Sanobar Syed- Associate Director, Beigene
Just like a hand is to a glove, excipients are to pharmaceutical APIs.
Any drug formulation is composed of two components or aspects. According to a MarketsandMarkets research report, the global pharmaceutical excipients market in terms of revenue was estimated to be $8.6B in 2022 and is poised to reach $11.5B in 2027 growing at a CAGR of 5.9% from 2022 to 2027. Whereas the global active pharmaceutical ingredients market is expected to reach $198.8B by 2022 with a CAGR of 6.4%.
How the Pharmaceutical Supply Chain Works
The first step in the pharma supply chain is for the pharmaceutical company to either develop or source the two building blocks of a drug product: Active Pharmaceutical Ingredients (APIs) and excipients.
APIs: The active ingredient in drugs that produces the intended health effect, manufactured using a range of synthetic and biological raw materials.
Excipients: Includes any substance other than the API that helps deliver the medication into the patient’s system. They are chemically inactive, allow the medicine to remain stable, and control the absorption of the drug.
The generic/non-branded segment of the industry witnessed the largest market share during the forecast period due to rising healthcare costs, government prominence on generics for dropping healthcare costs, and decreasing pipelines of global pharmaceutical products. The supply chain for Active Pharmaceutical Ingredients (APIs) has been increasing in complexity for several years with the potential for several players to be involved. The role of the business strategy and forecasting manager is by nature very transverse. They have to wear multiple hats and work in tandem with the supply chain manager. It is to orchestrate the collaboration of disparate functions — sales, production, marketing, product development, and more — and deliver a flawless service to the company’s customers, while ensuring profitability. Forecasting leaders must therefore be able to speak multiple languages with their internal and external stakeholders. This requires a broad spectrum of skills, including the ability to understand and evolve the company’s information systems.
Jargon galore has clouded the industry - from MRP to ERP to SQL to APIs- Pythons to AI, we have it all. With the evolution of systems and IT systems in particular, the API industry and its supply chain function has undergone a massive digital transformation. From a risk management standpoint, it is important to pursue a dualistic, longer term supply strategy that embraces cost control and supply reliability/diversity to improve the integrity and resilience of international supply chains.
API Prices Continue to Increase
The surging prices of APIs has become a major concern in the pharma industry. In the last couple of years, the biggest hike was noticed in the price of methylprednisolone, a high-demand medicine for COVID-19. Its price rose from around USD 1,000 to USD 2,800 within a week. Booming transportation costs, disorganization and slowdown of API production lines, and the rise in energy prices have led to a steep price hike. The health crisis during the pandemic has highlighted structural supply difficulties that are mainly due to the existence of a fragmented and vulnerable API manufacturing process.
The U.S. imports nearly 70% of APIs. While China contributes ~15% to the U.S. API market, the European Union, which is currently involved in the Russia-Ukraine conflict, offers ~25% of the API manufacturing facilities. Supply chain disruption has led to delays in raw material availability and shortages. The pandemic magnified the challenges of pharma companies’ heavy reliance on foreign contract manufacturing organizations (CMOs). Delivery times for shipments from Chinese CMOs to the U.S. West Coast took less than 50 days till early 2019. In January 2022, these delivery times hit a record high of 113 days.
Business Strategy and Forecasting Can Help Mitigating Risks
Know Thy Supplier
It is imperative to understand and know your supplier in and out. Diversifying the geography of API suppliers is an important first step. Defining a risk profile for source countries and suppliers as if it were a part of the technology transfer process may help in developing the strength and resilience of pharma supply lines. Employing strategic techniques like SWOT, and PESTLE analysis might support developing a more insightful risk profile of potential and existing API suppliers. It is important to connect the strategic forecasting here so that we know exactly the demand and supply situation to be able to guide the supply chain leaders accordingly.
Resilient and Trustworthy Partnerships
The causes of API or excipient supply issues may run deeper than just ingredient shortages and stem from broader operational issues at certain suppliers that cannot be ignored. It is important to consider the source of issues with problem suppliers, and explore alternative partners, focusing on those that have a strong track record of reliability and supply sustainability. Most pharma trailblazing companies use state-of-the-art forecasting tools to be able to navigate the supplier’s historical trend and predict what the supply has been. It can then be used to derive the prediction for the upcoming period and if there will be hiccups or smooth sailing.
Stability in an Unstable Environment
Unforeseen political or natural events with the potential to disrupt supply chains can happen anywhere in the world. However, some economies and political systems are more stable than others and can handle adverse events more effectively. The war in Ukraine is a situation the world is still grappling with, and no one could have predicted.
Conclusion
Pharmaceutical companies have undergone a massive test in recent years. While the COVID-19 pandemic kept doctors and healthcare professionals on their toes, it also exposed wide gaps in pharma supply chains. COVID-19 has prompted a pivotal shift in pharma supply chain strategies. Over the coming decade, resilient networks will be key to navigating an increasingly turbulent market. Pharmaceutical companies that integrate flexibility and redundancy into the entire value chain and that improve visibility will be best positioned to predict chain disruptions efficiently and respond to them rapidly. The shortage of staff, and medicines, as well as facilities has put a lot of pressure on pharmaceutical companies to quickly transform their operations, especially with regards to the supply chain. Companies must act now, identify potential risks, and mitigate their impact by leveraging end-to-end supply chain visibility. Today's API supply chain must be managed more closely for risk and reliability to ensure a secure and consistent supply and steady production. Having an integrated business strategy and forecasting plan will not only help but capture the immediate unmet need of the organization and propel success and turn the tide in favor.
All the views, and opinions expressed do not represent the views or opinions of the author's employer or any present or past organization.
References
- https://www.pharmoutsourcing.com/Featured-Articles/350151-Raw-Materials-Excipients-and-APIs/
- https://www.gep.com/blog/mind/how-pharma-is-dealing-with-api-shortages
- https://www.abiresearch.com/blogs/2023/02/17/pharma-supply-chain-challenges/
- https://www.pfizercentreone.com/insights-resources/expert-content/building-more-resilient-api-supply-chains
- https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/life-sciences/life-sciences-pdfs/ey-pharma-supply-chains-of-the-future-final.pdf
Sanobar Syed is currently Associate Director at Beigene. She has over 14 years of proven achievements in establishing and leading business strategy and forecasting in leading global pharmaceutical firms (Beigene, AbbVie, Novartis, McKesson to name a few). She is considered a subject matter expert, delivers speaker presentations at reputed conferences, guest lectures and has developed academic modules at TRIEC, Toronto Metropolitan University and Schulich University (Healthcare & Biotech) Canada. By education she is Masters in Organic Chemistry and MBA (Marketing).
Subscribe to our e-Newsletters
Stay up to date with the latest news, articles, and events. Plus, get special
offers from Pharmaceutical Outsourcing – all delivered right to your inbox! Sign up now!