Alongside large-scale disruptions of many critical industrial operations, Covid-19 global pandemic took the wind out of the sail of pharma supply chain, as well, at the very onset of lockdowns. This happened in many countries around the world, including the largest global pharma market – the United States, and also in ‘the pharmacy of the world’ – India.

That there were such disruptions in India, both in procurement and logistics, during the national lockdown, was widely reported in the media. Besides product non-availability, cost of goods also went up significantly in several cases.

From this perspective, I shall deliberate in this article, how different countries are contemplating to respond to any similar crisis in the future, primarily to safeguard patients’ health interest, despite some opposition, though. To drive home the points, I shall cite examples from India and the United States, as specified above.

Supply Chain vulnerability of the ‘largest pharma market of the world’:

There are several examples to vindicate such vulnerability, both for the US and also India. From the US perspective, the country’s supply of generic and branded medicines are, reportedly, heavily rely on emerging markets, like India and China.

This point has now ‘come under close scrutiny of the American policy makers, as COVID-19 sends shockwaves through the industry. According to the US Food and Drug Administration, China and India represent 31 percent of the plants that are registered with the US to supply Active Pharmaceutical Ingredients (API), as of August 2019. The details are as hereunder:

It is worth noting, the number of facilities in China supplying APIs has, reportedly, more than doubled since 2010 – to 13 percent of all those serving the US market.

Examples from India:

The outbreak of Coronavirus had just not shut factories in China - impacting supplies and leading to fears of a shortage of drugs and medicines. It happened in India, too. Several critical supply chain issues were reported during this period. For example,  a major Indian drug manufacturing hub - Baddi,reportedly, was either shut down or operated with reduced capacity, since COVID-19 pandemic related national lockdown.

Its impact also got captured by the twitter handle of the former USFDA Commissioner – Scott Gottlieb. He twitted, “Drug supply chain at risk as Asia’s largest pharmaceutical manufacturing hub in Baddi (an industrial town in southwestern Solan district of Himachal Pradesh, India) is declared a #COVID19 containment zone – forcing many pharma units to slow or stop operations.”

Supply Chain vulnerability of the ‘pharmacy of the world’:

Supply Chain vulnerability related to the domestic issues in India, can possibly be sorted out by the country’s decision-making authorities. However, the country’s vulnerability arising out of the reasons originating in the other countries, needs a greater priority focus of the nation.

As is widely known – India caters to about 20 percent of the world’s generic drug supply. However, according to Bloomberg, 70 percent of the country’s imports of APIs come from China, ‘totaling US$ 2.4 billion of India’s US$ 3.56 billion in import spending for those products each year.

Consequently, ‘pharma companies in the country are dependent on China for two-thirds of the chemical components needed to make them.’ Exposures of such nature are now coming on to the center table – mostly triggered by Covid-19 pandemic, both in India, as well as in the United States.

India is reevaluating its import dependence from China:

To illustrate this point, let me begin with some related recent developments. While reevaluating the import dependence, India has taken both immediate and medium to long term measures – at the policy level.

The immediate reaction of India to Covid-19 outbreak, was to shift focus on local with restricted export of common medicines, such as paracetamol and 25 other pharmaceutical ingredients and drugs made from China. Curiously, prior to the national lockdown, on March 17, 2020 by a written reply the Government had informed the Indian Parliament about the import of APIs /drugs and the extent of the country’s dependence on China for the same.

Be that as it may, to protect the local interest, the above ban was followed by another export ban of the age-old malarial drug - hydroxychloroquine, ‘touted by President Trump as a possible weapon in the fight against Covid-19,’ but has been in short supply, globally. Interestingly, India produces around 47 percent of the U.S. supply of hydroxychloroquine. Thus, understandably, Indian Government had to partially lift this ban after the U.S. President Donald Trump sought supplies for the United States.

For medium longer-term measures, while announcing a ₹20 lakh crore stimulus package, Prime Minister Narendra Modi articulated that Covid-19 pandemic had taught India to ramp up domestic production and create supply chains to meet internal demands. Earlier, for safeguarding ‘national healthcare security’, the Government had allocated US$ 1.2 billion for the pharma industry to be self-reliant, by reducing its import dependence, especially for APIs. The government also wants to finance the construction of three bulk drugs with an investment of ₹300 Crores.

The United States is reevaluating import dependence from one region:

The Fierce Pharma article of June 03, 2020 also reported a shifting focus of supply chain from global to local, as the United States seeks to ‘onshore’ drug production, with the fallout of Covid-19 pandemic looming large on its drug supply chain.

U.S. legislators have argued that ‘U.S. reliance on drugs made or sourced outside the country has created a security issue that could be addressed by erecting parallel supply chains stateside and eliminating reliance on potential bad actors abroad.’ Accordingly, they have put forward ‘a raft of legislation’ that would seek to “onshore” drug manufacturing at the expense of major producers abroad.

Its biggest obstacle could be the pharma industry and its lobbyists:

Nevertheless, the same article also underscores that the biggest obstacle to that plan could be the pharmaceutical industry and its lobbyists on Capitol Hill. This is because, PhRMA - the industry’s biggest lobbying group, has pushed back against Congressional support for a supply chain shake-up. It said, “Policymakers must take a long-term, more holistic look at global pharmaceutical manufacturing supply chains before jumping to rash proposals that may cause significant disruptions to the U.S. supply of medicines.”

Will it happen in India?

My article, published in this blog on February 03, 2020, also focused on this issue. There I had emphasized, about five years back - the Government of India had also announced on February 25, 2015 – terming ‘2015 – Year of Active Pharmaceutical Ingredients’ (API). This came after ascertaining that over-dependence on imports of bulk drugs or API, especially from China, is detrimental to India’s health interest. This decision was also in sync with the freshly announced, and well-publicized government objective regarding ‘Make in India’, I wrote.

Two years down the line from the above date, on July 15, 2017, eHEALTH publication also deliberated on this issue in an article – ‘Why over dependence on APIs imported from China is harmful for India?’ However, not much change has been witnessed till date, in this regard. The same vow is now being taken afresh. Nonetheless, let me hasten to add, Covid-19 has changed the life of all – in several respects. Thus, no one can possibly vouch with a high degree of certainty what can happen hereafter, as we move on.

Conclusion:

As the ‘Lockdown. 05’ or ‘Unlock down. 01’ begins in India – the ‘pharmacy of the world, as on June 02, 2020 morning, the recorded Coronavirus cases in the country reached 247,040 with 6,946 deaths. India is now racing ahead with its number Covid-19 cases, surpassing Italy and Spain, occupying the global fifth rank, in this regard. Whereas, the top ranked pharma market in the world – the United States, where Covid-19 struck hard before India, recorded 1,988,545 cases with 112,096 deaths, on the same day.

Thus, the need to have a fresh look at the strategic design of pharma supply chain is being felt in both these countries. The requirement for becoming less global and more local is attracting a priority focus of Governments in both countries. With an increasing State-push for safeguarding the health security of the country, the need to reshape pharma supply chain – call it transient or otherwise, is now more palpable than ever before.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.