Long-Term Solutions: Building Resilience Into the Drug Supply

Every year, hundreds of drugs vanish from pharmacy shelves-not because they’re no longer needed, but because the system that makes and delivers them broke down. In 2022, the FDA recorded 245 drug shortages, and nearly two-thirds of them were life-saving injectables used in hospitals during surgeries, cancer treatments, and emergency care. These aren’t rare glitches. They’re systemic failures built into how we make medicine today. The good news? We know how to fix them. The hard part is doing it at scale, and doing it now.

Why the Drug Supply Is So Fragile

For decades, pharmaceutical companies chased one goal: efficiency. They cut costs by relying on single suppliers, often overseas, for the active ingredients in drugs. Today, 72% of active pharmaceutical ingredient (API) manufacturing happens outside the U.S., with nearly half of it concentrated in just two countries: China and India. That sounds fine until a flood shuts down a factory in Shanghai, or a political dispute delays a shipment through the Suez Canal. Then, hospitals run out of antibiotics, anesthetics, or heart medications-and patients pay the price.

This isn’t just about geography. It’s about invisibility. Most drugmakers don’t even know where their raw materials come from beyond their first supplier. Only 12% of companies have visibility into Tier 3 suppliers-the ones mining chemicals or growing plants that become the foundation of medicine. That’s like trying to fix a car without knowing where the engine parts were made.

What Resilience Actually Means

Resilience isn’t about hoarding pills. It’s about designing a system that can bend without breaking. The National Academies of Sciences laid out a clear framework: anticipate, plan, manage. That means three things:

• Anticipate-track global risks before they hit: weather, politics, cyberattacks, labor strikes.
• Plan-build backup options into the system before a crisis starts.
• Manage-use data and tech to respond quickly when something goes wrong.

The most effective strategies aren’t flashy. They’re practical. For example, keeping 6 to 12 months of buffer stock for critical drugs can prevent 45% of shortages. But that alone costs billions. A smarter approach combines that with diversification: having at least three suppliers for each key ingredient, spread across different continents. That way, if one region collapses, others can pick up the slack.

The Real Cost of Doing Nothing

Drug shortages don’t just delay treatment-they cost lives and money. In 2022, these disruptions added $216 million in extra expenses to the U.S. healthcare system. Why? Because when a hospital runs out of a standard IV antibiotic, they turn to more expensive alternatives, or worse, delay surgery. Patients wait longer. Nurses scramble. Clinicians make risky substitutions.

And it’s getting worse. Cyberattacks on supply chains jumped 214% between 2020 and 2023. One ransomware attack can shut down a distribution center for days. Meanwhile, climate disruptions are becoming more frequent-floods in India, heatwaves in Europe, earthquakes in Mexico-all of which can stop production lines overnight.

Reshoring vs. Diversification: What Actually Works

There’s a lot of talk about bringing drug manufacturing back to the U.S. It sounds patriotic-and it helps. But reshoring API production typically increases costs by 25% to 40%. That’s not sustainable for every drug.

A better path? A hybrid model. Keep domestic production for the most critical medicines-like epinephrine, insulin, and chemotherapy drugs-while diversifying suppliers for everything else. According to the Duke-Margolis Center, this approach prevents 85% of critical shortages at a fraction of the cost of full reshoring. It costs about $1.2 billion to $1.8 billion a year-a small price compared to the $216 million we already lose annually to shortages.

Compare that to stockpiling alone: it would cost over $4 billion a year and still miss half the problems. Or relying on demand management-like rationing drugs during a shortage. That helps in the moment, but it doesn’t stop the next crisis from happening.

Technology Is the Hidden Game-Changer

The biggest opportunity isn’t in building new factories. It’s in seeing what’s already out there.

Companies using AI-powered supply chain mapping report 32% fewer disruptions. These tools track raw materials from farms and mines all the way to hospital shelves. They flag risks-like a supplier in Vietnam with poor labor compliance or a port in Brazil facing customs delays-before they become emergencies.

Pfizer spent $220 million to roll out AI forecasting across 150 distribution centers. Result? 38% fewer stockouts. Merck used federal grants to bring API production for key antibiotics back to the U.S. and now sources 95% of those drugs domestically. But both required years of planning, data integration, and staff training.

The problem? Only 35% of pharmaceutical companies have staff trained in supply chain risk analytics. Most still use spreadsheets and phone calls to track inventory. That’s like flying a jet with a paper map.

Regulations Are Finally Catching Up

The FDA’s Drug Supply Chain Security Act (DSCSA) is now fully in force. By 2024, every drug package must have an electronic identifier that tracks it from factory to pharmacy. That’s a massive step forward. But it’s just the start.

In 2023, the FDA released new guidance requiring manufacturers to do annual vulnerability assessments. By Q3 2025, every company must show they’ve identified risks and have a plan to address them. The European Medicines Agency is doing the same. And now, CMS is proposing to tie Medicare reimbursement to supply chain transparency. If you can’t prove you’ve got a resilient system, you might not get paid.

This isn’t bureaucracy. It’s accountability. For the first time, the financial incentives are aligning with patient safety.

What’s Holding Us Back?

The biggest obstacle isn’t technology or money. It’s culture.

Procurement teams still pick suppliers based on lowest price-not reliability. A 2023 study found that 67% of manufacturers say price-focused contracts block resilience investments. That’s like choosing a car based only on fuel cost, ignoring whether it’s been recalled for brake failure.

Data systems don’t talk to each other. 78% of companies use incompatible software across their suppliers. That means even if you have visibility, you can’t use it. And there’s a skills gap. By 2027, the industry will need 125,000 new supply chain risk specialists. Right now, we’re nowhere close.

What Needs to Happen Next

There’s no single fix. But here’s what’s working:

1. Start with the most critical drugs-the ones that save lives if given on time. Prioritize them for domestic production or multi-sourcing.
2. Build visibility. Invest in mapping tools that show your supply chain down to the raw material level.
3. Share data. Public-private partnerships for threat intelligence have cut cyberattack response times by 47%. More of that.
4. Change procurement rules. Reward suppliers for reliability, not just low bids.
5. Train people. Build internal teams that understand risk, not just inventory.

The HHS 2024 plan is allocating $520 million to boost domestic production of 50 critical drugs. That’s a start. But long-term resilience needs sustained funding-around $2.1 billion to $3.4 billion a year. That’s less than 0.3% of what we spend on prescription drugs annually. The return? A 75% reduction in critical shortages by 2030.

It’s Not Just About Medicine. It’s About Trust

When a patient shows up for chemo and the drug isn’t there, it’s not just a logistical problem. It’s a betrayal. They trusted the system to deliver. When that fails, it erodes faith in healthcare itself.

Building resilience isn’t about being perfect. It’s about being prepared. It’s about having backups, knowing where things come from, and acting before the crisis hits. We have the tools. We have the data. We know what works.

The question isn’t whether we can afford to fix this. It’s whether we can afford not to.