes that its most vital products (in this case, pharmaceuticals) should be manufactured domestically to avoid disturbances from external factors (geopolitical, natural disasters, etc.). Indeed, the past several years have seen efforts by various governing bodies to safeguard the public from unexpected (but inevitable) supply chain shortages.
More recently, in February 2021, the President signed an Executive Order for a 100-day review of four supply chains (including Pharmaceuticals and APIs) critical to the United States. Consider the Prepare Act of 2021, which aims to create a national stockpile of active pharmaceutical ingredients and generics for critical medicines. The bill also includes regular threat assessments, which look for reduced capacity in the current supply, incoming spikes in demand and scenarios of two or fewer manufacturers of any vital generic medicine.
Another notable example of the country’s commitment to domestic drug manufacturing comes from the Department of Defense in the form of a biomanufacturing executive order. Over the next five years, it will invest $1 billion in bio-industrial domestic manufacturing infrastructure to promote the establishment of a national base accessible to U.S. innovators, ensuring native production remains robust despite supply chain disruptions. Additionally, Puerto Rico continues to position itself as an ideal investment destination in the bioscience space. An incorporated U.S. territory, Puerto Rico enjoys the same support, protections and legal framework – and, as of 2020, 12 of the 20 largest drug makers have operations on the island. The U.S. government will likely keep contributing resources to Puerto Rico to further cement it as a close-to-home hub for the pharmaceutical manufacturing industry.
How Life Sciences Companies Can Protect Against Supply Chain Disruptions
As the U.S. government strives to strengthen the pharmaceutical supply chain, the onus also falls upon companies. Here are a few strategies to protect against supply chain disruptions:
- Bringing End-to-End (E2E) Visibility within Supply Chain: Large attack surfaces within global supply chains, multiple types of systems, higher presence of proprietary components and the critical lifesaving nature of the pharmaceutical supply chain requires companies to focus concerted efforts towards achieving E2E visibility. This requires consistent gradual efforts to build visibility and may even require updating existing master data and data governance practices within organizations.
- Emergency Response Planning and Playbook: Building a small team focused on creative risk assessment, defining correct risk algorithms, and creating a playbook of mitigation actions will help organizations in identifying, quantifying and managing disruption impacts.
- Leveraging Emerging Technologies with Rapid “Proof of Value” Assessments: Companies now have a large set of tools at their disposal along with multiple emerging technologies (GenAI, IoT, ML, Blockchain) to gather data points, assess potential disruption impacts and prepare mitigation actions. However, a rapid factory model to complete “Proof of Value” assessments will be helpful to see rapid benefits and business acceptance of such tools.
- Developing Right Supply Chain Talent: There is a growing need for multi-faceted supply chain talent who have hands-on E2E supply chain experience and are comfortable in data analytics and technology solutions. However, finding such talent is difficult as reiterated by the 2023 Korn Ferry Supply Chain Agenda. Therefore, a structured program to identify in-house talent or develop them through a training program could be a starting point. Supply chain teams require individuals across two broad categories: engineers (data, analytics, technology) and business-focused project managers (PMs). More than the hard skills, the team will require individuals with unique skills to plan for risk scenarios, while being resourceful and continuously learning.
- Increasing Collaborations with Suppliers and Carriers: Enabling end-to-end visibility across the supply chain requires real-or near-real-time collaboration with suppliers and carriers. This collaboration ultimately drives customer experience as it helps manage expectations.
It is a very deliberate and time-intensive effort to diversify suppliers or increase a manufacturing footprint due to difficulties from increased operating expenses and regulatory oversight requirements. However, even tracking the sole source/single source/Tier 1 visibility/Tier ‘n’ visibility can be a good starting point to proactively plan for managing disruptions.
Short- and Long-Term Investments
With the federal government working to bring manufacturing and supply chain operations to familiar soil, it is paramount that pharmaceutical and life sciences companies start making strategic investments in short- and long-term initiatives. Companies can benefit with quick wins by working on foundational data projects and rapid “proof of value” assessments.
While the industry is moving towards near-shoring and friend-shoring and global realignments are in progress, long-term actions will be defined by an organization’s existing product supply chain, talent availability, customer needs and regional regulatory conditions.
