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Hospitals and patients often do not get access to the most fundamental and crucial medication due to shortages of medications like Adderall, amoxicillin, the saline and epinephrine. The recent COVID-19 pandemic and its geopolitical threats have made it imperative to detect and fix the weaknesses within the US drug supply chain.
A variety of reports have been published by academics, government agencies, research institutes, think tanks, consulting companies, and various other stakeholders in the industry to identify the root causes and possible solutions to these problems.
One of these initiatives was to build Resilience to the Nation’s Medical Product Supply Chains, from the National Academies of Sciences, Engineering, and Medicine (NASEM) in which the article’s authors participated as consultants or authors. (The report was requested as a result of Congress adopting the Coronavirus Aid Relief and Economic Security [CARES] Act in October, 2020.)
In order to synthesize for policy makers the best ideas on the resilience of the supply chain for drugs We present the suggestions of a complete, though not exhaustive, listing of reports on the subject. We also discuss recent initiatives taken by both the private and public sector to strengthen supply chains. We conclude by recommending the next steps for advancing three areas: transparency inventory management, and offshoring. In this light we also discuss the necessity to establish incentives for financial investment and how to prioritize actions.
What makes a resilient supply Chain?
The supply chain is resilient when they are able to prevent shortages in spite of the impact of supply or demand. Events that trigger or cause shortages include sudden increase in demand, a decrease in capacity for supply, or inconsistencies in coordination.
There are a variety of ways that both public and private sector actors can improve supply chains to be more resilient to trigger events. In 2022, the NASEM report consolidates these into four layers which are in the following manner:
- The definition of awareness is that it is the ability of the right individuals of the necessary information to determine, reduce the effects of, prepare for and deal with the risks of shortages of drugs;
- Actions to mitigate the impact are taken prior to an event that causes disruption to prevent the disruption from occurring or to lessen its impact;
- The term “preparedness” refers to actions taken before an event that could cause disruption to limit negative effects on safety and health and
- The actions taken in response are post-event to limit the harm caused by the shortage and also to address the issue.
Each layer can be further subdivided into categories as shown on Exhibit 1 Below.
- Exhibit: A medical products supply chain resilience framework: trigger events as well as resilience measures
Common Recommendations
We have reviewed the recommendations within 22 documents. The appendix at the end of this article provides a description of the reports. Then, in this part of the article we refer the reports by identifying them found in the appendix. While the reports differ in their focus and scope, they do contain regular recommendations.
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Transparency
The transparency of supply chain enables buyers evaluate the quality of products and the quantity of products that is available, producers to evaluate demand from consumers of their product, as well as other suppliers to ensure that the product gets to the correct consumer.
Some of these measures are not feasible within the US prescription drug market due to the lack of transparency in the links in supply chains that makes the identification of weak connections difficult. Increasing transparency of supply chain maps–who makes what, where, and how much–is therefore a key recommendation across many reports.1,11,14,19,20 Another oft-proposed transparency enhancement is manufacturing quality-rating systems.1,2,6,12,15,20,21
Advanced Manufacturing
Outdated production technology is another commonly identified cause of prescription drug supply disruptions.1,2,21 Reports recommend promoting the use of advanced manufacturing technologies because they can reduce the likelihood of trigger events and promote responsiveness and adaptability.1-4,6,8,14,15
Onshoring Of Supply
Many reports recommend onshoring (or nearshoring or friend-shoring) manufacturing facilities to lower the risk of geopolitical disruptions.2,3,8-10,12,14,15,18 However, a few suggest that onshoring is not a panacea for achieving reliable and resilient supply chains, due to higher costs from local sourcing.1,9,19 Others suggest that concentrating manufacturing onshore can make supplies more vulnerable to regional disruptions (for example, hurricanes, regional climate change, or geopolitical events).1,15
Inventory Management
The COVID-19 pandemic highlighted the challenges of managing inventory, with hospitals, pharmacies, and clinics competing for drugs from private vendors as well as their own US Strategic National Stockpile (SNS).
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Some reports claim that the SNS–which was previously targeted to deal with local public health issues and natural disasters, but never for nationwide pandemic 3 is outdated and inadequate to address disruptions.3,8,9,17 The inventory-related problems extend to the very last mile, in which providers often must allocate limited prescription medications to patients. Many reports have criticized the absence of a fair distribution of prescription medicines during the pandemic.9,12,13,17
Several reports recommend that raw material suppliers, manufacturers, distributors, pharmacies, and health care organizations increase their own safety stock to buffer against trigger events.2,6,7,9,13,17-19 A few reports1-3 introduce inventory management models that supply chains could adopt, such as vendor-managed inventory, in which the supplier (for example, drug manufacturer, wholesale distributor) takes full responsibility for maintaining an agreed-upon inventory level of the product at the end-user’s location.
Many reports recommend modernizing and optimizing inventory stockpiling management for SNS.1-3,8,9,14,15,17,22 In addition, several reports call for regional SNS’s to address regional shortages more effectively.1-3,14
Financing Resilient Supply
In the course of the pandemic, federal funds were utilized to finance certain prescription drug supply chain resilience initiatives. Numerous reports recommend providing similar financial incentives to private companies involved in resiliency efforts such as improving manufacturing quality;1-4,5,6,9,10,15,20-22 adopting dual sourcing (having multiple suppliers);1,2,5,10 diversifying suppliers and manufacturing sites;2,3,9 developing contingency plans;2,5,6 and installing advanced manufacturing technologies and holding more inventory.1-4,6,8,14,15,22 Other reports recommend updating government reimbursement policies for supplies to pull improved quality and resiliency.2,4,6,9,15,22
Recent Developments
There is some progress towards taking some of the suggestions from the reports, specifically with regard to the Administration for Strategic Preparedness and Response (ASPR) that released the national plan.3 We discuss the latest developments in three areas that include the transparency of manufacturing, modernization in addition to inventory and capacity and management.
Transparency
The ASPR created a cross-sectoral joint working group on resilience of the supply chain (179 companies and government partners) to facilitate sharing of information and collaboration to address the supply chain from beginning to end.
FDA’s (FDA’s) Center for Drug Evaluation and Research (CDER) has developed tools to provide greater understanding of the supply chain. For instance, CDER expanded its surveillance capabilities to provide early warning indicators of imminent shortages. The FDA has been working on legislative options to close the gap in surveillance.
Other parties have also been improving transparency within supply chains. Suppliers have been providing more information to buyers in order to improve upstream transparency. US Pharmacopeia, an independent scientific, non-profit organization that develops standards for the purity and quality of prescription medications, has relied on its data, along with other sources of data, to identify a number of supply chains and evaluate their capacity to withstand the test of time.
One of the most important aspects of transparency is the manufacturing process and product quality. In the FDA’s Office of Pharmaceutical Quality is developing an approach to measure and assess the level of quality management maturity. RISCS, an independent nonprofit rating and certification organization, has been developing a rating system that uses non-public manufacturer-reported data at the National Drug Code level.
Advanced Manufacturing
The ASPR created an industrial base as well as a supply chain management program . It also invested in the latest continuous and platform manufacturing of important prescription medications. It is also the reason that FDA has been operating its Emerging Technology Program, which helps to eliminate any regulatory uncertainties regarding new manufacturing technologies throughout the life-cycle of a product.
Capacity and Inventory Management
The ASPR has worked with federal as well as state local, tribal, private sector and territorial partners to build stockpiles and manage vendor-managed inventory systems. The pharmaceutical industry is making a comprehensive array of contingency plans and increasing their flexibility to accommodate faster shifts when needed.
Manufacturers are diversifying their suppliers and expanding the utilization of contract development and manufacturing companies, and increasing capacity, as well as expanding the use of digital tools to track real-time throughout all of the chain. Distributors say they’ve worked on allocation strategies that are based on more accurate measures of demand. For example during the outbreak, distributors worked together with federal officials on vaccination and distribution of therapeutic drugs.
Next Steps
In the process of deciding on your next steps when planning your next steps, there are three key aspects of US prescription supply chains for drugs that the stakeholders should be aware of.
First they are massive and complicated: They have more than 20.000 prescribed prescription drugs and more than 13,000 establishments registered to produce active pharmaceutical components (APIs) or finished dose pharmaceutical products.
More than three quarters, or the majority of APIs are produced outside of the US. The figures are inflated because they don’t account for the raw materials, the components like vials, components such as machine components, or even drugs which predate the current FDA approval procedures.
The root sources of supply problems are diverse and interconnected. One reason for this is that they are related to the policy of offshoring. Although we may move factories to the US in order to deal with geopolitical issues, the manufacturing process in the United States can’t guarantee reliability on its own. In the end, disruptions to production in facilities located in the US are among the main causes of shortages.
The positive social effects of building resilience to supply chains are higher than the benefits to private individuals that come from these initiatives. For a company that suffers from a shortage, it means losing sales and possibly a weakening of competitive position however, that expense is when compared to the costs incurred by healthcare providers, patients as well as the entire society.
In closing the gap between social and private benefits, we is not possible if you rely on the goodwill of manufacturers by themselves. They are bound by fiduciary obligations to their shareholders, which is why they are driven to pursue cost benefits that are derived from foreign sourcing and carrying a limited inventory as well as avoiding capacity that is not needed, and keeping the composition the supply chain secret.
When taken together, these features indicate that there is a crucial contribution to be made by the federal government when it comes to prescription resilient supply chains. The government has the ability to undertake jobs where it is not feasible or expensive to depend upon the industry and it is able to prioritize and financially assist specific distribution chains the most vital to the well-being and health of Americans and those who are those who are most vulnerable.
We outline ways that the government could implement these principles to improve transparency as well as practices for managing inventory and outsourcing. We also highlight the contribution of other stakeholders involved in this process.
Transparency
The first step to achieving transparency is to determine who requires which information and for what reason. For instance the federal government requires more transparency in supply chains so that it can determine the ones that require intervention or assistance.
The FDA requires greater transparency what happens when manufacturers experience the prospect of a spike in demand and implement mitigation or prevention strategies. Group purchasing companies must evaluate the reliability of their suppliers to select vendors and create contingency plans. Doctors require information to decide what and how they can alter the protocols of care for their patients.
A large portion of the information that users require is confidential to business. The government has the ability to require that certain information to be made public. Additionally, it is able to assist in the processing of information in a manner that privacy concerns are reduced by, for instance, system of rating quality.
In its own shortage-reduction measures, the government may also request that manufacturers report on spikes in demand as well as supply disruptions that are similar as those mentioned in the Executive order in the Obama administration, requiring manufacturers to disclose shortages. There are other options to explore payment methods that offer more transparency, and information technology like blockchain, which can ensure data exchange is secure.
Inventory Management
Just-in time manufacturing makes great business sense, but it’s not an ideal social decision. This is the reason why the government has a national stockpile. However, the vastness of US prescription supply chains for drugs suggests that the SNS cannot and should not attempt to address every supply chain issue on its own. Private sector companies are better equipped to tackle more regular problems, which could allow the SNS to respond to urgent needs caused by catastrophes.
With the advantage of having access to information, the government can establish the foundation for improved inventory management processes by working with stakeholders to continually determine and modify what products are most important at what point (manufacturer and wholesaler) and in which types (raw material API, raw material, finished product). The government also has the position of requiring or financially motivate companies to keep adequate inventories and prepare “resiliency plans” including auditing compliance as necessary.
Establishing frameworks and systems to allocate scarce inventory is also an ideal area for engagement by the government. There are a lot of lessons to be gained from COVID-19’s distribution of monoclonal antibody and vaccines worth examining as models to be used in future catastrophes. The existence of clear and agreed-upon strategies is beneficial in resolving an emergency and creates trust among the people involved, prevents hoarding and promotes shared sharing.
Onshoring
Onshoring as a method of resiliency emphasizes the importance of prioritizing. Seventy-eight per cent of API products are produced in the US and the proportion for excipients (inactive chemical ingredients like preservatives and coloring agents) as well as raw materials could be higher. It is not possible to make all of these substances in the US therefore determining which supply chains are the most vital for the health and well-being of Americans is vital as is determining the ones that are most at risk.
While Congress or federal authorities look at the possibility of imposing incentives or mandates on onshoring it is imperative that such initiatives are implemented in conjunction with other initiatives, particularly ones that increase the efficiency of manufacturing.
Incentives for regulatory and financial incentives could be used to strengthen public-private partnerships for diversification and onshoring. This requires specialists with multidisciplinary expertise in fields like operations management, economics, trade policy and manufacturing of pharmaceuticals.
