At a Glance
Building a resilient supply chain framework for pharmaceutical companies requires:
Pandemics, natural disasters, cyber-attacks, political turmoil, and other actions are beyond a company’s control. Any one or combination of them can thoroughly disrupt a smoothly running supply chain.
Critical supply chain areas getting battered by these disruptions include reduced or non-existent access to:
The unquestionable first requirement to improving supply chain resiliency is having access to accurate data and knowing what to do with the data-driven insights. Data sources such as the Industrial Internet of Things (IIoT) provide real-time information, and applications such as Microsoft Dynamics Supply Chain Management helps users evaluate existing information.
A 2020 report from Avalere states that U.S. biotech firms making medicines here get their active pharmaceutical ingredients (APIs) from U.S. suppliers – import them or import finished products. These precursor chemicals accounted for $86.5 billion in the U.S. alone during 2019.
One issue U.S. companies are facing is the location of active pharmaceutical ingredient (API) manufacturers. According to the U.S. Food and Drug Administration (FDA), the top four places are:
Figure: Percentage of API Sources in U.S. Dollars
Figure: API manufacturing facility locations
Canada and the rest of the world produce the remaining 20 percent of APIs used in medicines. Also, the FDA report states India, the EU, and the rest of the world have 1048 facilities making FDA-regulated drugs.
Adding to the importance of having resilience in the pharmaceutical supply chain are potential supply chain disruptions caused by using overseas suppliers. These include recalls, such as two from China cited by the FDA within the last six years.
One way to counter a dependency on foreign API supplies is by using advanced technology to produce chemicals and medicines at lower costs, the FDA suggests. Using the continuous manufacturing (CM) process to make finished products instead of producing batches with gaps between steps can be more effective.
Another method of reducing reliance on foreign API suppliers is using advanced technology. Newer methods producing APIs and finished dosage forms (FDF) helps in supply chain management in the pharmaceutical industry. The ability to rapidly respond to changes in demand, using smaller physical footprints that require smaller facilities, helps reduce pharmaceutical manufacturing costs potentially, offsetting overseas production advantages. High tech production methods, such as those in smart factories, also tend to have lower environmental impacts.
Pharmaceutical companies considering boosting their pharmaceutical value chain using this method can get help from the FDA. The FDA has an Emerging Technology Program (ETP) described in “Advancement of Emerging Technology Applications for Pharmaceutical Innovation and Modernization Guidance for Industry.”
The FDA is also working on a framework to develop miniature mobile manufacturing “Pharmacy on Demand” platforms to produce essential drugs at or near the point of care. This method, while requiring capital costs, provides the means of eliminating delivery costs.
Before making changes to the current supply chain, CFOs should look at four primary sources of risk:
Before investing in building a resilient supply chain, CFOs would want to know:
$16 trillion (i.e., $16,000,000,000,000): Estimated total cost of the Covid-19 pandemic in the U.S. alone.
$85 billion (i.e., $85,000,000,000) lost by the Nasdaq Biotech Index in the week ending March 6, 2021, its third weekly loss in a row.
$242 million (i.e., $242,000,000) lost by the Health Care Select Sector SPDR Fund (XLV) in the week ending March 6, 2021, bringing the total loss to date to $1.68 billion
Figure: 1A roadmap to digital transformation to a resilient supply chain
According to a recent Deloitte article, CFOs can reduce their chain disruptions and improve their supply chain resilience by using these strategies:
Before making changes to their current supply chain, CFOs, chief technology officers, and other executives should consider:
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