As the coronavirus continues to spread and the supply shock to the global economy grows, there is increasing concern about how the outbreak could affect the life sciences industry, especially the availability and quality of drugs and medical equipment.
U.S. Food and Drug Administration Commissioner Stephen Hahn cautioned that the outbreak “would likely impact the medical product supply chain, including potential disruptions to supply or shortages of critical medical products” in the United States.
Key drug ingredients
The disruption in the life sciences supply chain could be particularly acute for the ingredients that produce therapeutic effects in drugs. Known as active pharmaceutical ingredients, or API, they are the most important part of any drug. Some drugs, such as combination therapies, have multiple active ingredients to treat different symptoms or act in different ways.
The U.S. relies on China for 97% of its antibiotics, according to the Commerce Department.
While the majority of drugs prescribed in the United States undergo the final stages of their production domestically, the past two decades have seen an almost universal outsourcing of API manufacturing to Asia and India, which have a lower cost of production and less restrictive labor and environmental regulations. The United States is currently able to cover only about a quarter of global production capacity for APIs, according to Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research.
The FDA maintains a list of “at-risk” drugs that are vulnerable to supply shocks, and while the agency will not specifically comment on what drugs are on that list, officials have said that they are keenly aware of the risks to the medical product supply chain.
The FDA recently said it had reached out to 180 China-based prescription drug manufacturers asking them to evaluate their supply chains and remind them that they are required to notify the agency of any coming disruptions. The agency is paying particular attention to 20 products that contain 100% of raw materials that come from China.
Unaddressed exposure
The over-reliance on outsourcing in the life science supply chain is nothing new. Over the past few years, a growing chorus of voices have spoken up about the matter.
- Approximately 80% of all API manufacturers are outside of the U.S., according to the most recent FDA Regulated Products report. Based on dollar values, about 55% of biologics and 30% of medical devices are imported.
- Roughly 80% of APIs used by commercial sources to produce finished medicines come from China, according to testimony from Christopher Priest, deputy assistant director at the U.S. Defense Health Agency, to the U.S.-China Economic and Security Review Commission.
- Approximately 90% of the drugs prescribed in America are generics, according to 2019 testimony from Rosemary Gibson, senior adviser at the Hastings Center. Of the generics used in the U.S., 40% are imported from India, which in turn acquires approximately 80% of its APIs from China, according to 2018 comments from India’s commerce minister Suresh Prabhuwhich.
- A Department of Commerce study found that 97% of all antibiotics in the United States came from China. In recognition of their importance to the U.S., the recent tariffs on Chinese products excluded “pharmaceuticals, certain pharmaceutical inputs and select medical goods.”
FDA officials have said that most large producers of finished drugs do keep adequate supplies on hand, between eight weeks to a year, and there would be minimal effects on the pharmaceutical supply chain if the threat from coronavirus subsides quickly. But as the outbreak grows, there is an elevated risk that reserves are depleted and product shortages appear.
A current concern
Consider something as simple as a face mask. U.S. health care organizations typically buy more than 2 million N95 respirators each month to protect healthcare workers from the spread of airborne illnesses. The majority of those are manufactured in countries that have stopped shipping to the U.S. because of increased demand in their own countries.
Most hospitals are experiencing delays of three to five days on orders of N95 masks, and are receiving only partial orders, said Chaun Powell, group vice president for strategic supplier engagement with Premier Inc.
Even the simple face mask presents a supply challenge for U.S. health care systems.
Alex Azar, secretary of the Department of Health and Human Services, recently told the House Appropriations Committee that the U.S. has a stockpile of 12 million N95 masks. But according to his department’s estimates, the country would need 300 million in an emergency situation. Powell said the maximum annual production capacity in the U.S. and Mexico is 65 million.
All major U.S. distributors are using allocation protocols to control the distribution of N95 masks so no hospital is shut out, and many health experts have urged individual consumers to use other preventative measures and forgo the purchase of such masks so that they can be used for hospitals and health workers.
Resilience and innovation
Governments across the globe are taking significant precautions with the coronavirus — not only in establishing containment procedures and stockpiling essential medical supplies, but also with the commitment of billions of dollars in funding for transmission prevention and the development of vaccines. Some countries, including Australia and Germany, are also considering broader stimulus packages to support their economies.
All these measures illustrate how deeply connected the global economy is, and highlight areas of exposure. The life science sector is known for innovation and adaptation, and while the outbreak presents challenges, it has also driven institutions to collaborate internationally to develop breakthrough treatments and vaccines.
