Supply Chain Disruptions in Biopharma: Navigating Risk and Opportunity in Specialty Drug Manufacturing

The U.S. biopharmaceutical sector is at a crossroads, with regulatory shifts, geopolitical tensions, and market pressures reshaping the landscape for specialty drug manufacturers. The recent FDA-announced discontinuation of Otrexup by Assertio Specialty Pharmaceuticals serves as a microcosm of these broader dynamics, offering critical insights into the risks and opportunities facing the industry.

The FDA’s Role and Assertio’s Strategic Shift

Assertio’s decision to discontinue Otrexup, a methotrexate-based injection for rheumatoid arthritis and psoriasis, was directly tied to FDA guidance, though the agency did not specify the exact rationale [1]. This move reflects Assertio’s broader strategy to streamline operations and focus on high-margin products like Rolvedon and Sympazan, which align with growing demand for non-opioid pain management and specialty therapies [2]. The discontinuation underscores the vulnerability of legacy products to pricing pressures and generic competition, a trend that has forced Assertio to pivot toward innovation and operational efficiency [3].

The FDA’s recent initiatives, such as the PreCheck program, aim to accelerate domestic manufacturing by streamlining regulatory reviews for new facilities [2]. This aligns with Executive Order 14293, which prioritizes onshoring to reduce reliance on foreign APIs and finished products. However, the agency’s 2025 budget also highlights ongoing challenges: $12.3 million is allocated to address supply chain disruptions, including hiring investigators and modernizing data systems to combat drug shortages [3]. These efforts signal a dual focus on regulatory relief and resilience-building, but their success hinges on industry adoption and political stability.

Industry-Wide Pressures: Tariffs, Pricing Reforms, and Regulatory Uncertainty

The Trump administration’s aggressive pricing reforms and tariffs have compounded existing challenges. The “most-favored nation” pricing executive order and 25% tariffs on APIs from China and India have driven up costs, with API prices rising 12%-20% in 2025 [4]. These policies, while intended to incentivize domestic production, risk inflating drug costs for consumers and creating inflationary pressures. For example, a 250% tariff on pharmaceutical imports could force manufacturers to absorb higher expenses or renegotiate supplier contracts, further straining margins [5].

Specialty drug manufacturers face an additional layer of complexity. High-cost therapies for conditions like cancer and diabetes are particularly sensitive to pricing reforms, which could reduce profitability and slow innovation [5]. Companies like Johnson & Johnson and Merck have responded by expanding U.S. manufacturing, while Swiss giants Roche and Novartis have pledged $73 billion in domestic investments by 2030 [4]. These moves highlight the sector’s pivot toward onshoring as a strategic hedge against supply chain volatility.

Investment Opportunities in a Shifting Landscape

Despite these risks, the current environment presents compelling opportunities for investors. The FDA’s PreCheck program and Executive Order 14293 are likely to spur growth in domestic manufacturing, particularly for specialty drugs with strong demand and limited generic alternatives. Companies that align with these initiatives—such as those investing in advanced analytics, compliance technologies, or diversified supplier networks—could outperform peers [2].

Assertio’s experience also underscores the importance of portfolio diversification. By exiting low-margin assets like Otrexup and focusing on core products, the company has positioned itself to navigate pricing pressures and regulatory scrutiny [3]. This strategy mirrors industry trends, where firms are increasingly prioritizing innovation and operational efficiency over legacy products.

Conclusion: Balancing Risk and Resilience

The biopharma sector’s ability to adapt to 2025’s challenges will depend on its capacity to balance regulatory compliance, cost management, and innovation. While tariffs and pricing reforms pose significant risks, they also create opportunities for companies that proactively invest in domestic manufacturing and supply chain resilience. Assertio’s Otrexup discontinuation is a cautionary tale but also a blueprint for strategic reinvention in an era of uncertainty.

Source:
[1] Assertio Specialty Pharmaceuticals Discontinues Otrexup Manufacturing [https://www.ainvest.com/news/assertio-specialty-pharmaceuticals-discontinues-otrexup-manufacturing-2508/]
[2] FDA Announces New FDA PreCheck Program to Boost ... [https://www.fda.gov/news-events/press-announcements/fda-announces-new-fda-precheck-program-boost-us-drug-manufacturing]
[3] FDA Targets 2025 Funds Toward Supply Chain Resiliency [https://www.specialtypharmacycontinuum.com/Online-First/Article/04-24/FDA-Targets-2025-Funds-Toward-Supply-Chain-Resiliency/73504]
[4] Navigating pharma supply disruptions and U.S. policy shifts [https://www.zs.com/insights/us-pharma-policy-strategies-to-future-proof-your-supply-chain]
[5] Pharma Supply Chain Faces Risks of Tariffs Driving ... [https://www.pharmaceuticalcommerce.com/view/pharma-supply-chain-risks-tariffs-excess-inventory]