What will it take exactly? How would you diversify China-dependent supply chains so you can procure more materials, and develop and manufacture more API and products outside of that country in general, or in the U.S. specifically?
Corbus Pharmaceuticals Chief Operating Officer, Robert Discordia, Outsourced Pharma Board Member, and previously long-time Bristol Myers Squibb executive, provides some nuts-and-bolts to building new paths to production.
Discordia approaches this, well, scientifically, as he is wont to do. (His favorite phrase is, “I’m a scientist; I look at the data.”)
That means digging deeper than drug substance and finished product.
When you trace further back, warns Discordia, “it can feel like an insidious exercise, because fully expanding your ‘bill of materials’ for all your ingredients and products, for even a simple supply chain, can explode into hundreds of SKUs.”
“When you do drill down to typical pharmaceutical excipients for common drug products, for example microcrystalline cellulose, or mannitol, it’s difficult to find materials that did not originate from China, or had some part of their supply chain dependent there.”
He continues: “The source one buys from may not be a ‘Chinese’ source, but a material’s origins – or parts of its raw material supply chain – may very likely pass through China.
“If the goal is to not only move your supply chain to the U.S., but also remove any dependence upon China, one needs to really investigate beyond who you are buying from.
“These are the realizations through internal investigation bio and pharma companies should be encouraged to do.”
Then there’s your partners’ search.
Ask your supply-chain partners – CRO, CDMO/CMO – to undertake a similar activity, be they located in the U.S., Europe, or Asia.
Certain realities will set in … and that’s the point.
This is the data that will eventually set U.S. biotech and pharma free from any over-dependency on China – or elsewhere.
“I task my team with investigating whether ‘on paper’ we could put together a ‘fictitious’ supply chain – ‘fictitious’ meaning not pursued currently, but with sources and services we know exist – so we could have an entire supply chain not dependent on China,” explains Discordia.
“Not dependent on China,” he adds, “means one can have several sources for materials – some can be outside of China and some may come from China – but if China were to cut supply to the U.S., you would still be able to operate your supply chain.
“Right now,” concludes Discordia, “even that is difficult to do.”
Unearth The Goods
When tracing back to what the pharmaceutical industry calls “raw materials,” are these literally obtained with cranes digging earth in areas of China?
Discordia answers with a qualified affirmative.
“While ‘rare earth metals’ are more prominent in the electronics industry, there are a lot of catalysts and other materials for chemistry that we rely upon and originate in China. That country is the world's leading supplier of these metals.”
There are other areas in the world where these metals exist, “but no country has put the effort in that China has, to the point where materials are readily accessible and connected to lanes of commerce.”
“If, for example, you're looking for your yttrium catalyst or for some other exotic metal, or even just platinum and palladium – used hugely in the pharmaceutical industry – China is one of the largest suppliers.”
Finding other geographies where these raw materials are accessible is thus only a start. Industry would need to match China’s infrastructure, and of course, create profitable businesses; materials would have to come to market at prices competitive with China.
“When you bring a supply chain back all the way to its raw materials, the margins on any one of those are thin; it takes huge volumes to get established and operate economically,” says Discordia.
How about operating in the U.S.?
“A challenge you have here, which I don't see as a problem because we enjoy our system of government, is you can’t just start digging,” replies Discordia. There are environment and other concerns – and the “biggest American paradox”: We want to make our goods here, as long as “here” isn’t too close to where we live."
However, the Wuhan coronavirus shock may be altering the landscape.
That reporting mentions the whole of U.S. government may have to get involved, “because creating a lasting, rare-earths processing business effectively from scratch is likely to take years and a lot more money.”
Nonetheless, commented Ryan Castilloux of Adamas Intelligence, a rare-earths research firm, “Symbolically I think it’s huge.”
“Today, U.S.-based biotechs are certainly able to move drug-substance manufacturing out of China, and swap it for a domestic company,” says Discordia.
“There’s also the reality full reversals could be on the order of years. Maybe quicker, but certainly not immediately.”
One reason for that timeframe: Supply-chain recalibration becomes a regulatory burden.
An NDA including an approved manufacturer will require a new validation process to add a supplier.
“You'll have to put batches on stability, and there’s a lot of other work to do. It’s neither a cheap nor fast exercise,” says Discordia.
There are added complications for the growing number of biotechs with high-potency, low-volume products. Diversifying a supply chain across two suppliers – say in China and the U.S. – expands unit costs by putting ever-lower volumes of product in facilities.
“CDMOs are designed to be modular, and handle an array of reactions and chemistries,” says Discordia.
“However, this isn’t analogous to years ago when every time pharma had a commercial drug they built a plant to produce it in the most efficient way. Many plants today are still designed to repeatedly produce larger quantities.”
U.S.-based CDMOs, in order to facilitate “reshored” relationships, will also have to adapt accordingly. For service providers, the calculus will be price, procurement, and productivity.
What’s clear is with this violent push from the Wuhan coronavirus, many in the U.S. are calling for a supply-chain revolution.
Like that 60s Beatles song goes, we’d all love to see the plans.
“The reality is it's not like flipping a light switch,” concludes Discordia. “One would need to start from that reality to formulate the best plans, and timeframes.”
Certainly feels like now’s the time to do just that.
*The views and opinions expressed in this article by Robert Discordia are his personal views and opinions, and do not necessarily reflect those of Corbus Pharmaceuticals.