PHARMA CHAMELEON: Drug Disruption Mirrors Semiconductor

Near the end of December 2019, global news broke about a new, deadly virus that appeared in Wuhan, China. Only a few months later, China ordered the closing of many chemical plants for a week-long extension of the New Year celebrations. However, a subsequent issuing of quarantines shut down work forces preventing chemical plant workers from returning. By the end of February, it became clear that there would be substantial disruption in the pharmaceutical supply chain as COVID-19 began its devastating spread across the world.

Interestingly, the supply chain continued functioning until Chinese suppliers were back in operation, and API producers in both the US and Europe maintained operation without any major stoppages. Drug manufacturers wisely keep emergency reserves of important ingredients to cover for disruptions, and most say that the slowdown of raw materials has yet to really make a negative impact. The reason seems to be that significant improvements in the operations of Western producers over the past few years were initiated to protect against rapid changes in service from China and other Asian suppliers. As a result, similar to recent observations made about the semiconductor industry, some are predicting long-term effects on supply chain management. 

China is poised to control an outsized portion of the global pharmaceutical supply chain for the foreseeable future, which many are seeing as a risky proposition. Some industry experts are also claiming that the world has yet to really feel the impact of the coronavirus, and may not for several months. What is clear is that pharmaceutical manufacturing has been moving to China and India at a steady rate for years as drug makers looked to cut costs and lessen the responsibilities of managing the dangerous pollutants that are an unfortunate byproduct of drug manufacturing. In fact, estimates show that close to 80 percent of the chemicals used to produce European pharmaceuticals come from China and India. 

To better understand how the pharmaceutical supply chain works, the FDA has established a database of drug manufacturing facilities and are becoming increasingly aware of the significance of the originating links of the supply chain. For example, there are many raw materials used in the production of drugs that are only available from China. This fact adds several degrees of difficulty to moving manufacturing back to Europe and the US because doing so only makes a beneficial impact if the entire supply chain is controlled. There is another mitigating factor, as well, in particular one that appears once a supply chain is reestablished and the production of a vaccine gets underway: competition.

Recently, top pharma execs have claimed not to be in competition with each in order to focus on competing with the virus, and reports suggest that they’re doing all that they can, as fast as they can, to develop and distribute a COVID-19 vaccine. Their reasoning is as sound as it is obvious – no one can combat coronavirus by themselves. It will require a massive and coordinated effort across the entire industry. 

Even as executives pledge allegiance to the spirit of cooperation, all of them express fears that beyond the development of an effective vaccine there is an equally formidable challenge waiting in the form of producing and disitributing enough vaccines to make the kind of difference needed to stop the pandemic in its tracks. Some suggest that upwards of 15 billion doses of a COVID-19 vaccine could be required to control the spread. This means that participating companies will actually have to begin investing in scaling up efforts long before knowing if their contributions will actually have a positive effect. That determination will require even more cooperation in order to come to an official agreement as to which vaccines can be safe enough to be moved to the next phase of production.

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