CSIS panel troubleshoots the now and future of pharmaceutical supply chains.
Pharmaceuticals can, in the most literal terms, be a matter of life and death. So it is cause for concern when so many lifesaving drugs have supply chains that are outside the United States, as we saw during COVID. As some US companies bet big on China, what does the United States have to do to incentivize the pharmaceutical industry to onshore production? During a recent series of expert panels, the Center for Strategic and International Studies (CSIS) Summit on Resilient U.S. Medical Supply Chains on June 16 helped answer that question.
The first panel, “The Landscape of Supply Chain Innovation”, focused on the problems our domestic supply chain currently faces, ranging from reliance on foreign countries for Active Pharmaceutical Ingredients (API) and high start-up costs. Stephen Colvill, an assistant research director at Duke University, said the U.S. needs to focus on building a resilient supply chain rather than focusing on who can be the cheapest. Colvill thinks purchasers also see the benefits of more resilient suppliers, and he highlighted programs that aid in that goal.
“There are a few recent examples like the Healthcare Industry Resilience Collaborative and US Pharmacopeia, which both have recently either launched or announced new benchmarking programs to enable purchasers again to better shop for more resilient, more reliable suppliers,” he said.
Heather Zenk, president of US Supply Chain at Cencora, added that goal is for “resiliency but also redundancy across the board, in every step of this supply chain channel.”
Erez Israeli, CEO at Indian pharmaceutical company Dr. Reddy’s Laboratories, spoke on the current dominance of India, China and Italy in sourcing API, further stating that companies like Dr. Reddy’s would be glad to make an API factory in the US. However, Israeli spoke to the challenges such as the lack of long-term contracts and the lower profit margins that companies face when discussing active ingredient manufacturing in the U.S.
“If we start today the first kilo will be available maybe in 2030,” Israeli said. He further stressed that if the U.S. believes this is a national security concern, then officials need to figure out a path for domestic production.
However, money alone won’t be enough to change industry behavior, the summit’s second panel posited. During their conversation, experts argued that proper incentives and trusted commitments will be needed to build out the U.S. pharmaceutical supply chain.
In the current marketplace, China’s price point is hard to resist – even for our own government.
Andy Bover, Executive Vice President and Chief Commercial Officer at Amneal Pharmaceuticals said the federal government should not purchase antibiotics and anti-infectives from China, viewing it a national security issue in addition to concerns regarding contamination in the manufacturing process. And yet, “I can tell you real time that the decision was about two years ago, for price, to buy an antibiotic from China instead of from the U.S.,” Bover said.
A strategic rival is an unacceptable source for essential medicine, especially when purchased by our own government. As geopolitical tensions ratchet up, lawmakers and government officials must focus their energy into developing our domestic supply chain for these critical goods.
Bover noted that Congress could create incentives by ordering the Department of Defense, Medicare, and Medicaid to buy from supply chains that are resilient, whether they are onshore or highly vetted nearshore.
Philip Luck, director of CSIS Economics Program, tried to ease worries about cost by highlighting that “resilience is kind of the opposite of efficiency” and reiterating warnings from the prior panel on the danger of this cost-cutting approach. Luck spoke on how, during his time as the deputy chief economist at the State Department, he encouraged partners to “think about their vulnerabilities to the PRC economically.”
Sen. Todd Young (R-Ind.) echoed this sentiment during a short video statement, warning that “China is rapidly integrating biotech into its military and industrial plants guided by its values, not ours,” after recognizing how revolutionary biotech could be for health, food security, defense, and national security.
Americans across the aisle can agree with Young that our values should be in the driver’s seat. The Trump administration has taken recent actions, such as a May 5 executive order, which instructs the Food and Drug Administration to streamline reviews and support domestic manufacturers, while also instructing the Environmental Protection Agency to speed up factory construction. President Trump is also expected to announce tariffs aimed at foreign pharmaceuticals shortly. The challenge is going to be able to translate these policy decisions to real-world impacts.