How Do We Make Supply Chains More Resilient?

The year 2024 has presented a global medicines shortage crisis. The rationing of vital drugs has become all too common, with healthcare practitioners forced to make difficult choices when prescribing what should be easily accessible drugs. In my view, this is unacceptable.

As with many complex and global phenomena, there is no single cause for drug shortages. Global trade tensions, wars, the lingering impact of the COVID-19 pandemic, and broader economic instability all play a role and there is no single silver bullet that might alleviate the problems.

The pharma industry has a reputation for innovation in R&D, but it is time for some of that creativity to head downstream to the manufacturing and logistics processes that hold the industry up. As global demand for medicines continues to rise, the importance of efficient and secure supply chains has never been more critical. Traditional supply chain systems can suffer from fragmentation and a lack of interoperability, leading to inefficiencies and delays that exacerbate shortages. The supply chain is one area where technology and an assessment of some of the fundamentals could make a tangible difference to the medicine shortages crisis.

To understand why improving supply chain resilience is so important for our global pharmaceutical ecosystem, we have to go back to basics. Though high-profile pharmaceutical companies spend their time researching and developing new drugs that can be sold under patent at high margins, the backbone of the global drug market is off-patent generics. Over 90 percent of the drugs prescribed in the US, and 70 percent in Europe, are generics and biosimilars. It is precisely these products that are seeing the biggest shortages. Without the high margins or a reputation for innovation, there isn’t the willingness to invest in the manufacturing and logistics processes that would ensure these medicines remain in good supply. This has created a system riddled with blind spots. Drug manufacturers can lack real-time visibility into inventory levels throughout their supply chains, and pharmacies and hospitals face similar limitations as they struggle to anticipate shortages. The lack of transparency creates a ripple effect, leading to shortages.

However, there are a number of solutions available that are well-suited to the pharmaceutical industry and its complex web of global manufacturers; key words include visibility and interoperability. Real-time tracking of inventory across every stage, from raw materials to finished products, increases visibility and empowers better decision making. It allows manufacturers to predict potential shortages based on the current supply of crucial ingredients; ensures distributors can optimize delivery routes and identify bottlenecks; and allows healthcare providers to anticipate and manage stock levels more effectively.

When tied together with interoperable – supply chain systems that ensure the smooth flow of data between disparate parts of the chain and its external partners – a much smoother system starts to emerge that could mirror the successful supply chains seen in the retail and automotive industries.

While visibility and interoperability are crucial, they're meaningless without the ability to translate data into actionable insights. When it comes to the production of pharmaceuticals, manufacturers tend to see source diversification as a silver bullet. Operating a diverse supply chain, however, only increases the importance of using interconnected networks that facilitate real-time information sharing, empowering proactive response strategies, and ensuring continuity. Otherwise, such investments can be more trouble than they’re worth. For pharmaceutical suppliers and manufacturers especially, prioritizing action-driven networks that support the foundation of a supply chain, rather than investing in speculative technology, is surely essential for building resilient supply chains and recovering from the issues we see today.

The bottom line is that the global drug shortage is a complex phenomenon with a whole gamut of causes – and they can’t be solved overnight. However, as an industry, more emphasis should be put on the importance of the manufacturing and supply chain side of getting medicines to patients – the crucial final step. Those aspects, and those responsible for them, need to get back to the fundamentals: investing in real-time actionable insights via interoperable systems, to create a more resilient supply chain system.