What is Threatening the U.S. Drug Product Supply Chain? The Answer May Surprise You

Seqens North America CEO Ed Price’s Congressional testimony on safeguarding the U.S. pharmaceutical supply chain

Posted: December 2, 2019

API Manufacturing and Pharmaceutical Manufacturing

Stop targeting API manufacturers based in the U.S.  That was my main point in the Congressional testimony I was recently invited to give to the Subcommittee on Health, part of the U.S. Congressional Committee on Energy and Commerce. The hearing related to Safeguarding Pharmaceutical Supply Chains in a Global Economy.

The committee’s investigation was prompted by concern about drug shortages in the event that Asian countries, particularly China, decide to withhold or cut supplies of raw materials or APIs.  The concern is justified: today nearly 80 percent of APIs are manufactured outside of the U.S.  So what is the U.S. government doing about it? They’re giving U.S. drug substance and drug product manufacturers a hard time.

As a member of the Board of Governors of the Society of Chemical Manufacturers & Affiliates (SOCMA) and a long-standing member of the organization’s Bulk Pharmaceutical Task Force (BPTF), I know it’s a topic that is top-of-mind in the industry.  I can tell you from our own experiences at Seqens N.A., formerly PCI Synthesis, that we are being over regulated by the very government that should be coming to our aid, contrary to what they have done to protect America’s farmers and energy suppliers.

Instead of helping, some government agencies have gone on the offense – against the very same organizations they need in order to safeguard the pharmaceutical supply chain.

Problems CMOs are encountering

Here are a couple of examples of what we’ve faced from agencies that have taken on an inappropriate activist role.  Let’s start with the EPA.  We have adhered to the EPA’s long-standing regulations for decades, as have other CMOs.  We have never had an adverse environmental incident or problem.  The EPA has come to our facility year after year to inspect. There has never been an issue—until now. They came to inspect…and issued significant fines by reinterpreting long standing regulations for small tanks that collect small amounts of materials that are properly disposed of.

Then came OSHA applying rules regarding products we have made for decades without a problem. These new rules applied to older products and older processes.  They’re requiring us to revamp our policies despite our decades-long focus on employee safety. It’s hard enough to recruit talented personnel and we do everything we can to assure they have a safe work environment.

Then on top of all that the IRS decided to do an audit.  Although that’s somewhat understandable as it relates to reaching a higher level of assets, it’s punishing to suddenly have to deal with another agency, and for no really good reason.  It creates havoc, it’s a distraction and it doesn’t make a lot of sense.

Don’t get me wrong. We know the agencies are well intentioned. They’re just reinterpreting rules, applying new standards, or doing what they always do.

FDA regulations make sense

When the FDA issues new regulations based on evolving science, naturally we accept that and make all the changes required, which include developing new processes, new analytics, and training staff.  That in itself is a lot of work but when you layer OSHA, EPA and IRS issues on top of that it becomes a distraction.  These other rules don’t solve any problems, nor do they protect employees. What they do is make it hard for U.S. CDMOs to go about their business, which is helping our pharmaceutical clients develop new products and bring them to market ahead of competitors.  Also, as a reminder, in the pharmaceutical industry CDMOs are the only ones who are lowering the price of drugs, a national priority.

In effect, what is happening is that the agencies are legislating on their own, making it difficult for our businesses to operate.  And by so doing they are doing just the opposite of safeguarding the pharmaceutical supply chain — they’re attacking it.

We already police ourselves.  Our trade association, SOCMA sets high standards in these five related areas:

  1. Chemical Risk Management: Supporting development of modernized regulations that allow manufacturers to innovate and commercialize specialty chemicals while ensuring their safe use.
  2. Environmental Safety: Promoting environmental stewardship, guaranteeing the health and quality of the environment and supporting effective, cost-benefit balanced regulations that do not hinder industry growth.
  3. Facility Site Security: Ensuring consistency and effective performance of the Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards (CFATS) and other chemical security programs.
  4. Workplace and Process Safety: Ensuring effective occupational safety and health programs through policies that leverage preventive measures and tools, safety training, monitoring and communication
  5. Value Chain Engagement: Influencing both upstream and downstream issues impacting the value chain for specialties including ingredient disclosure and labeling policies, product- specific regulations, and state level initiatives.

We completely agree with the government’s aim of assuring that life-saving drugs are readily available, and we in the industry can help make that happen. For now, the FDA’s database lists more than 120 drug shortages. There is a nationwide prescription drug shortage with dozens of medications in short supply, including some used to treat cancer and life-threatening emergencies.  The shortages are causing hospitals to ration lifesaving treatments and patients to change drugs or delay treatment.  Pharmacists worry that a constantly evolving mix of substitutions and changing doses opens up a greater chance for errors.


A recent FDA report cited three root causes for the increasing drug shortages in the U.S., two of which impact the CMO business.

  • A lack of incentives for drug manufacturers to produce less profitable pharmaceuticals.
  • Logistical and regulatory challenges that hinder the market’s recovery from production disruption.
  • The market’s failure to reward drug manufacturers for “mature quality systems,” which prioritize continuous improvements and early detection of supply chain issues.

Further, the FDA report found that 63% of drug shortages stemmed from supply disruptions tied to product quality or manufacturing issues.

You can watch the Congressional testimony from other industry experts and me via this link. In our next article in this series, we will suggest how government agencies can work with and help drug developers assure a steady supply of needed drugs.

About the Author

Ed Price CEO of PCI Synthesis
Ed is President & CEO of SEQENS North America (formerly PCI Synthesis). He serves as a co-chair of the New England CRO/CMO Council and sits on the Industrial Advisory Board for the Department of Chemical Engineering at UMass, Amherst. Ed is also a long standing member of the American Chemical Society and advises the Bulk Pharmaceutical Task Force of the Society of Chemical Manufacturer’s and Affiliates (SOCMA)...

Do you have questions? Talk to Ed.