While supply chains everywhere face mounting obstacles, issues in the pharmaceutical industry are particularly severe. After the COVID-19 pandemic, the sector’s shortcomings are painfully clear, so calls for change across public and private entities are growing. Pharmaceutical supply chain management will have to evolve as this pressure rises.
The U.S. was once a leader in the pharmaceutical supply chain and could become one again. As any experienced logistics professional knows, that process is easier said than done. However, while the road ahead will be challenging, that doesn’t mean it’s impossible.
The State of the Pharmaceutical Supply Chain Today
It’s important to understand where pharmaceutical supply chain management is today to learn where it can go from here. Among the biggest current issues are a reliance on foreign sources of active pharmaceutical ingredients (APIs) and a severe shortage of critical products.
Roughly 83% of the most-consumed generic drugs have no U.S. sources for their APIs. Even if U.S. manufacturers produce them domestically, that production relies on international sources — mostly in China and India — for critical supplies. COVID-19 revealed why those dependencies are risky. Over 40 Chinese pharma companies ceased production, and India stopped exporting 26 medicines during the pandemic.
These supply chain disruptions have exacerbated existing product shortages. Many of the most critical drugs face significant backlogs and availability issues. These shortages often follow a vicious cycle. As a drug’s demand surges, generic competition increases, leading to offshoring to lower production costs, making the most essential medicines the most susceptible to supply chain disruption.
What’s Next for Pharmaceutical Supply Chain Management
Pharmaceutical supply chain management must change to break this cycle and prevent future shortages and backlogs. That shift will require several significant changes across the pharma industry and its strategic partners.
Reshoring Efforts
Reshoring API production is the biggest piece of the puzzle. As long as manufacturers rely on international sources for these drug building blocks, critical medicines will be at risk of severe supply chain disruption.
U.S. drug manufacturers may already have the capacity to expand domestic production. Domestic operations account for 28% of all API manufacturing facilities, more than any other region. However, generic drugs — which account for the vast majority of consumption — rely more heavily on foreign-made APIs, and many U.S. facilities are operating under capacity.
