As the number of COVID-19 cases continues to grow worldwide, countries are increasingly reliant on population health measures (such as social distancing, quarantines, and business closure mandates) that directly reduce economic productivity and manufacturing output. The global pharmaceutical supply chain has had to adapt in real time given shortages of critically important healthcare equipment and new hurdles to source both raw materials and final, finished goods. These challenges are compounded as countries have focused inward, closing borders and prioritizing materials and active pharmaceutical ingredients for domestic populations.

Although the COVID-19 pandemic has highlighted the tenuous nature of—and introduced new challenges for—the global pharmaceutical supply chain, the current crisis should provide an opportunity for established and emerging stakeholders to evaluate the issue of drug security on a national basis and develop alternative strategies for risk mitigation around drug shortages and stockpiling requirements. Addressing these issues within the pharmaceutical supply chain that were exposed by the pandemic are relevant to broader audiences as well, including the medical community (i.e., their ability to bring products to market) and the broader political dialogue given the heightened scrutiny of drug availability, particularly in the 2020 election year.

Supply and Demand of Raw Materials

Given the complexities and costs associated with producing raw materials, producing finished goods, and operating an efficient global warehousing and distribution model, the global pharmaceutical supply chain has relied on a series of agreements and interdependencies around the world to develop, ship, and deliver products at a tenable price.

Whereas manufacturers have traditionally driven decisions based on quality, sourcing scalability, and cost, these stakeholders now must contend with additional variables such as air freight capacity and international shipping regulations—all while often functioning on their regular just-in-time inventory approach. Given the sustained demand for raw materials and finished goods, certain global players (such as China and South Korea) are well positioned to compensate for lost global production given that they experienced the effects of the pandemic earlier and have since adapted to “overcome the curve.” Given that the US Food & Drug Administration has suspended certain domestic and international inspections, a renewed need to focus on quality and consistency will likely come to the fore once more.

Impact of US and International Trade Regulations on Sourcing

The impact on the evolving market also extends to significant disturbances in intra- and international trade as manufacturing sites and distribution channels become further interrupted. The disparate actions taken by other countries have significantly limited or burdened all forms of transportation and trade between the exchange of goods in the global supply chain, and some countries have expressly limited exports.

The provisions of state and international trade policies will evolve as the world copes with and recovers from the public health emergency and adjusts to a new normal. Different state actors will recover and take actions to re-engage the global economy at a varied pace, and there is genuine threat that certain states will again have to further restrict trade and transportation due to the subsequent spread of COVID-19. In order for the often-used just-in-time inventory approach to remain a viable strategy, stakeholders will need to monitor and adjust accordingly to ensure an ongoing and reliable supply of medicines within the US.

Considerations Moving Forward

This global health emergency has shed light on the need for all stakeholders in the healthcare ecosystem to re-evaluate their supply chains. This assessment should identify opportunities to mitigate potential risks to the manufacturing and delivery of their products and ensure continuity supply for drugs and all other relevant transactions to customers and consumers in a timely fashion.

While stakeholders should consider how these challenges and opportunities apply specifically to brand drugs, generics, and devices, a particular focus for the US will be the security and reliability of the biologics supply chain (the US accounts for 60% of global biologics consumption). Recent interruptions to the global supply chains has highlighted the pressing need to address potential solutions for strategic stockpiles of raw and finished goods in the future.

The COVID-19 pandemic resurfaces opportunity for manufacturers and the industry writ large to revisit drug security and assess how public and private stakeholders are positioned to limit the risks global pandemics present from a supply chain perspective. Whether this is creating new boluses of stockpiled supplies strategically located around the world or a willingness to invest in (and pay for) local manufacturing capabilities, this pandemic has raised a number of questions that industry stakeholders and policymakers worldwide will need to address in the months and years ahead.

Avalere is engaging manufacturers, plans, and stakeholders across the pharmaceutical supply chain to assess the impacts of COVID-19. To learn more about our work, connect with us.

Check out our  COVID-19 Intel Center.