How USP Is Navigating Global Disruptions and Building a Better Future for the Industry

Tony Lakavage, executive vice president and head of Global External Affairs at the US Pharmacopeia (USP). Sat down with PharmTech to discuss the major regulatory, economic, and environmental trends disrupting the pharmaceutical industry. As well as what USP is doing to help the sector adapt.

The Pharmaceutical Industry Is Dealing with Many Disruptions. What Are the Biggest Forces Driving That?

Lakavage: There have been several major trends hitting the industry simultaneously. On the pricing side, we've seen the Inflation Reduction Act (IRA) kick in with mandatory price negotiations for high-cost medicines, and that list of selected drugs continues to grow. On top of that, there's the Most Favored Nation (MFN) initiative, through which several large innovator companies have been negotiating medicine prices for federal programs with the administration. Together, these create significant pressure on R&D budgets, investment decisions, and manufacturing. The industry really has never seen this level of pricing disruption all at once.

Are those pricing trends expected to ease, or is this the new normal?

They're built in at this point. IRA will continue expanding, and MFN is set to add new mandatory programs through the Centers for Medicare and Medicaid Innovation. Right now MFN has been voluntary, but that's reportedly changing. So these pressures are going to be with us. The downstream effects will eventually reach the generics industry too, not just innovators, though the timeline there is longer.

At the same time, the administration is pushing companies to manufacture more in the United States. How does that fit with the pricing pressure?

That's exactly the tension. There's a clear imperative from the administration to invest more in US manufacturing and R&D, and we have seen meaningful commitments. This has come mostly from innovators, but some from generics companies as well. The problem is that production is less expensive in most other countries, and the economics for the generics industry don't support the level of investment needed. Generic medicines are often priced below the cost of production. That's a fundamental challenge that needs more attention, because you can't build a resilient domestic supply chain if the economic model for generics is broken.

Supply chain resilience has become a national security conversation. How serious is the vulnerability?

For years, supply chain fragility has been tied to ongoing drug shortages, the system hasn't been able to absorb a wide range of disruptions. But now there's a growing concern that the medicine supply chain could essentially be weaponized through trade. The concentration of key starting materials in China in particular represents a real vulnerability, both for national security and patient care.

How is USP addressing that?

We created the USP Resiliency Center specifically to tackle this. A flagship program is the USP Medicine Supply Map, which now charts the full upstream supply chain for every approved U.S. medicine — where the finished dose is made, where the API comes from, and where key starting materials originate. For the first time, we can actually see where the vulnerabilities are for each medicine. That's significant because supply chain resilience was for so long considered too complex to attack, we simply didn't understand it. Now we do. From there, the levers include advanced manufacturing technology, nearshoring to allied countries, and longer-term onshoring. Each plays a role.

In terms of sustainability. Is that mostly about reducing environmental footprint?

It's broader than that. Yes, reducing the environmental footprint of pharma manufacturing is central. However, sustainability is also about efficiency, resource conservation, and cost savings. In quality testing alone, more efficient methods use fewer natural resources and save industry money. What we're seeing with Pharma 5.0 is the integration of digital systems that do real-time quality monitoring while simultaneously reducing unnecessary resource consumption. Within facilities, companies are minimizing waste and transitioning to more environmentally friendly solvents.

What role do USP standards play in that effort?

A larger role than most people realize. USP standards are used in roughly 22,000 manufacturing facilities worldwide that supply medicines to the U.S. and to 140 countries globally. When we update our standards to reflect modern, more sustainable technologies, the impact is enormous. USP's membership recently passed a resolution making this a key objective for the next 5 years: integrating modern technologies into our standards to reduce the industry's overall environmental footprint. That includes eliminating animal testing, reducing reliance on toxic chemicals, and finding greener alternatives at every step.