Pharma Supply Chain: A Fragile Lifeline

The American Hospital Association (AHA) recently called on the Senate Finance Committee to bolster the supply chain for essential pharmaceuticals and medical devices. In a letter to the committee, the AHA urged for the continuation of tariff exceptions for pharmaceuticals and the addition of similar exemptions for medical devices and other critical care supplies. The AHA argued that diversifying the sourcing of raw materials and manufacturing locations is crucial for mitigating supply chain challenges and enhancing resiliency.

The pharmaceutical supply chain is a complex web of interconnected processes, stakeholders, and regulations. It encompasses the sourcing of raw materials, manufacturing of pharmaceuticals, distribution to wholesalers, and delivery to end-users such as hospitals, pharmacies, and patients. The supply chain's efficiency and reliability directly impact patient outcomes, cost savings, regulatory compliance, and competitive advantage.

The COVID-19 pandemic exposed the vulnerabilities of the pharmaceutical supply chain. The rapid development and market delivery of COVID-19 vaccines and treatments created a belief that drugs can be developed, manufactured, and marketed more quickly than previously thought. However, the pandemic also highlighted the problems in supply chains of many different products, not just pharmaceuticals. The fast development and market delivery of COVID-19 vaccines and treatments, however, also created a belief that drugs can be developed, manufactured, and marketed quicker than the industry has been used to, according to Jordi Robinson, chief commercial officer, Navin Molecular. “As such, there has been a shift in the industry whereby delivery times of raw materials need to be faster, with the aim of getting molecules into the clinic more rapidly than ever,” says Robinson. In this post-pandemic world, pharmaceutical manufacturers are applying the lessons learned during COVID-19 in regard to the supply of the raw materials they procure.

The AHA's call for tariff exceptions and diversification of sourcing is a step in the right direction. Tariff exceptions would likely reduce the cost of pharmaceuticals and medical devices in the U.S. market, making them more affordable for consumers and healthcare providers. This could lead to increased access to essential medications and medical devices, improving patient outcomes and overall public health. However, there are potential long-term economic implications for both domestic and international suppliers. For domestic suppliers, tariff exceptions could lead to increased competition from international suppliers, potentially impacting their market share and profitability. This could incentivize domestic suppliers to innovate and improve their products to remain competitive. For international suppliers, tariff exceptions could provide new opportunities to enter the U.S. market and expand their customer base, potentially leading to increased revenue and growth.

The AHA also urged Congress to reintroduce the Mapping America’s Pharmaceutical Supply Act and the Pharmaceutical Supply Chain Risk Assessment Act. These bills would create a plan for the Food and Drug Administration and the Department of Defense to map the U.S. pharmaceutical supply chain and conduct a comprehensive risk assessment of the supply chain. This would help identify vulnerabilities and develop strategies to mitigate risks, enhancing the overall resilience and sustainability of the supply chain.

The pharmaceutical supply chain is a critical component of the healthcare industry, ensuring the timely and efficient delivery of life-saving medications to patients worldwide. However, it is also a complex and fragile system, vulnerable to disruptions and challenges. The AHA's call for tariff exceptions and diversification of sourcing is a step in the right direction, but more needs to be done to enhance the resilience and sustainability of the supply chain. The U.S. government can take several specific measures to diversify the sourcing of raw materials and manufacturing locations for pharmaceuticals and medical devices, including incentivizing domestic manufacturing, promoting public-private partnerships, enhancing regulatory compliance and oversight, investing in supply chain resilience, encouraging diversification of suppliers, and supporting research and development.

In conclusion, the implementation of tariff exceptions for pharmaceuticals and medical devices would likely reduce costs and enhance availability in the U.S. market, with potential long-term economic implications for both domestic and international suppliers. The AHA's call for tariff exceptions and diversification of sourcing is a step in the right direction, but more needs to be done to enhance the resilience and sustainability of the supply chain. The U.S. government can take several specific measures to diversify the sourcing of raw materials and manufacturing locations for pharmaceuticals and medical devices, including incentivizing domestic manufacturing, promoting public-private partnerships, enhancing regulatory compliance and oversight, investing in supply chain resilience, encouraging diversification of suppliers, and supporting research and development. By implementing these measures, the U.S. government can enhance the resilience and sustainability of the pharmaceutical and medical device supply chain, ensuring a stable supply of essential medications and devices, reducing the risk of disruptions, and supporting the long-term growth and competitiveness of the U.S. pharmaceutical and medical device industries.