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How COVID-19 is reshaping the pharmaceutical supply chain

The keys to staying competitive in the pharmaceutical supply chain have changed since the appearance of COVID-19. Here at The J. Molner Company, we believe that it is no longer enough to rely on low-cost manufacturing practices, since the challenges regarding production and logistics have evolved.

"Pharmaceutical supply chains are essential for the national and health security and economic prosperity of the United States, yet the COVID-19 pandemic revealed just how vulnerable the supply chain is in this country," said Food and Drug Administration Acting Commissioner Janet Woodcock in a statement.

For better or worse, the pandemic has changed the future of the pharmaceutical ecosystem and it is up for the different agents of the supply chain to adapt to the emerging challenges.

Indrek Kaing, Business Development Manager at The J.Molner Company said, “We are really concerned about the situation and patients safety and therefore we are working with our partners to find resilient solutions.”

Below are the lessons from the world crisis and the next steps that the pharmaceutical industry needs to take to overcome the next great challenge.

What COVID-19 taught the pharmaceutical sector

According to a recent report by the American Department of Health and Human Services (HHS), the pandemic has made evident several critical vulnerabilities in the pharmaceutical supply chain:

Insufficient manufacturing capacity

The decline can be attributed to competition from countries with lower wages and a stagnation of productivity. There is also an industry-wide underinvesting in new technologies that can increase production and thus avoid drug shortages, a problem that has worsened according to Global Trade writer Anne Marie Gaffney:

“Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list. In April 2021, there were 175 drugs on the FDA drug shortages list.” she writes.

Geographic concentration of suppliers

The supply chain needs to be globalized and diversified, since there is a concentration of producers and other intermediaries in a few nations. Relying on a few partners or locations though increases the risk of disruption due to natural disasters and other geopolitical events. Many generic manufacturers and marketers make the mistake of over-reliance on individual providers and individual sites, and have not qualified alternate sources with alternate geographies.

Misaligned incentives and short-termism in private markets

The current structure of the US market does not reward firms for investing in quality processes, sustainability projects, or the long-term productivity of the pharmaceutical industry. The investment in “high-road” strategies may require higher upfront costs, but eventually it will lead to an improved performance of the supply chain both in normal and crisis periods.

Underinvestment in cyber security

The lack of investment in continuous digital security has left companies, partners, and critical supply chain infrastructures vulnerable to hackers and other cyberattackers.

Limited international coordination

While domestic production can compensate for the vulnerabilities of the supply chain, no country can manufacture all the pharmaceutical products they require. Aside from a few pilot projects and small initiatives, there is no international coordinated approach that promotes exchange and collaboration to help nations overcome their supply challenges.

Building a stronger supply chain

The HHS report points out three milestones that companies must achieve to build a stronger pharmaceutical supply chain in the post-pandemic economy:

● Increase the ability to manufacture high-quality products for the US market;

● Diversify suppliers and their locations; and,

● Increase the redundancy in the supply chain for each pharmaceutical product.

In order for the pharmaceutical industry to reach these goals, we believe each agent in the supply chain should implement one or more of the following actions:

Create a risk management plan

Starting from the strategic level, company leaders need to be involved in the creation and implementation of a risk management plan that covers potential supply chain crises arising from partner losses and regional disruptions. In particular, this should consider supplementing existing approvals with alternate API manufacturers and alternate manufacturing sites.

Invest in the development of new pharmaceutical processes

This includes increasing the production of key ingredients and products by using traditional and on-demand manufacturing, API and finished dosage form drugs in modular, highly portable platforms.

Diversify supply arrangements

By collaborating with small and medium pharmaceutical businesses, companies will be able to meet their research and development needs, without over relying on a single partner or location.

Improve transparency throughout the pharmaceuticals supply chain

This includes sharing key data at an institutional level, tracking production by facility, tracking API sourcing, and requiring API and finished dosage form sources to be identified on labelling for all pharmaceuticals sold in a market.Forbes council member and Kit Check CEO Kevin MacDonald, suggest incorporating the use of AI-powered solutions and RFID tags to optimize monitoring:

“Tech like this can provide the pharma distributor or manufacturer with even more visibility into the supply chain, allowing for the best, most informed business decisions at every step.” he points out.

Increase inventory levels and promote agile processes

Consolidation in the distribution channels for pharmaceuticals has stripped away levels of supply in the supply chain. In response, by having a buffer of pharmaceutical products in key points of the supply chain and working using agile methods, pharmaceutical companies can increase their resilience to disruptions and identify which points in their processes can be improved to increase overall efficiency.

The beginning of the end… or the end of the beginning?

It is evident that evolving a company supply chain will be more challenging than it seems on paper. However, pharmaceutical organizations need to address the vulnerabilities that COVID-19 pointed out in their supply chains in order to build an industry with greater resilience and aptness to deal with future global challenges.

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