4 ways the U.S. can strengthen its pharmaceutical supply chain

Experts across academia, government, and industry offer strategies the U.S. government could use to reduce drug shortages and build supply chain resilience.

Critical minerals, semiconductors, energy storage—these all underpin essential functions of American society and defense, and experts say it’s time for another element to join the list. Once thought of as strictly a public health matter, the U.S. prescription drug supply is now becoming a matter national security.

Representatives from the pharmaceutical industry, academia, and government gathered at the Johns Hopkins University Bloomberg Center last month for a National Academies of Sciences, Engineering, and Medicine workshop to determine the best “make, buy, and invest” strategies to strengthen the resiliency of the U.S. pharmaceutical supply chain.

“Drug shortages have become a serious problem, not only with their frequency, but also with their duration,” said Mariana Socal, associate professor at the Johns Hopkins Bloomberg School of Public Health who spearheaded the creation of the new Johns Hopkins Pharmaceutical Supply Chain Data Dashboard.

Martin Makary, U.S. commissioner of food and drugs for the Food and Drug Administration and former surgical oncologist at the Johns Hopkins University School of Medicine, recalled moments when his work came up against drug shortages.

“I’d be in the operating room calling for certain medications, and they’d say, ‘Well, there’s a shortage. We don’t have it,” or having a cancer patient and recommending a chemotherapy regiment, and they’d say, ‘That’s in a national shortage,’” Makary said.

The COVID-19 pandemic underscored the already existing fragility of the global pharmaceutical supply chain, and now leaders say it’s time to protect the domestic drug supply from other threats, such as geopolitical tensions, natural disasters, cyberattacks, and economic coercion, to safeguard national security and health.

Experts emphasized the need for a drug supply chain that serves the public under normal conditions as well as investments in a medical industrial base that can withstand unpredictable disruptions. These are four strategies they said could help the U.S. tackle shortages and build long-term resilience.

Table of Contents

• The government should better enable domestic drug manufacturing
• Quality, not just low prices, must be a priority
• The U.S. should refine, not end, its participation in a global drug supply chain
• The federal government should authorize an agency to lead drug supply chain resiliency efforts
• How the Johns Hopkins Pharmaceutical Supply Chain Data Dashboard can help

1. The government should better enable domestic drug manufacturing

Experts said these strategies must include efforts to:

• Encourage the construction of more domestic plants.
• Invest in mitigation strategies— such as stockpiling, vendor-managed inventory, and distributed and redundant manufacturing—that can support the supply chain until those new plants are operational.
• Differentiate between common shortages, such as shortages of generic drugs, and other uncommon but more consequential shortages that impact national security.

“We put a man on the moon, we took an eight-year vaccine development cycle down to 10 months. We can do that, and we can do this,” said Robert Kadlec, former assistant secretary for preparedness and response for the U.S. Department of Health and Human Services. “It just takes concerted thought and effort, and again to realize that the government should enable this, should be helpful, should get out of your way, provide opportunities, provide incentives.”

Ensuring demand

In 2022, when the API Innovation Center surveyed 13 U.S. drug manufacturers that represent nearly 25% of the country’s generic pharmaceutical manufacturing capacity, it found that one-third of manufacturing sites were producing at half or less than half of their production capacity. They simply didn’t have the surety of demand from the U.S. government to manufacture at full capacity, said Natalie de Graaf, vice president and general manager of data analytics, AI, and ML solutions for health and national security at the API Innovation Center.

“If we do not have surety of demand for the manufacturers we have in America to know that they’re going to have a place to sell a drug at a certain price, then we will never fill this void,” de Graaf said. “We have to make sure that we fill the demand side, and the supply side will follow.”

Timothy Manning, research professor at Georgetown University’s Center for Global Health Science and Security, said some countries don’t see the same shortage severity as the U.S. because they operate under a single-payer system in which the government “is in the business of ensuring a resilient supply.” The U.S. works differently.

The Centers for Medicare & Medicaid Services’ “primary objective is savings, is cost efficiencies, so it’s kind of counterproductive,” Manning said. If the government recognizes health care as national security, it should be willing to invest more to build a resilient supply chain.

One way to achieve that, he said, would be through differential reimbursement payments for resilient drug manufacturing through CMS, which would require reauthorization.

Identifying single suppliers

In 2023, one of two domestic manufacturers of albuterol, an asthma and RSV treatment, filed for bankruptcy and shuttered its facilities, contributing to an albuterol shortage. The same year, the cancer drug cisplatin experienced a similar shortage due to over-dependency on a single manufacturer that had to cease production because of quality concerns.

Knowing if one manufacturer is making the majority of drug can help the government move to identify alternate sources.

“We need to make sure we have a balance of what is being manufactured out there so that if for some reason a natural disaster, a bankruptcy, a failed inspection [happens], others can pick up the load without having to pick up the entire load,” said Scott Biggs, director of supplier services at IQVIA.

Offering incentives and support

Operation Warp Speed, the U.S. government initiative to accelerate the development of COVID-19 vaccines, was effective in delivering the vaccines in record time because it was built on private-public partnership, Kadlec, formerly of HHS, said.

“Warp Speed was about not having the government make vaccines; we enabled the private sector to do that, de-risking it, enabling it, and being successful by staying out of the way,” Kadlec said.

Makary and others pointed to different incentives and programs that can remove red tape to help speed up drug manufacturing.

• FDA PreCheck program
• Commissioner’s National Priority Voucher pilot program
• Defense Production Act Title III

Taking such steps to strengthen the industrial base under normal conditions prepares the country to effectively use the appropriate policy levers, such as the Defense Production Act and advanced market commitments, during a crisis.

2. Quality, not just low prices, must be a priority 

In addition to increasing domestic demand of important pharmaceuticals, the U.S. should also prioritize higher quality generic drugs, according to de Graaf of the API Innovation Center.

Inspections of pharmaceutical manufacturers took an expected dip during the pandemic but haven’t yet rebounded to pre-pandemic levels, raising concerns about the quality of drugs entering the U.S. market today.

Rather than buying generics from “the lowest bidder,” Biggs of IQVIA said the U.S. should target the medications with the best quality, which would allow those manufacturers to have the margins they need.

“That then solves the demand problem, which then solves the foreign dependency problem,” de Graaf said.

3. The U.S. should refine, not end, its participation in a global drug supply chain

There is complexity to the global supply chain, which is the result of decades of industrial and diplomatic policy that considered it a strength to have global cooperation on drug production, said Nicolette Louissaint, chief policy officer for the Healthcare Distribution Alliance.

“When we’re thinking about foreign dependency, it is not guaranteed that moving products to the Unites States results in higher quality,” she said.

Use quality as a filter

The U.S.’s growing reliance on China and India, which sources many of its ingredients from China, for pharmaceuticals is a source of major concern for U.S. leaders. But rather than trying to completely sever ties with these countries, de Graaf noted that assessing quality may be a way to refine which of their manufacturers the U.S. partners with. This “provides the best quality and value for our citizens in the United States” while avoiding negative health outcomes from cheaper, lower quality ingredients.

“We created this, but I think the pendulum maybe swung a little too far,” de Graaf said. “Now it’s time to again prioritize what makes the most sense to our public health and defense industrial base to say, we need to make these things here in case of any environment.”

Align trade policy with supply chain resilience strategy

It’s impossible to produce all drugs domestically, said Manning of Georgetown University. Ally-shoring or nearshoring can help complement onshoring efforts to help strengthen the resilience of the pharma supply chain. But it requires aligning trade policy to promote partnership, Manning added.

“If you look at our current trade policy, some of the most severe tariffs that we’ve levied around the world are on these places where they are our logical partners, ally-shore partners, where you can’t necessarily bring [manufacturing] back economically into the United States,” he said.

Reapproach China

While experts agree that reducing dependency on China for pharmaceuticals is key to strengthening the U.S. drug supply, completely decoupling from China is not the answer, according to Melanie Hart
senior director of the Atlantic Council’s Global China Hub. Rather, the U.S. could partner with China for drug production, as both countries work to address similar diseases among their populations.

“That is unique, and it can save American lives when we’re working with China on drug development,” she said. “We can find ways to work together but not completely put our fate in the hands of the Chinese Communist Party on the supply side.”

4. The federal government should authorize an agency to lead drug supply chain resiliency efforts

While the FDA is focused on using its pharmaceutical supply chain data primarily for drug safety and efficacy, there isn’t an entity that is tasked with using the data to safeguard the availability of those drugs.

“Right now, the FDA will talk about a shortage; they won’t talk about anything before the shortage, because that’s not their role,” said Daniel Singer, former director for countering biological threats on the National Security Council. “The problem is it’s nobody’s role.”

Authorizing the FDA to capture additional supply chain data

While the FDA may know a certain drug is made across four manufacturers, it doesn’t know if capacity is split evenly across those four or if one of them manufactures the vast majority of that drug, Singer said. The FDA should be granted additional authorities for collecting more granular supply chain information, he said, something that would require congressional approval.

Singer also suggested there be formal agreements on the different tiers of information the FDA could be allowed to share with companies, other agencies, and the public.  

“We put a man on the moon, we took an eight-year vaccine development cycle down to 10 months. We can do that, and we can do this.”

– Robert Kadlec, former assistant secretary for preparedness and response for the U.S. Department of Health and Human Services

Key capabilities of the lead agency

The Department of Defense is another potential leader for supply chain resilience efforts, said Chandresh Harjivan, chief strategy officer of the Medical Countermeasures Coalition. It leads innovation and procurement rules for other areas of national security, and pharma supply chain resiliency efforts wouldn’t take nearly the same resources as other priorities in the department. 

When determining where within the government this initiative should live, the government should assemble a team that can influence CMS, DOD, other agencies, and Congress, Singer said. “We’ve all identified specific interventions that need to happen in a lot of different places to make this work, so it can’t be buried within one agency that doesn’t have that reach,” he said. 

How the Johns Hopkins Pharmaceutical Supply Chain Data Dashboard can help

This new dashboard helps close the persistent information gap that has impeded efforts to take actionable steps to safeguard the pharmaceutical supply chain. The interactive tool aggregates publicly available data to provide key information on more than 60,000 medications.

Historical shortage information: Whether the drug has experienced a shortage in the past five to six years and how long that shortage lasted.

Where drugs are made: Whether they are manufactured mainly in one country or at one facility.

Quality indicators: Results of FDA inspections and whether a facility has faced regulatory action.

This information can help forecast and prevent shortages. Additionally, it can help the government decide which potential shortages are most likely and most consequential that they require intervention.