Times Have Changed: Coronavirus Bares Drug Supply Dangers

These are unprecedented times. The novel coronavirus causing COVID-19 is galloping around the world and wreaking havoc in its wake.  Life as we knew it has been disrupted and will continue that way for who knows how long. No one is immune, whether living in rich countries or poor. And, due to unprecedented travel bans, border closures, flight cancellations, and work-from-home orders across the world, it has become glaringly evident that Western reliance on China for drug products, APIs and the raw materials needed to make them is dangerous to the health of the American public.

We’ve known about this problem for a long time and as a nation, we’ve done little about it. As a nation we have not been proactive. However, this coronavirus crisis has exposed our vulnerabilities. As Warren Buffet likes to say, you can’t see who’s swimming naked until the tide goes out. The tide’s gone out and the time to act is now.

We have shared our views in this blog and with government officials again and again.

In a time of crisis such as the one we are facing now, the U.S. may not to be able to import drug substances or drug products into the U.S. causing serious shortages for U.S. consumers and potentially dire health consequences. Among the reasons, which are coming to the fore now, are these:

• There is little redundancy in the system.
• There is an overall lack of manufacturing capacity in the U.S.
• There is too much dependency on China.

Indeed, it has been reported that China exports 97 percent of all antibiotics and 80 percent of active ingredients used to make drugs in America. That supply is drying up just when we need to have drug products to battle not only the coronavirus pandemic, but also heart disease, diabetes, cancer and a host of other maladies. The headlines are telling. Desperate to deploy their COVID-19 testing kits, hospitals and other labs are decrying the fact that they don’t have enough of the reagent required to use the kits so they can run the tests.  

What’s more, America’s supply of 150 vital pharmaceuticals, including antibiotics, generics, and brand-name drugs, is compromised. The FDA maintains a list of drugs in short supply.  Some of these drugs do not have alternatives on the market.

In a recent op-ed in the Wall Street Journal entitled, “It may not the virus that kills me,” a Columbia University professor worries that the breakdown of the supply chain, even for common drugs such as the insulin he needs as a result of his artificial pancreas, may be in short supply.  “It’s a matter of life or death,” he writes.  And he’s not alone. It’s frightening.

Impact on pharmaceutical industry

For the pharmaceutical industry, the biggest impact of the coronavirus for the pharmaceutical industry is the lack of ability to procure the raw materials from outside the U.S. needed for the APIs that we CDMOs make. Generics, which make up 90 percent of the drugs taken by Americans, are at greatest risk. While at Seqens North America we have made a habit of anticipating the need for raw materials and stockpiling as best we can, I don’t think anyone in the industry expected that we would be hit by a worldwide pandemic that could last many months, shutting down our suppliers. 

The government is finally beginning to take action. Recently U.S. Sen. Josh Hawley introduced the Medical Supply Chain Security Act, S.3343, to reduce America’s reliance on Chinese manufacturing of pharmaceuticals. Only a fraction of that business is in Western countries. We need to bring it back. 

Senator Hawley said, “The coronavirus outbreak in China has highlighted severe and longstanding weaknesses in our medical supply chain. This is more than unfortunate; it’s a danger to public health. Our health officials need to know the extent of our reliance on Chinese production so they can take all necessary action to protect Americans. This legislation will give us the information we need to better secure our supply chain and ensure that Americans have uninterrupted access to life-saving drugs and medical device.

A week later, as reports surfaced that the production of 150 prescription drugs is also at risk, the House passed a companion bill that allows the FDA to identify where the overreliance poses threats  and swiftly take the necessary corrective actions, 

For those interested in how we got here in the first place, a new book, “China RX: Exposing the Risks of America’s Dependence on China for Medicine” by Rosemary Gibson and Janardan Prasad Singh, details how China overtook, and in some cases destroyed, key U.S. drug industries.  The authors make a compelling case for the ways in which China brought us to this point: they undercut competitors, stole from them, and cut corners to lower the price of their products. 

But China and other overseas suppliers aren’t the only problem. There is no incentive for pharmaceutical companies to develop or manufacture drugs that may not have a return on investment, as happened with SARS, MERS, and swine flu. Companies spent tens of millions or more developing vaccines or treatments, only to have their effort wasted. It doesn’t matter if it’s Pfizer or a small biotech in Cambridge. Every company has to use its resources wisely.  If not, the company is not viable. There has to be a market for needed medicines.  

Now that finally the U.S. may do something about it, here are some suggestions for how to go about it:

1. The FDA should put together a task force to determine the top 50 pharmaceutical products designated to be at risk.
2. Create a strategic national stockpile of these drugs and the raw materials needed to make them.
3. The government should become a large procurer of pharmaceuticals, giving guaranteed market share to companies designated as strategic. Any pharma company or CDMO, if told that if you make it, we will buy it and give you a reasonable—not large—margin, would take the deal.
4. Provide expedited FDA approval for the drugs identified as necessary. Instead of approving an 8^th generic being produced overseas, give priority to the list of drugs identified.
5. Keep production of these drugs and APIs perpetually in the U.S.
6. Address the active ingredients markup by middlemen that jacks up prices. The value thus extracted from the supply chain can then be shared between generic drug manufacturers and consumers, bringing down prices.  Too much of the value now is being manipulated by the supply chain.

These actions could make a huge difference. Needed drugs would be available to U.S. consumers, prices reduced and worries about short supply erased.

Everyone agrees the threat of drug shortages is major problem. The irony is that unlike a lot of other major problems, this one won’t take a lot of money to fix—just a couple of billion dollars to create an artificial market.  That is far less than is being provided to bolster other industries.  The reason it’s such a small amount is that we in the industry have the capacity to add production.  For example, we could add a fourth shift to develop and manufacture APIs, and, if we know the business would be there, we would add new plants if that capacity was exceeded.  

Taking these steps would provide a secure supply of drugs to treat millions of people. It’s not complicated, like trying to fix traffic in Boston. At the end of the day it’s about having a market for U.S. companies.

If there is any silver lining at all in this coronavirus pandemic, it’s that it has finally made crystal clear that Western countries need to make, and governments need to stockpile, critical drugs, raw materials and APIs that our citizens depend on for their well-being.