Are Current Global Trade Issues Affecting the Bio/Pharma Supply Chain?
A new benchmarking study by the Drug, Chemical & Associated Technologies Association (DCAT) examines where biopharma companies and their suppliers stand on their concern for, awareness and management of supply chain risks arising from global trade developments.
The global trade environment in 2019 was dominated by major trade disputes that threatened established global supply chains, including Brexit, the US-China dispute and the renegotiation of the US-Mexico-Canada trade relationship. Given the significance of international trade to its member companies, the Drug, Chemical & Associated Technologies Association (DCAT) commissioned a study of its members to gauge their level of concern about the trade environment and benchmark their best practices to manage trade-related supply chain risks.
The study, entitled Managing Biopharma Supply Chains in an Uncertain Global Trade Environment, was developed by the DCAT Research & Benchmarking Task Force and administered by Cell Associates, a St. Louis-based market research firm. Executives from pharmaceutical companies, CDMOs, CMOs and suppliers were surveyed on where they stand on their concern for, awareness and management of supply chain risks arising from global trade developments.
“In this uncertain trade environment, we are delighted to be able to offer this value-added service to our member companies,” said DCAT Executive Director Margaret Timony. “The full report is available to DCAT member company representatives by visiting our website.”
Biopharma industry exposure to trade disruption
While the biopharma industry has not been specifically targeted with tariffs or other trade barriers, the industry potentially has substantial risk because of its broad global network of manufacturing sites and suppliers. The FDA has reported that 80% of drug substance suppliers to the US are located outside of the US, and that biopharmaceutical imports into and exports out of the US totaled $140 billion in 2016. For Europe, EuroStat reported that EU biopharmaceutical imports and exports totaled EUR 250 billion in 2018.
The risks to the biopharma supply chain have been further highlighted in recent weeks by the coronavirus outbreak in China. China is an important source of raw materials and active ingredients for the global biopharma industry.
A sampling of key findings:
- Biopharma company and supplier executives have been giving increased attention to trade-related supply chain risks in recent months, and address trade-related developments as a major-to-moderate risk in their strategic plans.
- Biopharma companies and suppliers are particularly concerned about risks to the supply of drug substance from tariffs, quotas and other controls on key material imports, drug substance/API sourced from China and India.
- Biopharma companies and suppliers are using a variety of tactics to mitigate trade-related supply chain risks including increasing inventories of key materials and products, second sourcing, and redundant capabilities at multiple facilities.
- Trade-related risks are a factor in locating manufacturing facilities and supplier relationships, although they rank below other factors such as tax and financial considerations.
- Biopharma companies and suppliers would most likely turn to contract manufacturers and other alternative arrangements if trade were hindered by trade disputes or sanctions.
Methodology
An online survey was conducted from early September through late November 2019. DCAT member companies, consisting of both pharmaceutical companies and suppliers of direct materials used in pharmaceutical/biopharmaceutical development and manufacturing were invited to participate. One-third (35%) of the survey respondents worked in pharmaceutical companies while two-thirds (65%) worked in companies that supplied pharmaceutical companies with direct materials.
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