Secure the critical API raw materials up stream
Figure 2 – Post-Covid factors for API sourcing model
The aim is to reduce US reliance on API imports from countries like India and China , and eventually achieve back integration for critical chemical precursors . Multiple other programmes have been initiated in India , Japan , Europe and the US to reinforce or relocalise API production capacities .
Some solutions
A lot is now being written about the possible means of de-risking industrial operations in the new environment . Key decision makers in API sourcing and manufacturing strategy need to consider the new paradigm in order to integrate the new forces in place . An article in the October 2020 issue of the Harvard Business Review gives a well thought-out framework , which can be adapted to APIs .
1 . Identify & address the hidden risk : Given the complexity of the API supply chain , this task requires significant resources . Before COVID-19 , my employer at the time conducted a thorough review and classified its key raw materials into low , medium and high risk , with appropriate contingency plans . This greatly helped
Geopolitical risk & national priority for Healthcare supply
Increasing environmental constraints innovation & new technologies
it to go through this crisis without major issues . For example , during lockdowns in spring 2020 , some major labour shortages occurred in Northern Italy and later in some parts of India , leading to supply disruptions for small molecule intermediates . For one of my then employer ' s Indian suppliers , a medium-sized family business , this occurred at the time of the company founder ’ s death leading to a significant disorganisation of the supplier for several months . Pharmaceutical companies and CDMOs will need to take a fresh look at these hidden risks and vulnerabilities considering for example , the higher probability of temporary trade restrictions , local labour restrictions and the enhanced importance of the ‘ people factor ’.
2 . Diversify your supply base with multiple factories & regions : Large CDMOs can offer back-up manufacturing sites in different territories like Finland , France , the US and Germany . These back-ups should be implemented all along the API value chain for critical intermediates , including upstream non-GMP key raw materials that can be good candidates for relocalisation in Europe or the US .
3 . Hold safety stock of intermediates & APIs : Companies need to rethink the use of lean manufacturing strategies that imply minimising the inventory stock . The ‘ just-in-time ’ dogma is probably over .
4 . Take advantage of new technologies and process innovations : Associated with the supply base diversification and de-risking is the idea of backintegration for critical components so as not to rely exclusively on China or India . Then comes the issue of manufacturing competitiveness in Europe or the US , with stricter environmental regulations and higher labour costs . Relocating a key chemical intermediate and redesigning an API sourcing strategy can be a major opportunity to take advantage of new technologies like continuous flow manufacturing , biocatalysis based on engineered enzymes , or enhanced digitalisation and automation to offset higher labour costs while shifting to a greener process .
Conclusion
The pandemic has brought to light pre-existing vulnerabilities in pharmaceutical supply chains and raised doubts over extreme low-cost optimisation strategies . Managers in charge of API sourcing and manufacturing strategies should join their CDMO counterparts in taking a fresh look suitable to the new era . We can bet this new approach will rely on a ‘ tryptique ’ of regionalisation , integration for critical intermediates and technology . •
References :
1 : FDA , Drug Shortages – Root Causes & Potential Solutions , October 2019
2 : Times of India , 4 March 2020 3 : South China Morning Post , 10 September 2020
4 : W . C . Shih , Global Supply Chains in a Post-Pandemic World , Harvard Business Review , October 2020
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