Governments streamline life sciences manufacturing, supply and procurement during COVID-19 pandemic and move to incentivize companies to localize medical supply chains
- Taking stock: preventing drug shortages
- Streamlining drug manufacturing, supply and procurement
- Localizing and diversifying pharmaceutical supply chains
Concerns over medical supply chains amid the COVID-19 pandemic are seeing governments turn their attention toward policy measures aimed at preventing drug shortages and ensuring supply chain security. For life sciences manufacturers, this includes enhanced reporting requirements to ensure proper stock and supply as well as simplified and more centralized procurement policies aimed at getting drugs to patients faster.
Regional coordination – both across countries and within decentralized jurisdictions – has taken the place of traditionally commonly fragmented drug supply and purchasing processes in order to ensure an effective response to a problem that knows no borders. However, a more localizing trend in favor of enhancing domestic production of key pharmaceutical ingredients may be the more lasting impact of the crisis on medical supply chains.
Taking stock: preventing drug shortages
Several months into the pandemic, we have seen selective shortages in drugs associated with COVID-19 treatment across a variety of markets worldwide. These shortages have been largely seen among analgesics, antibiotics, muscle relaxants, anesthetics and resuscitation drugs, as well as popular treatments like remdesivir – where recent concerns over shortages were voiced in Europe, though manufacturer Gilead has assured supply will continue. Nonetheless, a combination of high demand and fears over stockpiling have seen a host of new measures to mitigate ongoing shortages.
Governments have quickly moved to secure their local supply chains, commonly relying on special measures passed to mandate compliance with a range of new, enhanced reporting requirements for manufacturers and policies to prevent stockpiling. Authorities have tasked life sciences manufacturers with surveying their supply chains and reporting stocks and shortage mitigation plans.
Companies have also faced mandatory orders to supply essential drugs reported in these inventories to public health facilities as well as to provide production and manufacturing plans for potential shortages. Further, authorities in some jurisdictions such as Spain have granted themselves the power to compel companies to prioritize the production of essential medicines. Governments have also drawn on and worked to build up centralized medicine stocks for emergency preparedness. Authorities such as Germany’s Federal Institute for Drugs and Medical Devices (BfArM), meanwhile, have issued orders prohibiting stockpiling by individual firms or health providers.
Manufacturers have been asked to closely monitor drug stocks with an emphasis on critical drugs such as anticancer treatments and immunosuppressants. Particular attention is paid daily to drugs undergoing clinical trials and drugs such as midazolam, propofol atracurium, cisatracurium, and rocuronium, which are used in the care of COVID-19 patients. Drugs for chronic diseases that are currently being used for COVID-19 treatment are also regularly monitored for shortages and severe adverse events.
Industry groups have also taken the lead in acting to minimize supply chain disruptions, not always waiting for government advisories. The Federation of Pharmaceutical Manufacturers’ Associations of Japan (FPMAJ) acted early to create a scheme to prevent drug supply disruptions. Through its action plan for industry, the FPMAJ provides companies with self-checklists for COVID-19 related medical products; potential stock issues will be reported to the task force and authorities who will in turn coordinate across other manufacturers offering the same or alternative active pharmaceutical ingredients (APIs).
Streamlining drug manufacturing, supply and procurement
Health product regulators have quickly moved to streamline existing manufacturing, supply and procurement policies in order to shore up supply chains and ease treatment access. This has come to include faster approvals for health product imports and manufacturing applications as well as waiving standard procurement requirements in favor of direct purchasing for COVID-19 treatments as for example has been ordered in France and Poland for cases of immediate treatment need. Simplified good manufacturing processes (GMPs) have been widespread in major markets such as the U.K. in order to ease the production of critical treatments.
Regional coordination to avoid drug shortages has also been evident. The European Medicines Agency (EMA) is leading efforts at the pan-European level and new national coordination in decentralized jurisdictions like Canada is leading to more centralized and/or flexible procurement in the face of the COVID-19 pandemic. Struggles to coordinate across fragmented procurement systems have in turn driven interest in more centralization – or at least more structured coordination – in markets like Spain and Italy.
Localizing and diversifying pharmaceutical supply chains
At the outset of the COVID-19 pandemic, concerns were widespread over potential disruptions to critical drug supply chains. Markets such as the U.S., Europe, and Japan are highly reliant on pharmaceutical ingredients supplied in other jurisdictions.
As some governments signaled their intention to potentially block exports and others jockeyed for position to secure needed medical supply imports, fears grew over potential shortages. While these concerns over explicit export restrictions have seen more realization in terms of shortages of personal protective equipment and testing,there is some evidence of disrupted supply chains due to API import shortages. This in turn has seen companies and authorities around the world reconsidering their degree of reliance on the globally interconnected pharmaceutical supply chain, particularly for these globally sourced APIs.
As a result, many countries have started to look at plans to further localize or diversify supply chains in order to reduce reliance on imported medical products. Should these early proposals take root and see more emphasis on domestic supply chains for drugs, it could end up one of the more lasting impacts of the coronavirus pandemic on the production of health products worldwide.
While not yet as widespread as initially feared, governments have acted to prohibit exports in certain key areas. In Colombia, authorities moved to prohibit export of some key medical products necessary to fight COVID-19 in March 2020, including medicines and other equipment. Citing fears of disrupted supply chains, India quickly acted in March 2020 to place temporary restrictions on its export of 26 APIs and drugs – amounting to roughly 10% of the country’s pharmaceutical exports.
In April 2020, in light of requests from several countries relying on India’s export of essential medicines, the government lifted the export ban on supply of hydroxychloroquine (HCQ) and 13 other APIs and their formulations, thus freeing up most medicine exports but maintaining hydroxychloroquine and paracetamol on a restricted export list requiring special government authorization based on need. Nevertheless, realizing their potential vulnerability to supply shocks in external markets for such critical products, governments and private players have increasingly begun to look inward in terms of drug production.
In maybe the most notable development politically, Germany’s Federal Minister of Economic Affairs and Energy Peter Altmaier has come out in favor of developing pan-European drug production capabilities, both at the pandemic’s outset and reaffirmed in October 2020. Pointing to ongoing initiatives in joint EU production in other industries, Altmaier’s statements are the clearest push yet from major EU figures regarding a desire to foster greater EU-level drug production and lessen current dependence for active ingredient production, largely on Asian markets such as India and Mainland China. Germany has also discussed providing support for life sciences manufacturers to develop needed production sites locally.
With France dependent on Asian markets for roughly 80% of its medicine supply, the country has already taken steps to encourage further local health industry production. Under a June 2020 Action Plan from the French Ministry of Solidarity and Health, funding and government support will be allocated for local medicines production. In concert with government plans to domesticate health product manufacturing, local pharmaceutical leader Sanofi has announced plans to develop new API manufacturing facilities locally to defray the costs of future supply chain disruptions. The company would be responsible for API production and marketing and bring together the commercial and API development activities of Sanofi with 6 of its API manufacturing sites throughout Europe. The creation of a European entity would look to notably reduce reliance on traditional API suppliers. Sanofi has announced that the new company would be the world’s second-largest API company, with approximately €1 billion in expected sales by 2022. Despite challenges associated with such a major move at a time of major economic disruption, the company announced plans to forge ahead in July 2020.
In response to its own concerns regarding drug supply chains, in May 2020, the U.S. Department of Health and Human Services announced it would work with private industry led by Phlow Corp. to expand the manufacturing of APIs within the U.S. Phlow and U.S. officials were developing a priority list of APIs that would be needed by the U.S. healthcare system during the COVID-19 pandemic. To further this initiative, the Biomedical Advanced Research and Development Authority (BARDA), part of the Office of the Assistant Secretary for Preparedness and Response at HHS, is allocating $354 million over a four-year period for this contract, with a potential extension to include an additional $458 million.
Finally, while many countries have looked to domesticate supply chains, Japan is the first to provide financial incentives specifically for firms to relocate their operations outside of Mainland China, on which Japan is currently highly dependent for its API requirements. This stems from the COVID-19 pandemic as well an earlier antibiotic cefazolin supply crunch in 2019.
In April 2020, Japan’s government earmarked JPY 220 billion ($2 billion) to encourage businesses to move their manufacturing facilities out of Mainland China and back to Japan while JPY 23.5 billion ($218 million) will be provided for companies moving their production facilities to other countries. The government plans to subsidize almost 50% of the cost to set up manufacturing equipment at new production facilities. With subsidies in place, life sciences manufacturers would eventually be able to diversify their presence in different regions to minimize disruptions to the global drug supply chain. Further measures outlined in August 2020 call upon manufacturers to identify and plan for API shortages and potentially draw on measures such as pooled API purchases.