Taking Steps Toward Supply Chain Continuity

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology, March 2023, Volume 47, Issue 3
Pages: 45–47

Stockpiling excess inventory is no longer enough to respond to supply chain volatility.

Pharmaceutical manufacturers maintain complex, global supply chains with both upstream suppliers and downstream distributors and customers. With so many factors shaping the landscape—ranging from the pandemic, volatility in raw materials, finished products and labor, to delays created by shortages and bottlenecks in the transportation infrastructure, to the unavoidable disruption that can arise from weather events, inflation, trade wars, and geopolitical unrest—it’s something of a miracle that pharma-related raw materials and finished products ever reach their destination on time and on budget.

“The pharma industry is in better shape today than it was at the height of the [COVID-19 pandemic],” says Anne Marie O’Halloran, managing director, global supply chain/IX.O life sciences for Accenture. “The level of collaboration across partners and public and private sectors helped the world overcome a once-in-a-century pandemic.” Nonetheless, she notes that “the past few years have also brought to the forefront the need to build improved supply chain and business resilience.”

“I think that we’ve gotten through the worst of it together as an industry, but I have more concern today than I did a year ago about the various types of risks that threaten to create supply chain disruptions for pharma stakeholders,” adds Tommy Pourmahram, vice president, multi-source products and analytics for McKesson.

Fog on the horizon

Rising costs. “For pharmaceutical manufacturers, the rising costs of raw materials is a really big deal,” says Anshul Agarwal, principal at ZS Associates. “In recent years, API costs have almost doubled while the costs of excipients have tripled in some cases. The impact becomes even more of a pressing concern for generics manufacturers, as the slender profit margin can threaten to shut down production.”

Drug shortages. At the end of 2022, 160 drugs were in active shortage in the United States—the highest number since 2014 (48% of them injectables), according to the University of Utah Drug Information Service (UUDIS), which tracks such data (1).These shortages include antimicrobials, central nervous system drugs, fluids/electrolytes, ophthalmology medications, and hormones. According to UUDIS, the main factors to blame included manufacturing or business decisions, regulatory issues, raw material issues, and supply/demand imbalance.

“The number of shortages is currently higher than it was during the height of the COVID-19 pandemic in 2020 and given the pricing pressure on generic manufacturers and the limited number of reliable API suppliers, this number of shortages will continue to grow,” notes John Bermudez, vice president of product marketing at TraceLink.

“I’m highly concerned about generic injectables right now,” says Pourmahram, who notes that unfavorable pricing dynamics and increased competition impact all manufacturers of generic medicines, because simply raising prices to account for rising costs isn’t really an option. “Facing tight margins, a manufacturing line that can switch between making Product A or Product B may cause the manufacturer to simply exit one market altogether and that can create shortages,” Pourmahram explains.

Regulatory uncertainty. Regulatory scrutiny creates another source of supply chain risk, and many sense a Sword of Damocles hanging over the head of the industry right now. Pourmahram says: “It is interesting to note that the pace of site inspections from the [FDA] has been falling, due to both the pandemic and other factors, and there’s been a huge drop in inspections of foreign facilities.” For instance, across all regulated products, the number of domestic inspections dropped from 14,725 in Fiscal Year 2017 to about 4500 so far in FY 2022, and the number of foreign inspections dropped from, 3166 in FY 2017 to 135 thus far in FY 2022, according to FDA’s Inspections Data Dashboard (2).

“FDA is beginning to pick up the pace, having conducted 97 foreign inspections in the first two weeks of January 2023, so this year may be the first since 2019 when we see a thousand or more inspections in a year, and this is bound to be another factor impacting supply chain volatility,” says Pourmahram. “As a whole, the industry is bracing for what they are going to find when more inspections are carried out and inevitably lead to the discovery of sterility issues, cross-contamination, and compliance breaches that may lead to shutdowns.”

Any shutdown creates a ripple effect, particularly if the manufacturer produces significant market share of a given product. “There is often not a surplus supply just sitting around—rather, it can take three to six months for another facility to ramp up production to meet a sudden shortfall,” notes Pourmahram.

“As a distributor, we maintain strong relationships with multiple manufacturers and multiple transportation companies and parallel distribution centers, and we work closely with our downstream customers to ensure that our inventory matches their needs, and that there is enough inventory to reallocate, as needed, to ensure the most equitable distribution when shortages do arise,” says Ammie McAsey, senior vice president, customer distribution experience, US pharmaceutical, for McKesson.

“However, it just doesn’t make good business sense to build up a ton of inventory to meet a potential shortfall that may or may not come,” McAsey continues. “Rather, it’s also important to continuously identify new sources for products, and to develop relationships with as many vendors as possible and build good working relationships.”

For instance, McAsey says, “with the right data signals and inventory
planning, when we see a flu outbreak starting in the western part of the US, we can quickly redirect inventory to push it out to field distribution
on the west coast and get the inventory on trucks or planes in a matter of hours.” And when related data flows back to the manufacturers, they are able to quickly respond to such
demand spikes, too, helping to reduce the likelihood of a shortage.

“The focus on building increased resiliency into the supply chain aims to give stakeholders the ability to both minimize day-to-day risk and absorb, adapt to, and recover from catastrophic disruption whenever and wherever it strikes,” adds O’Halloran of Accenture. “This requires managing and adapting to unknowns across the spectrum of risk—operational, tactical, and strategic.” Proven tactics include scenario planning, modeling, simulation, and risk/opportunity analysis.

Blind spots in digital connectivity. “Fortunately, many stakeholders throughout the pharma landscape are more prepared (both mentally and systematically) than they were during the worst of the pandemic, so there’s less need for triage,” Agarwal says. Some of this improved preparation, he notes, has been the result of enhanced data collection, and investment in the use of artificial intelligence and machine learning modalities to enhance prediction of shortages and enhance inventory planning.


“The competitive advantage in connecting the data end-to-end is the ability to then build predictive and prescriptive modeling capabilities onto that foundation, and all of the relevant supply and demand data can be accessed from a central place,” Agarwal continues. “The ‘Amazons of the world’ are doing it, and the pharma industry needs to catch up.”

Geopolitical risk. “Today, an estimated 80% of drug [APIs] come from two countries—China and India,” says Bermudez. “Shipping disruptions, trade wars, another pandemic, and other factors that disproportionately impact these two countries could have a devastating impact on the ability of Western pharma companies to reliably produce lifesaving medications.” Compounding the risk, he adds that too many pharma companies are also sole sourced from specific suppliers in these regions.

“Today there is additional pressure (and government incentives) to encourage manufacturers to bring manufacturing of certain essential raw materials and finished products back into the US,” adds Agarwal. “However, while this is [a] positive, stabilizing trend, we anticipate this may create short-term shortages in terms of labor, raw materials, and other limited resources. This could create additional costs and temporary shortages.”

Labor shortages. “When you think about talent and labor shortages, especially in supply chains that require highly skilled people, not having the right people to react decreases your ability to mitigate risk,” says Bermudez. “If you are short on personnel, you can only respond to so many disruptions—or perhaps you can’t respond at all.”

Recommendations and best practices

Through a collaboration, Accenture and Massachusetts Institute of Technology (MIT) co-developed a supply chain resilience stress test, which enables organizations to assess operational and financial risks created by significant market disruptions, disasters, or other catastrophic events and use the findings to identify appropriate mitigation strategies. “We have found that leading supply chain organizations build resilience through visibility across two dimensions—structural and dynamic,” explains O’Halloran. “Together they help companies to see where they might be vulnerable to disruption and prepare for or bounce back quickly from a crisis.”

Using structural visibility, companies can see a snapshot of their operations at a point in time or over a certain period. “This helps them to uncover hidden issues and better understand such factors as supplier location, points of manufacturing, logistic routes and more, and monitor and respond to events in real time with dynamic visibility,” O’Halloran continues. This can help improve data-driven decision making and help prioritize ongoing investments.

“What we have found is that while structural visibility may be relatively mature, dynamic visibility capabilities could be better for many companies,” O’Halloran continues. “Most of the executives we talked to reported they are strong in the first two stages—monitoring and predicting, but only about 40% said they use data prescriptively, and almost all companies are unable to
execute autonomously.”

Additional best practices have begun to emerge to bolster supply chain continuity.

Build improved visibility through increased monitoring and data integration. “Increasing visibility through monitoring, data integration, and collaboration is the number one way to reduce risk in the supply chain and improve supply,” says Bermudez.

“While investment has been increasing in enhanced digitization, and that’s a good thing, much of the data still remains siloed,” Agarwal continues. “When it comes to true end-to-end connectivity, the industry is making progress but there is so much more work to be done to improve connectivity and enable true visibility. The good news is that many companies that have been talking about this for years are now moving it to the front burner.”

Balance the need to be lean with the need to stockpile inventory. “Unlike some other industry sectors, the pharma industry has not pushed hard on lean or just-in-time inventory management because ensuring patient access to medications is too important,” says Agarwal of ZS Consulting. “But now that raw materials have become more expensive, so companies must be more strategic about how to optimize the amount of inventory they maintain, in the most strategic amounts and locations, to reduce risk.”

“Ultimately, many companies are stuck in the old way of doing things, thinking that if you have two years of inventory, everything will work. But in a pandemic, two years of inventory can run out in two weeks, so that’s not the answer,” adds Bermudez. “The answer is that while you can’t predict what will run out quickly, you must do what it takes to build a more agile supply chain that is able to react more quickly.”

“I’m feeling optimistic—the healthcare supply chain is stronger than it ever was,” says McAsey of McKesson. “Many factors are out of our control, but all of the work that has been done over the past few years (upstream, downstream, and laterally), and the fact that more than ever, competitors are willing and able to work together as needed to take care of the patient, has helped us to bridge a lot of gaps.”

“We’ve bridged a lot of gaps, and Healthcare Distribution Alliance (the trade association that represents pharmaceutical distributors) has really helped us come together as an industry,” she adds. “After [COVID-19], distributors and manufacturers understand the importance of collaborating to do whatever is necessary to deliver vital products to patients.”


  1. American Society of Health-System Pharmacists. Drug Shortage Statistics. ashp.org (accessed Feb. 3, 2023).
  2. Eglovitch, J.S. Experts Say FDA Enforcement Focus Unchanged, Use of Alternative Tools to Grow, Regulatory Focus, a Regulatory Affairs Professionals (RAPS) publication, June 2022.

About the author

Suzanne Shelley is a contributing editor to Pharmaceutical Technology.

Article details

Pharmaceutical Technology
Vol. 47, No. 3
March 2023
Pages: 45–47


When referring to this article, please cite it as Shelley, S. Taking Steps Toward Supply Chain Continuity. Pharmaceutical Technology 2023 47 (3).

Editor's note: This article was updated on March 21, 2023 to clarify a comment from Ammie McAsey of McKesson.