This article presents takeaways from a session at GIC Insights LIVE 2020, where panellists Marc Casper, Chairman, President & CEO of Thermo Fisher Scientific, Chris Chen, CEO of WuXi Biologics, and Erez Israeli, CEO of Dr. Reddy’s, shared their views on the outlook for supply chain onshoring, drug costs and pricing dynamics, and the potential winners and losers in the post-pandemic world. For more insights from our speakers, click here.
GIC Insights is our annual flagship event that gathers a select group of prominent business leaders to deliberate over long-term issues pertinent to the international business and investment community.
The COVID-19 pandemic has exposed vulnerabilities in the global biopharmaceutical supply chain, and raised renewed concerns over the offshoring of facilities to Asia as well as the heavy reliance on large producer markets like China and India for critical medical supplies.
When the virus began to spread in early 2020 and countries started closing their borders, this brought about significant disruptions in the manufacturing and distribution of drugs, diagnostics, devices and personal protection equipment. Acute shortages in various critical medical products and hospital supplies were experienced.
Disruptions from COVID-19
Panellists shared their experiences navigating the logistical disruptions to their operations during the weeks of global lockdowns. The combination of local restrictions on the movement of labour and goods, and global air travel grinding to a halt, posed challenges that were unprecedented and unanticipated by regular business continuity plans.
Supply chains have moved offshore over time, and in many instances, span multiple countries. For example, India manufactures and supplies 40% of generic drugs to the US, and China is a major supplier of pharmaceutical raw materials to India. Many large manufacturers with broad product portfolios have manufacturing plants spread across different states and countries.
Companies that manufacture products in single locations for global markets were the most acutely impacted during the early onset of the pandemic. Many of these companies had to turn to governments for help in getting raw materials and finished goods across borders.
Review of supply chain strategy and management
There have been unprecedented levels of collaboration amongst industry players and regulators. The pandemic, while global in nature, has affected countries unevenly, and also exposed the degree of interconnectedness and interdependence of biopharma supply chains globally. Private and public stakeholders around the world have had to collaborate to overcome supply chain disruptions.
Nonetheless, policymakers will be compelled to review supply chain strategy and management for assurance of supply and mitigation of risks. A heavily discussed area in the US has been the manufacturing of critical APIs (active pharmaceutical ingredients) and medical supplies that are often concentrated outside of the US, in countries like India and China. Governments, hospitals and private retailers are now under increased pressure to scrutinise the footprint of their medical supplies; governments will likely seek to increase the security of supplies through a certain degree of onshoring and diversification.