Rebuilding resilience in America’s pharmaceutical supply chain

Jerry Lee · J.P. Morgan

Pharma supply chain vulnerabilities run far deeper than APIs, into precursors, fill-finish and packaging.

Lee argues the public and policymakers mostly focus on APIs and China and India concentration, but the vulnerabilities go much further. He lists precursor chemicals, fill and finish, glass and vials, cold chain logistics and sterile injectables as weak points. He also argues that market forces have encouraged offshoring of core competencies that were once inside US borders, so these choke points are structural and not just a matter of one ingredient. The view is qualitative and is framed as a question for the guest, with no quantified exposure.

“So, Alex, when people hear pharma supply chain, they're usually thinking APIs, China India concentration, and the like. But I think the vulnerabilities are far, far, far deeper. You got precursor chemicals. You got fill and finish. You got glass and vials,”at 1:59

Alex Gorsky · ICONIQ Capital

AI will revolutionise drug discovery, though adoption lags before accelerating sharply.

Gorsky believes AI will have a fundamentally revolutionary impact across drug discovery, manufacturing and resilience. He qualifies this with a pattern he sees in major technology shifts: adoption is slower at first because of friction from the technology itself, the economics, laws and policy, but once those barriers are cleared it accelerates much faster. He argues AI suits drug discovery well because it can combine genotypic, phenotypic, patient history and imaging data in real time and find new insights. Drug discovery has been a needle-in-a-haystack search for more than two and a half decades. Understanding of disease biology and pathophysiology is still quite minimal, and he expects a massive transformation there. He sees AI helping both to repurpose existing compounds and to design bespoke compounds with better safety and efficacy profiles. As an example, a compound-identification step that normally takes about three years of prioritisation and filtering could take a couple of months. He sees AI-related business models, such as partnerships, JVs and new software products, as possibly lowering development costs and eventually drug prices.

“Look, think fundamentally AI is going to have a revolutionary impact on all those areas. ...they tend to take a little bit longer initially just because of friction points... But then once they grab hold, they will actually accelerate much faster.”at 10:06

Alex Gorsky · ICONIQ Capital

Most US generic drugs are still sourced abroad, making overseas API dependence the key reshoring bottleneck.

Gorsky says that on any given day almost 85% of US drug volume (by volume, not dollars) is generic drugs such as antihypertensives, statins, anticoagulants and pain medications, while about 15% is branded drugs from major pharma companies. Although many large branded-drug companies have moved some final-product and API production back to the US, the overwhelming majority of the generic drugs in use still rely on sourcing from outside the US. He calls this imbalance a key bottleneck. His proposed response is a practical mix of levers: build strategic stockpiles, source from other countries and make sure no single site is a point of failure, and over time bring manufacturing back to the US. He notes that underused CMO and CDMO capacity already exists and could be coordinated across companies. He also argues that next-generation manufacturing is more efficient, cleaner and more flexible, and could lower costs for startup biopharma companies. He expects the most ambitious part, building next-generation facilities in the US, to be hard to justify on classic DCF or NPV analysis, and says this will take five to ten years.

“On any given day, almost 85% of the drugs... are generic. And about 15%... are in what I'd call branded drugs that are produced by the major strategics. ...On the overwhelming majority of those generic drugs that are being used, those drugs continue to be sourced from places outside The United States.”at 2:27