Since the outbreak of the COVID-19 pandemic, concerns about the robustness of global supply chains have become all too familiar. From pressure on supplies of raw materials and disrupted shipping and transportation routes to workforce shortages, many industries continue to experience issues across their globalized supply networks. The pharmaceutical industry is no exception to this: since 2020, it has confronted challenges ranging from surging demand for vital medical products, constrictions on key supply routes and shortages of critical items. 

Yet, though shortages of key input materials undoubtedly caused headaches for the industry, pharma was able to demonstrate its underlying resilience throughout the crisis. Standing on the front lines of the global public health effort to contain COVID, the industry can point with pride to the fact that there were no meaningful increases in shortages of innovative pharma products, with some manufacturers indeed reporting performance improvements during the crisis, perhaps as a result of reduced reporting and inspection demands, along with a hyper-focus on product supply. Moreover, leading pharma innovators succeeded in developing and manufacturing multiple COVID vaccines in record times, a signal achievement for the industry’s R&D and supply chain operations.

This is by no means the end of the story, however. The pandemic has left behind it a changed world, in which governments worldwide are showing increasing commitment to securing supply chains within their own national or regional spheres of interest. As ongoing macroeconomic and geopolitical events continue to ratchet up the tension between nations and regional blocs, this trend towards a focus on regional/national supply security is only likely to intensify. The US governments moves to, for example, deploy the Defense Production Act to bolster investment in national manufacturing capacity, are likely to prove only the tip of an iceberg of policymaker intervention in supply chains in the near future. With increasing recognition of its status as an industry of critical importance to national strategic calculations, pharma is highly likely to be affected by this more activist governmental stance over the next decade, both within the US and beyond.

What this will mean for the industry is the question that forms the focus of the recently-published EY paper, “Pharma supply chains of the future,” which aims to assess the measures the industry and its stakeholders will take to increase supply chain resilience in a future shadowed by mounting geopolitical tensions. One issue the paper considers is the question of localization: to what extent will governments encourage industries to move away from globalized supply chains and onshore their production processes? 

Policy initiatives aimed at localization could, for example, see increased outsourcing to locally-based contract development and manufacturing organizations (CDMOs); a pharma company could with relative ease outsource secondary manufacturing processes to a CDMO or build its own local GMP-approved and licensed site. Perhaps, however, policymakers will demand still greater degrees of localization, with correspondingly higher cost requirements? Yet even localizing processes end-to-end could not guarantee resilience, since the supply chain would still require internationally-sourced materials at every stage. 

In practice, the paper suggests, localization in itself is not a complete answer. Rather, the industry and its stakeholders are likely to move towards hybrid supply chain models, with a balance between global, regional and local sites. Within these hybrid approaches, the industry may seek to pursue specific initiatives. These include, among others discussed in the report, hub and spoke models, (where overall control remains with the central “hub” but local “spokes” provide additional in-country production capacity), procurement clearing houses that can help the industry balance supply and demand, mitigating against excess orders and real-world shortages, and regulatory reforms that can speed up or simplify approval processes. 

There is no single approach which will deliver future supply chain resilience. Finding workable solutions will need the industry and its stakeholders to collaborate on finding the right balance of localization moves and additional strategies that can meet the needs of governments and companies alike. The pandemic offered encouraging hints that this level of collaboration, though rare in the past, may be a viable goal for the future. During COVID, pharma companies worked closely with governments and regulators which, to their credit, recognized the need for an unusual degree of regulatory flexibility to assist public health efforts. As EY’s paper concludes, improved cooperation and  reciprocal, continuing engagement between pharma and its stakeholders must be the basis for rethinking supply chains in terms that can deliver resilience into the future. If all stakeholders can commit to this level of dialogue, the results can benefit both pharma and its many ecosystem partners – including, most importantly of all, the patients that the industry served so well during the pandemic, and will continue to prioritize in the future.