The Biden administration aims to boost U.S.-based production of pharmaceuticals and their ingredients, among other initiatives looking to shore up the supply chain, according to a new report.
HHS, the Defense Department and other agencies should increase their funding related to producing active pharmaceutical ingredients in critical drugs, the White House recommended in its review of supply chain disruptions caused or exacerbated by the COVID-19 pandemic. HHS should also track production by facility and where API is sourced to improve transparency.
Until the pandemic hit, there was overconfidence in existing supply chains, said Barbara Binzak Blumenfeld, shareholder for Buchanan Ingersoll & Rooney.
“But we saw how quickly those supply chains can be impacted when there is overdependence on one, or only a few, suppliers for a particular product or ingredient,” she said. “The administration’s efforts to identify those drugs and APIs that are critical to the overall health of Americans and to work towards onshoring their manufacturing is a laudable goal.”
A public-private consortium should initially focus on stabilizing the supply of up to 100 drugs from the Food and Drug Administration’s essential medicine list, the White House said. In addition to the $60 million allocated in the $1.9 trillion federal relief bill to develop technologies to bolster domestic API production, the U.S. should work with its allies to reinforce the global supply chain, according to the report.
COVID-19 exposed vulnerabilities throughout the healthcare industry, particularly in how equipment and drugs are sourced. Some health systems have responded by building out local supply chains for personal protective equipment, stockpiling goods and other ways to reduce their reliance on overseas manufacturers. But it remains to be seen if those efforts will persist over the long term.
While improving supply chain resilience is of national and global importance, merely focusing on reshoring manufacturing is likely to prove unsustainable when finances are strained, said David Dobrzykowski, associate professor of supply chain management at the University of Arkansas.
“If the federal government simply awards a large pharmaceutical contract to one or two domestic manufacturers, it very well could lead to inefficiencies, higher costs and potentially inflexibility in supply,” he said. “Reshoring would likely produce the most favorable results, especially in the long-term, if the government develops incentives for domestic manufacturers to collaborate and innovate to develop responsive approaches.”
There are minimal incentives to manufacture less profitable drugs and an underinvestment in quality management, both in the U.S. and abroad. Around 87% of generic API facilities are located overseas, which has reduced costs but also caused persistent shortages of widely used medicines, according to the report.
The U.S. imported $1.8 billion in APIs from China and $582 million from India, the second and eighth highest sources, respectively. Regarding finished products, the U.S. imported $7.9 billion from India and $1.4 billion from China, the fifth and 16th largest exporters.
Still, just making something in the U.S. doesn’t ensure that it’s high quality or that it will eliminate shortages, said Erin Fox, senior pharmacy director at University of Utah Health. Most of the generic injectable shortages impacting hospitals are already made in the U.S., she noted.
“However, the report makes a good case for onshoring some items. Especially since FDA knows that foreign drug manufacturers don’t register their facilities, which really limits FDA’s ability to provide oversight,” Fox said. “I think targeting a few of the most critical products makes sense, but what makes them critical?”
It doesn’t make sense to target something that is clinically essential but already has a stable supply chain, Fox said. The U.S. should triage products that are sourced from a single API or manufacturer, difficult to make or have long histories of supply issues, she said.
Civica Rx, which is a hospital-led effort to, in part, onshore more production of generic drugs, applauded the report. It noted the recommendation to align reimbursement and procurement policy to bolster domestic manufacturing capacity and the proposal to develop quality maturity ratings for drugs.
Both the Association for Accessible Medicines, which represents generic drug manufacturers, and the American Pharmacists Association supported the report, adding that the U.S. can play a larger role in the global production of essential medicines.
“COVID has shown us the fragility of the drug supply and the administration’s new steps will strengthen the integrity and robustness of drug availability in the U.S.,” the pharmacists association said in prepared remarks.