While the U.S. and other countries are looking to step up their own domestic drug and device manufacturing, a bigger takeaway from the COVID-19 pandemic is the need for resilient supply chains that can withstand a global scramble for products suddenly more in demand than the supply can support.

To build that resiliency, biopharma and device manufacturers should go a level or two beyond their vendors for active pharmaceutical ingredients (API) or major components to determine where those vendors source their materials, Mike Piccarreta, a partner at global consulting firm Kearney, told BioWorld. Having alternative API or component vendors in the U.S. or even the U.S. and another country is meaningless if they both ultimately source their materials from the same supplier.

That happened in the early days of the U.S. pandemic with testing supplies. The FDA’s shortages team didn’t anticipate a shortage because the two primary manufacturers had “huge manufacturing capacity,” according to a disclosure from Rick Bright, former director of the Biomedical Advanced Research and Development Authority.

However, when Bright inquired about the source of the swabs used for testing, Jeffrey Shuren, director of the FDA’s Center for Devices and Radiological Health, informed him that the agency purchased its swabs from a manufacturer in the Lombardy region of Italy – “the epicenter of Italy’s coronavirus outbreak, which had been placed under lockdown to prevent the spread of the virus,” Bright said.

Vendor contracts generally have clauses that protect them from circumstances beyond their control, such as government bans on exports, shortages or emergency situations. Thus, the safest bet for a manufacturer to secure its supply chain is to know exactly where the raw materials are coming from and to have multiple sources for those materials, Piccarreta said.

While drug companies are pretty good at knowing the sources one to two tiers below their API supplier, the device industry is a little trickier, given the range of devices. It’s simpler to manage the supply chain for basic supplies such as masks and gowns, Piccarreta said, but it’s harder with more complex devices.

President Donald Trump’s “Buy American” executive order would address some of those issues by requiring manufacturers of essential drugs and medical countermeasures (MCMs) for the U.S. market to disclose not only the source of the finished product but of all “critical inputs” as part of the application and regulatory approval process. They also would have to disclose the use of “scarce critical inputs” in their products.

The order defines critical inputs as “API, API starting material and other ingredients of drugs and components of medical devices that the FDA commissioner determines to be critical in assessing the safety and effectiveness” of essential drugs and MCMs, including personal protection equipment.

Currently for drugs, the FDA doesn’t track the source of materials beyond the API. And although the agency approves alternative API vendors for a particular drug, it doesn’t know which vendor is supplying the API used in specific batches, the FDA’s Janet Woodcock said at a House subcommittee hearing last October.

Lessons from the past

Previous disasters and shortages have demonstrated the risks of having too much drug or device production in one basket – be it domestic or foreign, finished product or a raw material. When that production is restricted to one country or limited suppliers, it can be disrupted by a pandemic, disaster or cyberattack.

That problem hit home in 2017 with several finished drugs and devices when Hurricanes Irma and Maria ravaged Puerto Rico and its medical manufacturing industry. Prolonged power outages, mold incursion, contaminated water, fuel shortages and looting kept the island’s manufacturing plants from operating at full capacity for several months.

At the time, about 50 firms in Puerto Rico manufactured prescription drugs and another 40 produced medical devices. Some of those plants were the primary or sole source for 30 drugs, 14 of which had no therapeutic alternative.

That experience demonstrated what could happen if a similar disaster struck a manufacturing hub that serves as the sole source globally, or domestically, for critical APIs, raw materials or device components.

The African swine flu that’s hitting China’s pig population is another case in point. As the largest pig producer in the world, China supplies 80% of the raw materials needed globally to produce heparin API and about 60% of the U.S. crude heparin supply. Between 2018 and 2019, more than 1 million pigs had to be culled in China due to the ongoing swine flu outbreak.

As long as China is the primary source of the raw ingredients, the world’s heparin supply chain will be dependent on the health of China’s pig industry and may be susceptible to trade tensions.

Meanwhile, some heparin products in the U.S. are in short supply. Fresenius Kabi USA LLC reported last week that it doesn’t expect two dosages of its heparin sodium and sodium chloride 0.9% injection to be available until February 2021. The FDA’s shortage list also shows that two of Baxter International Inc.’s heparin products are unavailable, one of Hospira Inc.’s heparin products is in limited supply with recovery not expected until October, and a Sagent Pharmaceuticals Inc. heparin product is backordered until later this month.

Building preparedness

Such examples have raised concern in the past about the resiliency of the U.S. drug and device supply chains, especially for essential products and MCMs. Two years ago, following the hurricane damage in Puerto Rico, Rep. Tom Cole (R-Okla.) warned during a House Appropriations subcommittee hearing, "Certainly, pandemics are just a fact of life. They're going to keep coming. And if anything, the past few years should have taught us that everything from natural disasters to everything that nature throws at us is going to get worse and not better, so we'd better build the capacity to deal with them now while we've got the time, the focus and the interest."

Despite such warnings, Congress has continued to take an episodic approach to preparedness, which undermines the certainty needed for MCM development. Subsequently, there are a lot of lessons to be learned about resiliency in supply chains and business continuity in the drug and device industries.

While most drug companies have multiple suppliers for their major drugs, the system doesn’t have built-in resiliency for a global pandemic situation in which there is a huge surge in demand and government clamp-downs on exports, Piccarreta said.

Going forward, governments need to think about what is a “critical material” in order to manufacture “the right things locally,” he added. The products most at threat are APIs, intermediates, generic drugs and supplies that are typically made elsewhere. Finished brands are more often made in North America and the EU.

“We can’t stop globalization of the supply chain, but we need to be more thoughtful about it,” Piccarreta said. That likely will entail more dual sourcing of ingredients, generics, antibiotics, basic supplies and device components.

(Editor’s note: This is the second in a series looking at manufacturing and supply chain challenges. Read part 1 here.)

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