Pharmaceutical supply chain resilience is essential to ensuring ongoing delivery of lifesaving and life-altering medications to patients. The potential for significant supply chain disruption is great, however, particularly in the current geopolitical and environmental contexts facing the world today. Drug makers have learned a great deal from recent experiences, most notably the COVID-19 pandemic. Strategies for achieving supply chain resilience are evolving in response. Only time will tell if sufficient actions are being taken.
Why Supply Chain Resilience Matters
Biopharmaceutical companies must not only develop safe and effective drugs, but ensure reliable supply of those products once they are on the market. That requires ongoing access to sufficient quantities of high-quality raw materials, manufacturing equipment, and components; continued performance of production facilities; and control over storage and distribution, with all activities meeting regulatory compliance requirements.
Managing the risk posed by the existing complex, international and interconnected pharmaceutical supply chain is imperative for all phases of the drug development cycle.1 In recent years, the life sciences industry has suffered from the highest number of disruptions of any industry, according to a global monitoring platform.2 The number of new drug shortages has also increased significantly over the last two decades owing to many causes, which has had real impacts on human health.3 Generic drugs suffer disproportionately as the limited profit margins for these products provide little ability to adapt when disruptions occur.4
Assuring pharmaceutical supply chain resilience, therefore, involves anticipating potential disruptions and implementing solutions that enable the management of various scenarios and ensure rapid recovery to avoid any drug-product shortages.5
Understanding the Risks: What Threatens Pharma Supply Chains?
Disruptions to the pharmaceutical supply chain can result from both natural and human-derived events.2,3 Natural disasters, such as earthquakes, hurricanes, and floods, can wreak significant damage to facilities and transportation systems, impacting raw material, drug substance, and drug product manufacturing and distribution. Facility fires are a leading contributor to supply chain disruptions. Global health emergencies can disrupt all aspects of the drug supply chain. Geopolitical instability — wars, trade tensions, and economic sanctions — can also lead to interruptions in the flow of goods. Insufficient production capacity due to unexpected increases in demand, labor shortages/workforce disruptions, or plant closures as the result of failure to meet regulatory requirements is a leading cause of drug shortages. Technological issues, cyberattacks, mergers and acquisitions, and financial instability — particularly bankruptcies and company closures resulting from weak economic conditions — are additional negative factors.
Key Disruptions That Shaped Pharma Supply Chains
A number of events have occurred since the mid-2000s that clearly demonstrated the impact that geopolitical, economic, and environmental events can have on the pharmaceutical supply chain. Hurricane Katrina in 2005 affected manufacturing facilities in the Gulf Coast region of the United States. The earthquake and tsunami in Japan in 2011 significantly impacted the Japanese pharmaceutical industry.
More recently, blockage of the Suez Canal, a key transportation waterway in the Americas, by Evergreen; the conflict between Russia and Ukraine, the trade war between the United States and China, and the COVID-19 pandemic all tremendously impacted access to key raw materials, advanced pharmaceutical ingredients (APIs), manufacturing components, and transportation supplies and channels.6
The coronavirus pandemic in particular revealed the fragility of the pharmaceutical supply chain.7 The introduction of lockdowns, acceleration of COVID-19 vaccines and therapeutics, raw material and worker shortages, and an over-reliance on China and India for starting materials and APIs all created tremendous supply chain problems. One survey indicated that nearly three quarters of respondent companies experienced supply chain disruptions during the pandemic.8
While drug makers actively took steps to address many of these issues, disruption continue to plague the industry. Indeed, the GlobalData Global Supply Chain Pressure Index (GSCPI) indicates that pharmaceutical supply chain disruptions are only becoming more frequent and more extreme, testing the resilience.7 In 2023, for instance, nearly 33% of respondents to PWC’s 25th Annual Global CEO Survey indicated that geopolitical tensions were threatening growth opportunities.9 The existence of issues across the globe underscores the need to develop more effective strategies to ensure much greater resilence.10
Increasing Operational and Supply Chain Complexity
During the first decades after the birth of the pharmaceutical industry, supply chains were quite simple. Drug were generally produced in small volumes for local distribution.11 As the industry matured and advances in science and technology enabled larger scale manufacturing and global dissemination of medicines, the supply chain became more sophisticated.
Introduction of pharmaceutical regulations pertaining to quality control in the mid-20th century added another layer of complexity, with companies required to comply with Good Manufacturing Practice (GMP) and Good Distribution Practice (GDP) regulations.
Many other trends over the last few decades have further complicated and extended the supply chain. A rapid increase in demand for drugs (small molecule and biologic) and the growing interest in a diverse array of new, more complicated modalities (e.g., antibody–drug conjugates, multispecifics, cell and gene therapies, mRNA treatments) has created supply pressures for many important raw materials and components, as well as the storage and transport of the products themselves.12,13 Talent shortages and evolving trade policies are only exacerbating the situation. Shorter development cycles / accelerated timelines are also placing pressures on suppliers to deliver material more quickly while maintaining quality.14
Continued globalization of the pharmaceutical industry, increasingly volatile markets, and the growing reliance of drug makers on outsourcing of discovery, development, and manufacturing activities are other important trends increasing the complexity of the drug supply chain.3 Many different organizations are now involved in the pharmaceutical supply chain, with sometimes hundreds of entities contributing to the ultimate production of a single product.
The heavy reliance on outsourcing partners in China and India was raising red flags before the COVID-19 pandemic, with the global health crisis driving many to take at least some action in “reshoring” production to domestic locations, or at least adding domestic capabilities. Generic drugs have been impacted the most, with many quality issues at foreign manufacturing plants leading to facility shutdowns and ultimately drug shortages.10 Lack of visibility deep into supply chains (through all suppliers’ suppliers) and access to real-time data on the status of supplies/inventories was also made apparent during the COVID-19 pandemic.
The result has been “rising operational complexity, increasing risk, shifting capability requirements, higher capital expenditure requirements, variable-cost increases, and opportunities for savings.”12 Indeed, a 2023 McKinsey & Company study found that inefficiencies can contribute to increases in supply chain costs of up to 30%.13
New Strategies for Supply Chain Resilience
In the 2010s, there was a shift in pharmaceutical supply chain strategies to an emphasis on simplification and leaner operations. The goal was to increase efficiency by reducing the number of suppliers and increasing agility with a leaner approach.14 One example has been the growing interest in end-to-end outsourcing partners that provide services from early development to commercial manufacturing within a single organization — in many cases a single location.
Following the pandemic, there was a realization that the focus on lean operations introduced unacceptable supply chain risks for any industry that must ensure robust and reliable supply, even in the face of significant disruptions.12 Short-term solutions are not sufficient. Long-term relationships and a solution for central monitoring and control of supply chain networks is necessary. Simplified networks involving end-to-end suppliers can be effective if managed as strategic partners within a comprehensive and interconnected ecosystem built to be flexible and adaptable to chaining conditions.
The best solution involves a combination of some manufacturing redundancy (e.g., multi-sourcing, capacity reserves) coupled with flexibility (e.g., people, thought processes, technologies) through construction of a dynamic supply chain.1,3 To achieve these goals, some companies have made internal investments, while others have turned to M&A deals as a means for strengthening their ability to withstand supply chain disruptions.7 Increasing transparency, risk management, and real-time visibility across the entire supply chain are other important moves.
Specific actions that can be taken include maintaining strategic stock levels, validating transportation routes for raw materials and products, and establishing secondary and in some cases tertiary suppliers for critical raw materials.1 These activities require visibility into the supply chain coupled with greater collaboration among all supply chain members, increased flexibility across all activities, and greater oversight and control. Establishing a strong supply chain risk management plan that includes scenario planning, stress testing, and contingency plans is equally important.5 For most biologic drugs, a strategy for maintenance of the cold chain is also necessary to ensure ongoing supply of temperature sensitive products despite the occurrence of unexpected disruptive events.
Finally, one of the most promising strategies for improving supply chain resilience is the digitalization and automation of supply chain activities in order to simply operations, reduce the likelihood for errors, gain access to real-time data, and benefit from enhanced predictive capabilites.11 Such tools require supply chain integration and collaboration to support data sharing between all members of the supply chain.
Growing Importance of Digital Integration
The key to successful supply chain integration and the development of greater visible and control has been the advance of various digital tools and technologies that support transparency and communication around real-time data. These tools allow significant automation of many supply chain management activities, increasing robustness and reliability.7 They also enable end-to-end visibility across the entire supply chain, enabling close monitoring of linked activities and rapid response to potential problems as they arise. Deeper collaboration among all suppliers and agile decision making are also made possible.10
Simulation and predictive analytics tools leveraging the massive data generated with digital supply chain solutions meanwhile, allows assessment of different scenarios, trend identification, and anticipation of potential problems, allowing preventive measures to be taken in advance.10 Importantly, artificial intelligence (AI) has the potential to identified “patterns, trends, and anomalies” not detectable by humans that can be leveraged for more accurate demand forecasting, inventory management, and production scheduling.13
Supply chain mapping and risk monitoring using AI support supply chain risk management activities, allowing identification of potential weak points in the supply chain.2 Blockchain, meanwhile, offers global applicability and provides full traceability, data immutability, increased security, and scalability, benefiting pharmaceutical supply chains with assurance of supply and prevention of counterfeiting.9,15
Supply Chain Resilience in 2025 and Beyond
Despite the growing recognition of supply chain challenges and movement towards increasing resilience, the highest number of drug shortages recorded in the United States since this figure has been tracked by the American Society of Health-System Pharmacists occurred in 2024.16 The BIOSECURE Act, while currently stalled in Congress, poses an additional potential disruption to the biopharma supply chain.
A recent survey by the Deloitte U.S. Center for Health Solutions revealed that slightly more than one-third of life sciences executives view manufacturing and supply chain risks as “unpredictable”, and that building “resilient and adaptable supply chains” is a top priority, which includes leveraging digital tools including generative AI.16
In the United States, some reshoring efforts are underway. For instance, the API Innovation Center (APIIC) received $14 million from the U.S. Health and Human Services (HHS) Administration for Strategic Preparedness and Response’s (ASPR) Center for Industrial Base Management and Supply Chain (IBMSC) to lead the development and domestic production of three critical APIs. To be competitive with low-cost production in Asia, the focus is on leveraging novel technologies.16
Separately, in June 2024, the Biden administration announced formation of the received U.S. National Security Council’s Biopharma Coalition (Bio-5) — the United States, the EU, India, Japan, and the Republic of Korea — to support more resilient biopharma supply chains for APIs currently sourced from China.16
Outside of these activities, drug makers must also focus on addressing supply chain resilience for basic chemicals, packaging materials, vials, and other less glamorous but still essential materials, for which many may only have a single supplier.
The biopharmaceutical industry learned a great deal about the fragility of its supply chain during the COVID-19 pandemic. Reliance on key geographies for many key ingredients and a focus on lean manufacturing to achieve cost savings introduced unacceptable risk into the ecosystem. Lack of attention to ancillary materials enhanced the level of risk. Hopefully with access to advanced digital tools, increased multisourcing, and more local manufacturing, greater supply chain resilience will be achieved before the next global crisis.
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References
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16. “Building a more resilient biopharma supply chain in 2025.” Pharma Manufacturing. 26 Dec. 2024.