Supply chain & logistics
themselves. According to the country’s trade body, for instance, Germany’s pharmaceutical industry is bracing itself for a 5.5% slump in production this year. It is a similar story further east too. In January 2022, Chinese healthcare stocks registered their worst start to the year in over half a decade, in large part thanks to a desperate shortage of active pharmaceutical ingredients (APIs). As that last point implies, these battles can be characterised by a single phrase: supply chains. Long reliant on last minute deliveries, often from specific places, any disruption can quickly spell disaster – especially in a pandemic when countries were understandably focused on pumping out vaccines. One recent McKinsey survey found that almost half of pharmaceutical manufacturers saw the sole sourcing of inputs as a “critical vulnerability” to their operations, but the situation is by no means hopeless. By dovetailing more diffuse supply chains with technological innovations, even the most hard-pressed manufacturers can find ways to thrive.
Chaos theory
Few people are better placed to appreciate the recent pharmaceutical earthquakes than Maxine Fritz. An industry veteran of 25 years, she has worked everywhere from manufacturing giant Biogen to the FDA. Since 2012, meanwhile, she has been executive vice president at NSF International, a major product testing and certification organisation. To put it another way, Fritz is ideally suited to reflect on her profession over the longer term – and it is clear that the past few years have been extraordinarily tough. “The pandemic is what really drove supply chains to a point of despair – it really changed things almost overnight,” she says. “We couldn’t get products and shipments were delayed. It created this huge problem for everyone worldwide.” Certainly, Fritz’s point is reflected by even a cursory glance at the statistics. According to one February poll, for example, seven in ten doctors claimed that the pandemic had heightened drug supply chain problems, hampering their ability to provide proper patient care. But if that is the ‘what’, where is the ‘why’?
In part, this second question can be answered by understanding the exigencies of the pandemic. With factories converting manufacturing spaces to make vaccines – Merck alone spent $105m on the task – other drugs were bound to suffer. De facto export bans of certain medications, notably by India, hardly helped matters either. For Fritz, the war in Eastern Europe only exacerbated what was already a volatile situation. “The war in Ukraine on its own face probably wouldn’t have the same impact if there wasn’t a pandemic,” she says. “But the pandemic combined with Ukraine is creating a further impact.”
World Pharmaceutical Frontiers /
www.worldpharmaceuticals.net
Yet if these twin global emergencies begin to explain pharma manufacturing’s woes, there are deeper issues too. Think of it like this: if every state on earth had robust domestic manufacturing, the Narendra Modis of the world would be rendered irrelevant. Unfortunately, the situation could not be more different. With two decades of globalisation at their back, global pharma has happily embraced internationalism, with estimates suggesting between 72% and 80% of APIs in the US are sourced from overseas. That is fine when things work well. But as recent events have shown, internationalism can also be fragile, especially when lockdowns and staffing problems mean that suppliers have to wait 90 days to secure space on a container ship.
The pandemic meant factories started to convert manufacturing spaces to make vaccines.
“The pandemic is what really drove supply chains to a point of despair – it really changed things almost overnight. We couldn’t get products and shipments were delayed.”
Maxine Fritz
That is shadowed by other, broader challenges, which slow things down even further – and arguably even predate the pandemic. Technology is a case in point. “As for cybersecurity,” says Tacy Foster, “over the past decade all industries have seen an exponential increase in the number and types of cyber threats, and many companies are still figuring out the best approach to manage.” And as the McKinsey partner continues, these pressures are bound to be felt most keenly by less developed manufacturers. The Pfizers and Roches of the world can probably avoid hacks and the disruption they cause. “But,” says Foster, “some other pharmacos, with less mature processes, saw significant challenges as manufacturing processes and talent shifted rapidly during the pandemic.”
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