Pharmaceutical Supply Chain Resilience in a Shifting Market

Industry-wide anxiety regarding growth and pricing pressures has created a "self-fulfilling prophecy” in which companies are reacting with caution and reduced investment, naturally leading to the slower growth they fear, explains Mike Stenberg, vice president – Business Development at LGM Pharma. To combat these risks, the industry is moving beyond just vetting primary suppliers. Companies are now auditing their entire supply chain, including the providers of key starting materials used in APIs.

To ensure stability, many are adopting such strategies as second and third sourcing and maintaining safety stock. However, Stenberg warns that safety stock ties up essential cash, further limiting a company's ability to invest. Additionally, while there is a growing demand for geographic diversification to move supply chains away from India and China, sourcing APIs from the US or Europe remains difficult and expensive due to limited supply.

PharmTech spoke with Stenberg to get his perspective on what impacted the pharma supply chain in 2025 and where things are headed in 2026.

Which trends in 2025 impacted the pharma supply chain?

Stenberg (LGM Pharma): There is a pervasive concern about the supply chain and uncertainty surrounding the supply chain. That has led to what we see, what we hear, what we feel is a pessimism around the ability for the industry to grow. It's interesting because in a way, when you're pessimistic about your growth potential and you're worried about the supply chain, then in an ever-increasing pressure on decreasing prices, your natural reaction to the industry is to slow down, be more cautious, invest less.

That becomes a self-fulfilling prophecy in that when you do those things, of course you grow slower. So, you're concerned about slow growth, and the actions you take slow your growth. We're seeing that pessimism and that concern about the supply chain cuts across the entire pharmaceutical industry, and we've noticed it in our business as well.

How is the sector reimagining supply chains to protect against global disruptions?

The industry is doing a lot of different things to try to deal with those kinds of things. The number one thing is people are really trying to secure their supply chain. So, we see this really increased emphasis on vetting the entire supply chain. It's been pretty common that you would certainly vet your primary supplier.

When we look at APIs, for example, people are always looking into the quality history and trying to detect any potentials for future problems, but that's not enough anymore. Now we are vetting, and people want you to vet, their suppliers, so whatever pressures your primary supplier is facing in their particular geography is exacerbated by who their suppliers are too. So, in the area of APIs, who's supplying the key starting materials and what are the risks associated with them?

The other thing that we see going on in trying to secure supply chains is second sourcing, and of course, now third sourcing. We see people starting to lay in safety stock, which makes a lot of sense. The safety stock means you carry more inventory, and inventory is equal to cash, so it reduces your ability to grow and invest. It has a whole range of attendant problems associated with it. People are trying to geographically diversify. We are routinely asked to find and source APIs, but not in India or not in China; that is really difficult to do. It's possible, you can get some APIs from Europe, and you can even get some from the United States, but there isn’t a plentiful supply of APIs from those sources, and they tend to be more expensive as well.