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world map made of pills; the pharmaceuticals industry plays a crucial role during covid-19

Covid-19 and Supply Chain Impacts on the Pharmaceutical Industry

By Eric Johnson

As the Pharmaceutical industry begins to ramp up pursuit of both sets of treatment and vaccines, a surprisingly high level of attention is now being placed on aspects of the industry that formulate around logistics and supply chain, especially considering the level of disruption that has taken place in general industry during this time.  Here are some elements of that impact that pharmaceutical companies will need to consider.

Pharmaceutical industry: The offshore supply chain is a main input

It may come as a surprise to the general public that a large part of the pharmaceutical activity in the United States originates in China and India. Further compounding this is the fact that India has over the past 20 years been increasingly procuring a large percentage of its ingredients from China itself. Thus, China supports both the US industry and the Indian industry which then supports the US industry as well.  This creates an interesting situation as both countries are in very different phases of their curve in the current pandemic. While China is on the downward plateau of their virus infection rate, India is at an earlier stage and may experience increased infection rates that can impact their supply chains in the future. While the Indian government is currently giving assurances that it has the outbreak under control, there are emerging indications that the viral spread may be increasing in its rate.

Considering this, organizations may want to increase their inventory levels to account for future risks. The difficulty comes with ingredients that have short shelf lives. This will be an area of challenge for some organizations, as there has been a shortage of certain ingredients well before the COVID-19 situation. Additionally, this will be compounded by the limited visibility into some supply chains within offshore locations. 

Quality now becomes a critical driver

Quality can also become an issue, especially when larger volumes of supplies are needed. As early participants in the supply chain ramp up, there is the potential for increased defects which can have major ramifications further down the line. US organizations should ensure that they have the capability and resources to ramp up quality control to reduce the impacts on final products.

Potential regulatory impacts for the future

While pharma is heavily regulated by the FDA, the opaqueness of the supply chain further up is beginning to gain awareness in US regulatory circles. Organizations may want to consider that due to the current emergency situation, regulators may in the future create legislation around greater visibility into suppliers outside of the US. This may mean creating audit-style certifications with suppliers or greater information system linkages. As the effects of the virus on operations become clear, it is expected that there will be increased scrutiny around visibility and that there will be changes to how things have been done in the past.

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