Over-Reliance on Import of Drug Supply and the Way Forward

The coronavirus pandemic hit vital industries across the globe and disrupted supply chains due to restrictions and stay-at-home orders. The pharmaceutical supply chain has also been affected by lockdowns and restrictions imposed in India and China where major pharmaceutical producers operate.

Drop in Supply due to Over-Reliance

Supply from pharmaceutical manufacturers in China has dropped significantly over the last couple of months. This is a source of concern in light of estimates by the WHO that China produces about 1/5 of active pharmaceutical ingredients used by producers.  The UK’s Medicines and Healthcare Products Regulatory Agency announced that this figure could be much higher. Large producers such as Zhejiang Hisun Pharmaceutical supply pharmaceutical ingredients to major companies such as Bayer and Merck and export medical supplies to over 70 countries in Asia, Latin America, Europe, and North America. In addition to active pharmaceutical ingredients, China is also the main manufacturer and exporter of raw materials and chemical ingredients for medications and antibiotics needed for surgery.And while China mainly exports test kits, masks, and other antivirus supplies, India is a major producer of hydroxychloroquine and paracetamol, both of which are used to treat coronavirus patients.

Manufacturers Operating below Capacity

There are different reasons why production facilities in China operated below capacity until recently. One is that manufacturing material was not allowed through borders due to travel restrictions between cities and provinces. Another reason is that some producers are located in provinces that were hard-hit by the pandemic, one example being Zhejiang Province. So what does this mean for international freight forwarders? A recent survey by Swiss Kemiex reveals that about 85 percent of all producers, traders, and buyers believe that supply chain disruptions are likely to occur which will affect delivery and distribution worldwide. In light of this, many ask whether governments in Europe may have to consider making a radical change to reduce vulnerability and over-reliance when it comes to pharmaceuticals.

Europe’s Response

Vera Jourova, EC Vice-President recently stated that the coronavirus pandemic has put Europe’s morbid dependency on India and China into the spotlight. Jourova also said that the European Commission is about to assess the union’s supply chain in an attempt to increase production within the EU. Diversification is the key to stable supply chains across Europe and reduced dependency. European companies also consider diversifying their operations to reduce over-reliance to China and India. According to President of EU Chamber of Commerce Joerg Wuttke, the ongoing crisis has made it obvious that it is important to have a backup plan. Another problem is fragmentation, highlighting the need to pool resources to deal with supply chain problems and the health crisis within the EU.

Some experts also suggest that states must focus on risk exposure and whether they have access to alternative sources that will help them meet demand. Another question to answer is what percentage of supplies and finished products comes from India and China.