The U.S. Needs to Reimagine Its Pharma Supply Chain

The pandemic has only exacerbated a previously existing problem: U.S. dependence on foreign manufacturers of drug ingredients and finished products that has resulted in shortages of critical medicines. The remedy is to create a domestic manufacturing capability, adopt new production technologies, and change what’s kept in the Strategic National Stockpile. This will require a partnership between the public and private sectors.

When Americans go to a hospital or visit a doctor, they expect that the drugs they need will be on the shelf — whether to treat an infection or save a life. They can’t imagine that a hospital might tell them their cancer treatment has to be delayed for weeks because of a drug shortage, or that the safest and most effective medications for their condition simply aren’t available.

It’s not unthinkable: We’re living that reality today, because of a poorly designed global supply chain we depend on for our nation’s most essential medicines.

The flaws in that system were already taking their toll before Covid-19; the pandemic made shortages even more acute . While the economics of a global supply chain might drive better profits when everything works smoothly, the human cost of the current system is enormous when it fails. In fact, some basic essential medications and IV solutions that are used every day in emergency departments and outpatient clinics have been in short supply for more than a year.

These shortages have included medicines to control blood pressure, place patients on ventilators, manage pain, as well as key antibiotics and normal saline. The U.S. Food and Drug Administration (FDA) currently lists shortages of 115 basic drugs , and the American Medical Association (AMA) considers drug shortages to be an urgent public health crisis .

It is an intolerable situation, and it need not be this way — provided we rethink our dedication to these global supply chains. Instead, we should secure a fully domestic capability to produce the most commonly used and vital medicines — from pain relievers to asthma inhalers to antibiotics — and be able to activate it at a moment’s notice when a potential global shortage looms.

The Weak Link in the Chain

While the United States likes to think of itself as having the most sophisticated and advanced health care system in the world, its ability to provide that care is inexorably linked to a global pharmaceutical supply chain that has evolved over the last two decades.

Most finished pharmaceuticals, whether made abroad or in U.S. factories, depend almost entirely on the availability of active pharmaceutical ingredients (APIs), the primary functional components of the drugs we take. These ingredients include everything from the active substances in over-the-counter pain medications to life-saving IV solutions. Without APIs, pharmaceutical manufacturing grinds to a halt and shortages quickly follow.

There is a very limited domestic capacity to make these essential medicine ingredients; the U.S. manufacturing base to make them has drastically eroded over the last several decades, and most of the supply now comes from abroad. For many materials, there is a single, foreign source of supply.

The global over-reliance on China and India for APIs, the precursor key starting materials (KSMs) required to produce them, and essential medicines is especially worrisome. An estimated 80% of the world’s APIs come from China, India, and a handful of other foreign countries. U.S. dependence on these limited sources hit home when India imposed an export ban on medicines during the pandemic.

This dependence on a few foreign sources of these critical ingredients that are vital for the health of Americans means that our supply of finished essential pharmaceutical products is vulnerable to international economic, political, and public health crises. A fire or other disaster at a key factory can have the same effect on drugs that a fire at a chip factory in Japan had on automobile production. So can the inability to obtain the materials because of shipping interruptions; the disruptions that contributed to the devastating shortage of personal protective equipment (PPE) during the pandemic also led to shortages of drugs. In fact, the resurgence of Covid-19 cases in India this summer will likely lead to a severe ripple effect on worldwide drug supplies.

Building a New National Stockpile

Given the fragility of the global supply chain, the logical response should be to create a domestic supply of key ingredients. However, due to challenging economics associated with many of these essential medicine ingredients, there has been limited private investment in domestic capacity. Many of these medicines are viewed more as commodities than strategic assets critical to the health of our country. Although this is beginning to change and some infrastructure is being re-shored domestically through novel public-private partnerships, this will take time.

In its extensive 100-day review and through a new Supply Chain Disruption Task Force, the Biden administration has highlighted many of the challenges facing our nation’s pharmaceutical supply chain that have been amplified by the Covid-19 pandemic. The administration recognizes that creating a resilient pharmaceutical supply chain will require enhancing domestic manufacturing and has begun to outline a series of recommendations for diversifying the supply chain and leveraging partnerships with the private sector.

In the meantime, the United States is revamping its program for stockpiling the most vital medicines. The federal government created a strategic national stockpile of medical supplies — drugs like antibiotics and medical devices — several decades ago in order to be able to respond to a short-term disaster or even a biological attack. Dispersed in locations around the country, it is intended to provide an immediate stopgap for a sudden incident.

The problem with this stockpile is that it never was designed to address long-term shortages such as those the nation has been experiencing during the pandemic. The stockpile holds inventories of finished medicines that have an average shelf life of two years; if these costly items aren’t replaced often, they will be outdated when they are needed.

Recognizing this deficiency, the U.S. government is extending the stockpile so it includes enough key pharmaceutical ingredients to provide domestic factories with the inputs required to manufacture whatever essential medicines are needed at that moment, in the right presentation and dosage, through any trade dispute, natural disaster, or pandemic. In partnership with the federal government through a contract with Biomedical Advanced Research and Development Authority (BARDA), the organization I lead, Phlow, has begun to operationalize this stockpile of ingredients, the Strategic Active Pharmaceutical Ingredient Reserve (SAPIR) .

This initiative solves two problems.

The first is shelf life. APIs are not only far less expensive than finished medicines but also can be stored for much longer periods: With testing and analysis, they can be kept for more than five years.

The second is ensuring the stockpile can supply the medicines that are actually needed in a crisis. Since APIs can be made into a wide range of finished products and different doses, the SAPIR stockpile is much more flexible in meeting those needs.

Revamping Domestic Manufacturing

While the SAPIR provides the key essential medicine ingredients for a crisis, we must still address the manufacturing process itself. Our pharma manufacturing system is not set up to make efficient use of APIs. Making matters worse, the nation’s current process is expensive and can have significant adverse impact on the environment. To fix the dangerously broken supply chain, we must reimagine a domestic, end-to-end solution for turning APIs into vital finished medicines while at the same time lowering costs and waste and improving quality and yield.

Historically, the pharmaceutical industry has relied on a a step-by-step process for manufacturing medicines one batch at a time. This means that in order to manufacture a medicine or its active ingredient, each individual step must be completed for the next to begin. There can be many steps involved in each batch of production, requiring many different machines, manufacturing lines, and teams to create one finished product. This is an antiquated process that is often costly, both financially and environmentally.

We should be prioritizing new approaches that move from a batch to a continuous-manufacturing model to reduce costs, improve quality, reduce the environmental footprint, and allow manufacturing programs to scale quickly. Innovations such as flow chemistry — where a chemical reaction is run through an uninterrupted, continuously flowing process — and other advanced manufacturing technologies allow for faster production of essential medicine APIs and lower manufacturing costs. This enables U.S. producers to become competitive with foreign manufacturers of APIs and allows for greater control of product quality and the ability to rapidly respond to demand, with substantially reduced environmental impact.

Realistically, pharmaceutical companies are going to be reluctant to transition to these new manufacturing technologies due to the significant upfront investment and resources needed. The most effective way to accelerate this necessary paradigm shift is for manufacturers to work together and for the U.S. government to subsidize and catalyze a shift from batch manufacturing to continuous manufacturing. By doing so, the United States will be in a better position to re-shore its supply chain for essential medicines.

In addition, the public and private sector should work together to create a shared cloud-based IT network that would allow manufacturers and hospitals to get real-time information about needs and shortages. This system would allow all parties to work together to address supply-and-demand challenges and manage inventories.

Revamping the supply chain and stockpiling of essential medicines could have substantial economic and health benefits that go beyond rare crises like the pandemic. It would save the hundreds of millions of dollars that U.S. hospitals pay each year to cope with shortages, including those occurring in children’s hospitals.

The care of America’s children is unnecessarily impacted by essential medicine shortages, which sometimes lead to compromised patient care, clinician frustration, and increased hospital pharmacy costs and inefficiencies. With limited options and no access to the medications their patients need, children’s hospitals often find themselves needing to purchase adult doses of certain medications in order to treat their patients, throwing away much of the unused portions. The SAPIR and the addition of modern, continuous-manufacturing capacity would make it possible to economically produce pediatric doses of common medicines in the United States, eliminating the needless cost and waste that now exist.

Global supply chains are crucial but rarely noticed until something breaks a link in the chain. By changing the supply chain so it includes a domestic stockpile of key essential medicine ingredients and advanced manufacturing processes, we can ensure the nation is never again short of critical essential medicines.

Eric Edwards, MD, is cofounder and chief executive officer of Phlow, a public benefit pharmaceutical corporation that is reimagining the domestic production of active pharmaceutical ingredients (APIs), key starting materials, and finished pharmaceutical products critical to U.S. health care.

Copyright 2021 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.