As President Trump’s war in Iran rages on, it’s posing a growing threat to the pharmaceutical supply chain and risks spiking the prices of many drugs, particularly those that depend on petrochemicals.
The war in Iran and the effective closure of the Strait of Hormuz have caused energy prices to jump and disrupted supply chains for a range of industries. While the Middle East is not a major pharmaceutical producer like China or India, there are still products that originate from the region, and many drugs rely on petrochemicals to be made.
“If the instability really persists, you’ll probably see lead times, transportation costs that can impact direct items that we need for our medicines, including the key starting materials into active pharmaceutical ingredients,” Gerren McHam, vice president of external affairs at the API Innovation Center, told The Hill.
The U.S. Pharmacopeia (USP) issued a risk assessment report of the Middle East conflict, finding that the impact is currently limited. The region is responsible for only 0.3 percent of active pharmaceutical ingredient (API) production and 0.6 percent of oral solid dose production, with most of this concentrated in Jordan and Israel.
There are, however, a handful of drugs that those two countries have a significant hand in. Jordan produces about half of the world’s amoxicillin oral suspension and the same amount of API for etomidate, a fast-acting anesthetic. Seventy-three percent of API for flumazenil, a medication used to reverse the effects of benzodiazepines, is produced in Israel and Jordan.
Health care experts say there are alternative treatments for all these medications, and providers are well prepared to work around any potential shortages.
“There are therapeutic alternatives. We’ve actually weathered some drug shortages of those products in the recent past anyway, so we are familiar with some mitigation strategies if needed,” Michael Ganio, senior director of pharmacy practice and quality for the American Society of Health-System Pharmacists, told The Hill.
Ganio noted that Israel is also the sole supplier of some drugs but added that these are “niche orphan drugs” and opined that the impact would still be limited if the conflict affected these medications.
Pharmaceutical production aside, the Strait of Hormuz is a critical trade route, and that has observers more concerned, especially if the conflict drags on for much longer.
“Much larger impact is disruption of airspace and waterway trade routes — tough to quantify but we know a high volume of ingredients from India need to go west to Europe for final manufacturing. Logically that supply chain is vulnerable,” the USP noted.
The organization highlighted the Red Sea, separated from the Strait of Hormuz on the western coast of Saudi Arabia, as being a much higher source of risk, as it sits along the same trade route that India uses to the transport large volumes of API and finished doses to the U.S. and Europe.
Houthi rebels in Yemen on Friday threatened to enter the war to support Iran. The group could likely shut down the Bab el-Mandeb Strait on the Red Sea, much as Iran has done with the Strait of Hormuz, throttling another key shipping corridor.
India is a major global producer of generic drugs, which make up the vast majority of prescriptions in the U.S. With margins for these medications already paper thin, the added pressure of higher energy costs and a more treacherous trade route could price producers out of the market.
Ganio called this potential pressure on generic drug imports “almost an indirect tariff.”
Petrochemicals, derived from oil, are a key starting material for most medications. If heightened energy prices continue far into the future, those cost increases are likely to be passed on to consumers.
A 2011 analysis of the pharmaceutical industry’s reliance on petroleum estimated that 99 percent of pharmaceutical feedstocks and reagents are derived from petrochemicals, and there are relatively few substitutes for these materials.
As of Friday, the cost of crude oil has risen above $100 a barrel, with projections that it could go far higher if the war continues for weeks or months.
Petrochemicals aren’t directly going into the composition of drugs, but they are needed for production.
“Things that aren’t directly in the medications, but they’re needed in the chemical synthesis pathways,” Ganio said. “So, there may be some drugs that are based on a petrochemical, smaller hydrocarbons potentially.”
And as with almost all products, these chemicals need to be shipped around the world. Still, those familiar with the pharmaceutical supply chain aren’t alarmed yet.
“At the moment, in terms of the U.S., there’s no indication that the conflict is having anything directly impacting the supply chain, or availability of medicines,” McHam said.
“This is a reminder of how exposed we are with our pharmaceutical supply chain, specifically generics; especially those key materials that go into those medicines,” McHam added. “Because the real risk may not be today, but it raises a broader kind of bipartisan concern. The next event of disruption, if it’s more concentrated or is a critical part of our supply chain, what will happen?”