Long-term solutions for building resilience into the drug supply to prevent shortages

When a life-saving injection runs out, it’s not just a logistics problem-it’s a crisis. In 2022, the U.S. saw 245 drug shortages, and more than half of them involved sterile injectables used in hospitals for emergencies, surgeries, and cancer treatments. These aren’t minor delays. They force doctors to use less effective alternatives, delay critical care, and cost the system over $200 million a year. The root cause? A drug supply chain built for efficiency, not endurance.

Why the drug supply is so fragile

For decades, pharmaceutical companies chased lower costs by moving manufacturing overseas. Today, 72% of the active ingredients (APIs) in U.S. drugs come from just two countries: China and India. That sounds fine until a flood shuts down a factory in Shanghai, a political dispute blocks exports, or a cyberattack knocks out a warehouse in Mumbai. Then, everything stalls. The system was designed to run lean-no extra inventory, no backup suppliers, no safety nets. It worked until it didn’t.

What’s worse, most companies don’t even know where their raw materials come from. Only 12% have visibility past three layers deep in their supply chain. That means if a chemical supplier in Vietnam has a labor strike, the company making your blood pressure pill might not find out until it’s too late.

Building resilience isn’t about stockpiling-it’s about redesigning

The old idea was to just make bigger stockpiles. But storing six to twelve months’ worth of every critical drug would cost $3.5 billion a year and still only prevent 45% of shortages. That’s not smart spending. Real resilience means changing how the whole system works.

Start with supplier diversity. For any drug that saves lives, having at least three suppliers spread across different continents isn’t optional-it’s basic insurance. If one source fails, the others kick in. Merck did this with key antibiotics, using federal incentives to bring 12 critical products back to U.S. soil. It raised costs by 31%, but it also cut the risk of a total shutdown by 90%.

But you don’t need to reshore everything. A smarter approach mixes domestic capacity for the most critical drugs-like epinephrine or insulin-with diversified international partners. This hybrid model costs about $1.5 billion a year and stops 85% of shortages. That’s a far better return than pouring money into massive warehouses.

Visibility is the missing piece

You can’t fix what you can’t see. Most pharmaceutical companies only track their direct suppliers (Tier 1). But the real risks hide deeper: a dye factory in South Korea, a packaging plant in Poland, a shipping line in Singapore. Without full visibility, you’re flying blind.

Companies that invested in supply chain mapping tools-using AI to track materials from raw chemical to final pill-saw 32% fewer disruptions. These systems don’t just show where things are; they predict where they might break. One AI model can now forecast a shortage 30 days in advance with 83% accuracy. That’s enough time to reroute shipments, activate backup suppliers, or adjust patient dosing plans.

Yet only 8% of resilience spending goes toward visibility. That’s like buying a fire alarm but never installing the sensors. The FDA’s new Drug Supply Chain Security Act, fully enforced by 2024, is forcing electronic tracking across the board. That’s a start. But true visibility means connecting manufacturers, distributors, and pharmacies into one real-time network-not just checking boxes.

Cybersecurity is part of the supply chain

A broken pipeline isn’t the only threat. Cyberattacks on healthcare supply chains jumped 214% between 2020 and 2023. Hackers don’t just steal data-they lock up inventory systems, fake shipping orders, or disable tracking platforms. One hospital in Ohio lost access to its entire drug inventory for 72 hours after a ransomware attack. No one knew what was in stock, what had been ordered, or when it would arrive.

Resilience now means cybersecurity at every level. The Healthcare Distribution Alliance recommends following the NIST Cybersecurity Framework across all partners. That includes multi-factor authentication, encrypted data transfers, and regular penetration testing. Public-private threat-sharing networks have already cut response times by 47%. In a world where a single hacker can trigger a national shortage, this isn’t IT’s problem-it’s a patient safety issue.

Regulations are catching up

The government is finally stepping in. The HHS 2024 Supply Chain Resilience Plan is investing $520 million to boost domestic production of 50 critical medicines, aiming for 40% of APIs made in the U.S. by 2027. The FDA’s new guidance requires manufacturers to do annual vulnerability assessments-starting in late 2025. That means companies can’t ignore risk anymore.

Even bigger: CMS is proposing to tie Medicare payments to supply chain transparency. By 2026, drugmakers will have to disclose their full supply chain maps to get reimbursed for their products. That’s a game-changer. If your drug costs $10,000 a year but your supply chain is a black box, you won’t get paid. Suddenly, resilience becomes a financial priority, not a nice-to-have.

What works in practice

Pfizer spent $220 million and 18 months building an AI-powered forecasting system across 150 distribution centers. Result? Stockouts dropped by 38%. That’s not magic-it’s data. They now know which hospitals are running low before the nurses even call.

Some distributors are using drones to deliver critical drugs to rural pharmacies. What used to take three days now takes four hours. But they hit roadblocks in 42 states because of outdated aviation laws. Resilience isn’t just technology-it’s policy too.

The biggest barrier? Money. Manufacturers say price-focused procurement is the #1 reason they don’t invest in resilience. Pharmacies buy the cheapest version of a drug, even if it comes from a single source with no backup. That’s like choosing a car because it’s $2,000 cheaper, even if it has no airbags.

What’s next: Making resilience routine

Resilience can’t be a project. It has to be part of how drugs are made, bought, and distributed every day. That means training staff in supply chain risk analysis-something only 35% of companies currently do. It means rewarding suppliers who share data openly. It means redesigning formularies to include pre-approved alternatives for 15% of critical drugs.

And it means changing how we decide what’s “essential.” Right now, 72% of drugs on official shortage lists are chosen based on clinical importance alone. But 28% of those drugs have low supply chain risk. Meanwhile, some non-critical pills-like certain cholesterol meds-are made by one factory in one country. If that factory goes down, thousands of patients go without. We need to add supply chain vulnerability as a factor in every decision.

The cost of doing nothing is higher than the cost of fixing it. The Congressional Budget Office estimates comprehensive resilience measures could cut critical shortages by 75% by 2030. That’s not a dream. It’s a math problem with a solution. The tools exist. The data is there. The regulations are coming. What’s missing is the will to make it standard-not optional.