America’s drug shortage crisis is intricately linked to the complexities within the pharmaceutical supply chain. While the intuitive solution to this crisis might seem to be a straightforward increase in domestic manufacturing, Allen Jacques from Kinaxis, a leader in supply chain management platforms, provides valuable perspective on why this approach might not be the silver bullet many hope for.
According to Jacques, most shortages occur with generic drugs, where profit margins are thinner than patent-protected medications. This tight margin often results in lower investments in manufacturing operations, leading to disruptions in the supply chain. Additionally, some companies prioritize the production of patent-protected drugs over generics, exacerbating shortages in critical medications.
“America’s drug shortage crisis is deeply entangled with the pharmaceutical supply chain’s complexities,” Jacques explained.
Additionally, some companies prioritise the production of patent-protected drugs over generics, exacerbating shortages in critical medications.
“It’s worth noting that while shortages for high-margin patent-protected drugs are relatively rare, exceptions like Wegovy and Zepbound exist, presenting unique challenges. However, these instances differ from the broader trends observed in the generic drug market. Despite the profitability of patent-protected drugs, the overarching issue of supply chain resilience remains critical across all pharmaceutical industry segments”.
- Potential Solution:
- Indeed, localizing manufacturing operations holds promise in addressing drug shortages by creating second and third sourcing options. This diversification of manufacturing locations would enhance supply chain resilience, reducing the risk of disruptions and ensuring a more consistent flow of essential medications to patients. By decentralizing production facilities, pharmaceutical companies can mitigate the impact of localized disruptions and geopolitical risks, ultimately bolstering the reliability of the drug supply chain.
- Regulatory and Economic Pressures:
- Stability in regulatory requirements over the past few decades has provided a consistent framework for pharmaceutical manufacturing. However, compliance with these regulations can be challenging for older, outdated generic manufacturing facilities, leading to regulatory actions such as consent decrees. These pressures contribute to the difficulty in maintaining a reliable and resilient supply chain for essential medications.
These slim margins often translate to reduced investments in manufacturing robustness, subsequently heightening the risk of supply chain disruptions.
Highlighting a critical distinction, Allen notes that while high-margin, patent-protected drugs seldom face shortages, the generic market is fraught with them. This discrepancy is not merely about economics but is indicative of the broader issues affecting supply chain resilience across the pharmaceutical industry.
Allen advocates for a more diversified approach to manufacturing, suggesting that enhancing supply chain resilience involves creating multiple sourcing options. “The diversification of manufacturing locations could significantly mitigate risks of disruptions,” he posits, stressing the importance of not just increasing ‘Made in America’ production but also of fostering a more robust and flexible global supply network.
The conversation around regulatory and economic pressures unveils another layer of complexity. Allen points out that the pharmaceutical manufacturing landscape has been relatively stable in terms of regulatory requirements, but compliance can be particularly challenging for older facilities producing generic drugs. These pressures, Allen suggests, contribute to the fragility of the supply chain for essential medications.
Turning to the impact on consumers, Allen addresses the inevitable cost implications of supply chain challenges. “Drug shortages often lead to price increases, directly impacting patients and healthcare systems,” he observes. This phenomenon underscores a broader issue of accessibility and affordability in healthcare, with supply chain vulnerabilities translating to real-world hardships for individuals.
In response to global disruptions and geopolitical challenges, Allen underlines the importance of reevaluating supply dependencies. While acknowledging the value of domestic manufacturing, he warns against viewing it as a panacea. “Localization provides alternatives but comes with its own set of challenges, including potential cost increases,” he explains. Instead, Allen calls for a balanced strategy that includes both domestic and international production, aimed at ensuring a steady supply of critical medications.
On creating a resilient and transparent supply chain, Allen is emphatic about the necessity for strategic foresight and collaboration. “A resilient supply chain is indispensable for overcoming production limitations and ensuring medication availability,” he asserts. Transparency, according to Allen, is crucial for enabling stakeholders to identify and address potential disruptions proactively.
In terms of collaborative efforts between logistics providers and manufacturers, Allen envisions a partnership grounded in innovation. “Immediate notification of disruptions and maintaining drug shipment integrity are vital,” he says, highlighting the role of strategic stockpiling and production diversification in enhancing supply chain smoothness.
Finally, Allen speaks to the transformative potential of technological innovation. Digital tools, he suggests, offer unprecedented visibility and predictive capabilities, enabling more effective management of the supply chain. “Technologies like digital twins and AI can revolutionize how we anticipate and address drug shortages,” Allen concludes, painting a picture of a future where technological advancement and strategic planning converge to mitigate the impact of supply chain disruptions on America’s drug shortage crisis.
