Overseas API Manufacturing Identified As Key Vulnerability In US Supply Chain

The task force has already launched the second phase of the supply chain review(Source:Alamy)

The internal task force established by the Biden-Harris administration to review the critical US supply chain for key products, including pharmaceuticals and active pharmaceutical ingredients, has submitted its 100-Day Supply Chain Review report. The review comes after US President Joe Biden earlier this year signed an executive order directing a comprehensive review of the US supply chain. AAM Welcomes Biden Moves To Strengthen Supply Chain

According to the report, shortages of critical generic drugs and APIs have plagued the US for years. Outlining issues around domestic manufacturing, the report pointed out that cost pressures had driven manufacturing overseas. The lack of geographic diversity and dependence on foreign nations and anti-competitive actions by foreign nations were cited as key vulnerabilities in the report.

Outlining the problems in the API supply chain, the report said that 87% of generic API facilities are located overseas “which has helped reduce costs by trillions of dollars in the past decade, but has left the US health care system vulnerable to shortages of essential medicines.”

Across all sectors covered by the taskforce’s investigation, “China stands out for its aggressive use of measures – many of which are well outside globally accepted fair trading practices – to stimulate domestic production and capture global market share in critical supply chains,” the report stated. 

Based on the US trade data, in 2020 the US imported $1.8bn in APIs from China and $582m from India. Meanwhile, with regard to finished-dose products, the US imported $7.9bn from India and $1.4bn from China.

According to the report, most of the medications in shortage from the essential medicines list are also sterile injectables.

Another cause of concern for the US supply chain is single-source supply and limited redundancy. “Due to consolidation in overall production of APIs and finished dose forms outside of the US, the supply chain is vulnerable to changes in geopolitics, natural disasters or other disruptions that could occur in one country but reverberate throughout the supply chain,” the report said.

Talking about the causes of supply chain disruptions, the report summarized that “vast multinational supply chains and complex production and distribution paradigms can all contribute to disruptions in crucial steps in the supply chain that increase the risk of a drug entering shortage and other consequences of disruption such as quality concerns.”

Among the drivers of supply chain vulnerability overall, insufficient US manufacturing capacity, misaligned incentives and short-termism in private markets, and industrial policies adopted by allies, partners and competitor nations were at the top, according to the report.

On medicines specifically, “multiple factors, including lack of incentives to manufacture less profitable drugs and underinvestment in quality management, both at home and abroad, have resulted in fragile supply chains vulnerable to disruption,” stated the report.

In the review, Jake Sullivan, the assistant to president Biden for national security affairs and Brian Deese, the assistant to president Biden for economic policy and director of the national economic council, stated that the report makes it clear that a “more secure and resilient supply chains are essential to our national security, our economic security, and our technological leadership.”

“A new approach is needed to ensure that Americans have reliable access to the life-saving medicines they need,” insisted Sullivan and Deese.

Outlining the near-term and medium-term steps, the report recommended the following to improve the US API supply chain -

•   Improve supply chain transparency and incentivize resilience

•   Increase the economic sustainability of US and allied drug manufacturing and distribution

•   Boost local production and foster international co-operation

•   Build emergency capacity

•   Promote international co-operation and partnering with allies

AAM And Civica Support the Biden-Harris administration’s 100-Day Review

After the review was published, the US Association for Accessible Medicines said that it supported the review, with AAM president and CEO Dan Leonard stating that “AAM and our member companies are ready to partner with the Biden-Harris administration to ensure that the generic supply chain, which performed exceptionally well since the onset of the COVID-19 pandemic, is further strengthened.”

Commenting on the 100-day supply chain review, Leonard said, “The Biden-Harris administration has produced a thoughtful plan to strengthen the security of the US pharmaceutical supply chain that recognizes the importance of engaging with our allies and creating the incentives necessary to encourage additional production of essential medicines here in the US.”

“We believe that with the right conditions and incentives in place, the US can play a larger role in the global production of essential medicines,” added Leonard.

In April 2020, the AAM had itself released a policy framework “blueprint” that included a comprehensive set of recommendations on how to enhance the security of the US pharmaceutical supply chain. Purchasing Commitments Must Underpin US Expansion

Alonside the AAM, non-profit generics supplier Civica Rx also welcomed the findings of the 100-day supply chain review.

“Among the next steps outlined in the report, we particularly applaud the intent to bolster domestic manufacturing capacity for key products, ensure that reimbursement and procurement policy supports supply chain resilience and to develop quality maturity ratings that will allow purchasers to recognize quality along with price in procurement decisions,” said Civica.

Three pillars of a secure and robust drug supply chain are quality, diversification, and redundancy.

“Three pillars of a secure and robust drug supply chain are quality, diversification and redundancy,” the report stated. “A nimble structure that is flexible enough to change volumes and products in response to supply and demand is also important for a robust supply chain.”

“America’s approach to resilient supply chains must build on our nation’s greatest strengths – our unrivaled innovation ecosystem, our people, our vast ethnic, racial,and regional diversity, our small and medium-sized businesses, and our strong relationships with allies and partners who share our values,” the report suggested.

Sullivan and Deese said that the internal task force would continue to address resilience challenges in the broader pandemic supply chain, including a pandemic supply chain resilience strategy to be completed in July that will outline objectives and actions for long-term resilience.

Launching The Second Phase Of The Supply Chain Initiative

The internal task force said that it has already launched the second phase of the supply chain initiative, as directed by the executive order. The team is looking to report back to the Biden-Harris administration by 24 February 2022.

Sullivan and Deese insisted that the departments and agencies across the Biden-Harris administration have already begun to implement the reports’ recommendations, including “taking steps to strengthen the US manufacturing capacity for critical goods, to recruit and train workers to make critical products at home, to invest in research and development that will reduce supply chain vulnerabilities and to work with America’s allies and partners to strengthen collective supply chain resilience.”