Burns & McDonnell
COVID-19 has disrupted the supply chain to such an extent that governments around the world are asking questions about sources of active pharmaceutical ingredients (API) manufacturing. In the United States, the availability of critical pharmaceutical products has been reduced as countries of origin limit exports to protect their own populations.
This raises the questions of how much of U.S. pharmaceutical supplies are manufactured outside of the country and which countries are responsible for production.
Janet Woodcock, director of the Center for Drug Evaluation and Research at the Food and Drug Administration (FDA), stated in congressional testimony in October 2019 that “the FDA doesn’t know whether Chinese facilities are actually producing APIs, how much they are producing, or where the APIs they are producing are being distributed worldwide, including in the United States.”
Global Supply Chain Insecurity
Woodcock also noted: “Similarly, the United States and other North American governments do not have information that would enable assessment of the resilience of the U.S. manufacturing base, should it be tested by China’s withdrawal from supplying the market.”
The Pharma Letter, a newsletter covering the pharmaceutical industry, reports that according to Commerce Department data, China produces:
– 95% of U.S. imports of ibuprofen
– 70% of U.S. imports of acetaminophen
– 40% to 45% of U.S. imports of penicillin
The pandemic has highlighted the vulnerabilities of relying on a global supply chain for critical pharmaceutical supplies and personal protective equipment (PPE). President Trump’s administration and lawmakers from both parties are now calling for a revamping of drug manufacturing operations within the United States.
Looking to the Future
The immediate response from governments and pharmaceutical companies will be to continue to provide care to those who have contracted COVID-19 and minimize the spread through best-practice public policies, such as social distancing.
In the wake of the COVID-19 response, we can expect to see state and federal governments aim to reduce risk to pharmaceutical and medical PPE supply chains in the event of a future pandemic or other global event.
The onshoring of pharmaceutical and other manufacturing capacity would be expected to have many benefits to the welfare of North American communities.
First, it would significantly reduce the vulnerability of health and economic welfare to future pandemics similar to swine flu, H1N1 and COVID-19. The onshoring of manufacturing to the United States and other parts of North America also would eliminate systematic collection of intellectual property of western firms who expand manufacturing operations in China.
A Coordinated Effort
Ideally, moving as much of the supply chain to the United States as possible would result in fewer disruptions.
However, if economics prevent a move to the United States, relocating portions of the supply chain to the country’s North American trading partners would be beneficial as well. Additionally, with the adoption of the United States-Mexico-Canada Agreement, the U.S. is in a better position to make those arrangements.
Owners can prepare for the potential onshoring of pharmaceuticals and other critical manufacturing by seeking industry partners who can support them confidentially through the pre-development and site selection process.
James Zwiefel, a business development manager at Burns & McDonnell, has pharmaceutical and manufacturing experience in the United States, Europe, China and Asia, including managing capital processes for global manufacturing expansions of over 1 million square feet.
Burns & McDonnell
Burns & McDonald is based in Kansas City and has an office in Fort Worth.