Pharma Supply Chain Navigates its own Challenges

Like most supply chains, the pharmaceutical supply chain is heavily dependent on global cooperation. Unlike most, though, lives depend on its success.

According to an article on the National Library of Medicine website, Alan Cassels, a drug policy researcher, wrote that when he asked “one industry insider how much of the medicines we routinely swallow every day come from overseas, his answer was simple: most of it. Most of the North American supply of aspirin, for example, comes from China, which produces about 120 billion tablets per year. Other widely used drugs, such as omeprazole and simvastatin often come from Puerto Rico and India.”

The pharma supply chain encompasses manufacturers, wholesale distributors, pharmacies and Pharmacy Benefit Managers, and as expected, it is not immune to the challenges facing other supply chains.

Global weather impacts

For instance, Akosua Mireku, writing for Pharmaceutical Technology in December 2023, noted that a tornado at a Pfizer facility in North Carolina impacted production of anesthetics. That one factory produces 25% of all sterile injectable medications in the U.S., Mireku said.

The author also cited the November flooding in Dubai and more frequent and intense droughts across the global as impacts the supply chain is navigating. A 2019 article in the same publication quoted a study on the pharma sector that found it would have to reduce emissions by 58.6% by 2025 from 2015 levels to comply with the Paris Agreement reduction targets.

“This reliance leads to long-term forecasting uncertainties, resulting in volatile inventories. Disruptions such as those witnessed in the Suez Canal, impacting material supply routes to the EU/U.S., exacerbate these issues.”

Chandrachur Datta, partner at Vector Consulting Group, tells Supply Chain Management Review that external factors that impact the ability to import raw materials and packaging are also issues the sector is dealing with.

“This reliance leads to long-term forecasting uncertainties, resulting in volatile inventories. Disruptions such as those witnessed in the Suez Canal, impacting material supply routes to the EU/U.S., exacerbate these issues,” Datta says. “Moreover, unforeseen black swan events like the COVID-19 pandemic further disrupt the supply chain, underscoring the need for resilience and adaptability.”

Firms can also struggle with meeting market demands as the need to balance supply and demand challenges agility initiatives.

“The pharmaceutical market demands swift responses to emerging requirements without compromising quality standards. However, firms in India grapple with the dilemma of balancing long production campaigns and larger batch sizes against fulfilling small and emergent demands,” Datta says.

Technologically challenged

Gartner research has found that just 44% of life science supply chains use technology to calculate how different scenarios would impact their goal outcomes. Of those that do utilize technology, advanced analytics (69%), performance tracking/visibility (17%) and artificial intelligence/machine learning (14%) are the leading uses.

Datta sees the same issue within the pharma supply chain.

“Despite the potential benefits, technology adoption in the pharmaceutical supply chain remains a work in progress, particularly in India,” Datta points out. “Currently, many companies rely on manual systems, highlighting a significant opportunity for technological advancement.”

According to the Confederation of Indian Industry, India supplies 20% of the global generic drug market,. It is third worldwide in production of pharma products by volume and 14^th by value. The market is expected to reach $130 billion by 2030.

Datta says that Electronic Batch Manufacturing Records (E-BMR) are gaining traction for real-time data capture in operations, but it is the “integration of artificial intelligence [that] holds immense potential for enhancing decision-making processes.”

The use of AI modeling can “enable proactive responses to supply chain challenges,” Datta says.

Stricter guidelines

Nations are also strengthening their own guidelines around drugs, contributing to drug shortages and rising prices, Datta says.

“Stricter guidelines imposed by drug control authorities, such as revisions in limits for carcinogenic impurities like nitrosamine, pose significant challenges. These regulatory changes disrupt the supply chain and can lead to wastages, further straining operations. Firms that are not perfect will find it difficult to operate in regulated markets,” Datta notes.

Nearshoring’s impact

With so much of the generic drug market coming from India, many manufacturers in that nation are looking for ways to expand market share. At the same time, the giant pharmaceutical companies are looking to derisk their supply chains. The result is an expansion of facilities to locations closer to the end customer.

“The trend of reshoring pharmaceutical manufacturing is not exclusive to the U.S.; similar movements are underway in other countries as well,” Datta says. “Many large offshore suppliers are establishing nearshore or onshore manufacturing units to bolster domestic production capabilities. However, these initiatives are still in their early stages and have yet to significantly impact production and supply chains.”

Relocation allows companies to take advantage of special economic zones, country of origin conditions and lower transportation costs all while improving market responsiveness, Datta says. This movement still comes with some drawbacks, including higher operation costs.

“The shift toward nearshore manufacturing has the potential to reshape global pharmaceutical supply chains. By bringing production closer to consumption markets, companies can enhance supply chain resilience, reduce lead times, and mitigate geopolitical risks,” Datta says. “However, the full impact of this trend on supply chains remains to be seen as companies navigate the complexities of balancing cost considerations with strategic objectives.”