Dependence on Asia – and specifically China – has been the subject of a great deal of attention by political and industry leaders in the last year. In North America, this has led to calls to “reshore” drug production to domestic facilities.
But just how realistic is reshoring America’s drug supply? And what role, if any, could the US-Mexico-Canada Trade Deal (USMCA, the successor to NAFTA) play in making it a reality?
The COVID-19 wake-up call
The vulnerability of drug supply chains became starkly apparent in February of 2020, when supply shortages, lockdowns, and trade restrictions began to impact pharma companies worldwide. Talk of supplier diversification quickly escalated during the scramble to satisfy the demand that followed.
“Since the beginning of the pandemic, supply-chain resilience has been top-of-mind for companies up and down the pharmaceuticals value chain from key starting materials (KSMs) and intermediates suppliers to manufacturers and consumers,” says Paul Hirsh Senior Vice President, Industry Development & Strategic Partnerships for the Society of Chemical Manufacturers & Affiliates (SOCMA). “The industry is also working with regulators to meet a growing domestic need by looking for ways to expand domestic manufacturing opportunities and overcome challenges.”
Talk of “reshoring” isn’t new
Efforts to encourage more domestic production were already underway before the pandemic.
“The issue of U.S. dependency on KSMs and active pharmaceutical ingredients (APIs) specifically manufactured offshore had been raised by a number of U.S. government agencies and Congress,” Hirsh recalls.
At that time, both the White House and Capitol Hill were drafting executive orders and legislation to promote ‘Made in America’ pharma initiatives.
“Much of this was spurred by concerns that the U.S. was too dependent on foreign manufacturing of API, FD, and KSM,” Hirsh says. “Additionally, while there was significant focus on volumes coming from offshore, the actual quantities were unknown. As a result, a subsection of the CARES Act addresses volumes.”
Political rhetoric vs. supply chain reality
While demands for bringing pharma production “back” to North America have frequently made headlines, several obstacles stand in the way. Economic factors are particularly strong — not only on the pharma industry’s bottom line but in consumers’ desire for low drug costs. While the pandemic clearly showed that supply chain weakness could pose a threat to both of these goals, reshoring alone may not be the logical answer.
“Political rhetoric about reshoring was occurring before the pandemic, distinct from actual changes to the supply chain,” says Fiona Barry, Associate Editor for GlobalData PharmSource. “We have not seen evidence of a significant volume of pharma manufacturing moving from Asia to North America. If anything, the pandemic has shown the need for diverse supply chains that use multiple suppliers, in case of manufacturing or distribution problems in one location.”
Barry notes that many industry sources have criticized attempts to limit the use of foreign supply chains. That said, the pandemic has awakened a strong political appetite in the U.S. for pushing for more domestic manufacturing of essential drugs and vaccines.
While some efforts are underway to mitigate vulnerability in this way, major changes aren’t likely to happen overnight and will continue to be balanced with economic realities.
“Finding new suppliers and manufacturers can, in some instances, take years,” Hirsh says. “Considering agreements in place and regulatory regimes — both domestic and regional — are part of any procurement decision. Changes can take anywhere from three to seven years, depending on whether the company is expanding and refurbishing existing facilities or building new ones. Any timeline needs to account for the planning, execution of the ...
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