Reshoring Early-Stage Pharma

Reshoring Early-Stage Pharma

The Emergence of a Post COVID-19 Risk Mitigation Strategy

Over the last few decades, pharma companies serving the U.S. market have moved most of their production and API manufacturing overseas. Today there are signs that the pendulum may be starting to swing back the other way. Over the last few decades, pharma companies serving the U.S. market have moved most of their production and API manufacturing overseas. There were obvious incentives at the time. Offshore operations could deliver significant cost savings, even after factoring in the expense of shipping product to the United States. Manufacturing infrastructure – notably in China – surpassed that available in Europe or the U.S. Such offshore providers also offered a foothold into some of the most coveted emerging markets in Asia – India and China in particular.

Today there are signs that the pendulum may be starting to swing back the other way. Natural disasters and the COVID-19 pandemic have dramatically demonstrated the supply chain vulnerabilities which can result from extended global supply chains.

It’s not just the pharma industry that’s concerned about the risks posed by global supply chains. As noted in a recent article by Pharma Manufacturing and elsewhere, U.S. lawmakers are turning up the pressure to bring pharma manufacturing plants back onshore. In 2020 alone, Congress introduced almost ten pieces of legislation pushing for onshore manufacturing. Notable among these was the CARES ACT, which calls for an analysis of manufacturers’ supply chain resiliencies.

The Biden administration has indicated it will continue policies geared towards renewing and strengthening domestic manufacturing, and has issued “an executive order aimed at closing loopholes in existing ‘Buy American’ provisions.”

To minimize risks from future disasters — not to mention legislation — a growing number of biopharma and pharmaceutical companies are becoming more open to exploring reshoring earlier in the process, rather than waiting for it to become an issue.

But while there are obvious benefits to be had from improving the flexibility of the domestic supply chain, reshoring isn’t likely to happen overnight. This is especially true of most APIs and intermediates, which existing U.S.-based drug manufacturers still largely source from abroad. (Full disclosure: In 2020, LGM Pharma acquired US-based contract development and manufacturing firm NexGen.)

80% of generic products are manufactured overseas, while India and China have become the dominant players in the API market. Even if companies wanted to start API production in the USA tomorrow, it simply wouldn’t be possible given the lack of sufficient existing infrastructure.The Challenges of Reshoring

Reshoring is no simple matter. The cost alone can be significant, which means that any move back to the U.S. must offer significant competitive advantages to offset the expense. Lower-cost APIs were, after all, what encouraged manufacturers to shift production to low-cost countries in the first place.

As a result, approximately 80% of generic products are manufactured overseas, while India and China have become the dominant players in the API market. Even if companies wanted to start API production in the USA tomorrow, it simply wouldn’t be possible given the lack of sufficient existing infrastructure.

Time is another major factor. New drug API manufacturing plants need to be planned and built, and receive approvals. But that’s just the first step. At the same time, companies will need to identify the APIs they want to manufacture and develop the processes for their production. In most cases, this won’t be as simple as duplicating the batch processes used in existing overseas operations.

Why? Because U.S. companies will need to increase the yields in order for new domestic plants to stay competitive.

This may necessitate a shift toward continuous rather than batch processes, along with new quality control and other strategies to support them. Each process will need to be developed, scaled-up, validated and have its Drug Master File (DMF) submitted to the FDA. Only after all of that can a final dosage formulator begin working in earnest on approving their new API source.

We conservatively estimate that the minimum amount of time required for all of these stages to take place would be 3–4 years for bulk APIs. Niche products may be able to cut this lead time down a bit, perhaps to around 2–3 years.

Even then, however, many of the precursor materials used in the APIs manufactured in the USA will still be sourced from lower-cost countries. As a result, the supply chain will always be dependent in some fashion on outside players.

The bottom line is that reshoring API manufacturing will be a complex and time-consuming process. Manufacturers will need to carefully weigh all the pros and cons to ensure that maximum advantage can be gained for all stakeholders.

One of the most logical solutions involves reshoring those drugs (or APIs) which are considered essential. Antibiotics, certain vaccines and other vital therapeutics have all been referenced in this regard as potential candidates for domestic production.

Reducing Risks in Your Drug Supply Chain

When you partner with a sourcing company and CDMO you can minimize supply chain risks and streamline the reshoring process in a variety of ways, including:

  • Access to multiple supply sources from diverse geographic regions.
  • Turnkey management of vendor approval, on-site visits, QA inspections, logistics, importing and more to ensure you APIs arrive at your door on time and in pristine condition.
  • Global regulatory expertise that ensures a smooth journey from concept to regulatory approval in the USA, EU, and other highly-regulated markets.
  • APIs tailor-made to suit any challenge or application, including solubility, nanoparticle size and other technical requirements.

Contact us today to learn more about how you can reduce risks in your drug supply chain through reshoring, supply diversification, or other strategies.

 

 

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