Without a doubt, COVID-19 has changed nearly every aspect of our daily lives… from our personal lives to our professional lives. No area remains untouched from the impact of the pandemic. All industries, in particular the pharmaceutical industry, faced an unprecedented set of challenges.
Drug manufacturers and API suppliers were deemed essential industries that the world looked to in order to quickly provide treatments, cures, and vaccines to fight the disease. This renewed focus on pharma not only showed new opportunities that were suddenly created in the market, but also exposed fragile weaknesses in the supply chain.
Trends in the API industry may no longer be trending, and other more pressing matters have taken center stage. As we hope to close the book on COVID, we are now faced with a potentially devastating conflict in Eastern Europe.
Trend #1: Repatriating API supply
At the outset of COVID-19, while there were still many uncertainties about the disease, there was an immediate spike in the demand for various APIs, especially antibiotics and other anesthesia-related products to allow intubation for people on respirators.
It became clear that the raw materials, intermediates, and finished API for these products were sourced and manufactured almost exclusively in the Far East. Governments realized this the security risk associated with being so dependent on foreign ingredients that they made a priority to understand the implications of repatriating API supply.
The US government made available hundreds of millions of dollars to help manufacture pharmaceutical chemicals locally. In India for example, they realized that approximately 90% of the APIs used to manufacture antibiotics was imported. The government there began aggressively implementing a policy to increase local output.
In Europe they began consultations about the possibility to relocate API manufacturing back to the EU. As recently as late March 2022, the French government announced that it is prepared to buy 12% of a French API manufacturing company when it will be publically listed later in the year. A move like this will support the country’s sovereignty in the critical domain of pharmaceuticals.
Of course, all of these initiatives cost large sums of money and take years to implement, so the long term effects are yet to be seen.
Trend #2: Inflation, energy costs & the great resignation
One does not have to look far to realize the price of everything is increasing rapidly.
Inflation in the United States alone is at a 40 year high. This is a result of several factors, of which the three main ones include: printing money to pay for COVID-related relief programs, surges in demand unable to be met by supply, and soaring energy costs. These impact the cost of virtually every product, either in the actual production including the labor, or the transportation.
As the developed world attempts to shift to renewable, ‘clean’ energy, oil and natural gas remain the dominant forms of energy. The new conflict in Eastern Europe is causing a shock to the energy markets not seen in some time.
On the topic of labor, a unique phenomenon dubbed by economists, “The Great Resignation”, took place where employees worldwide are resigning from their jobs with no new job necessarily lined up. This may be caused by COVID-19 stimulus payments, fear of the pandemic, wage stagnation, among other things.
This phenomenon has caused labor shortages, and in theory, should result in higher wages as firms attract workers, driving up costs and further stimulating inflation.
To summarize, API production costs are increasing, as well as the costs for getting the API to the customer’s plant where it will be manufactured into the finished product.
Trend #3: Environmental Social and Governance (ESG)
Throughout all of the chaos and uncertainty of the past few years, one important item has continued to garner the attention of leading organizations in many industries. Companies are making commitments and investments in ESG matters.
For API companies especially, their effects on environment and society can be profound. Efforts to minimize impacts on climate change through reduced greenhouse gas emissions, including reductions in energy use, and overall increased use of renewable energy are priorities for forward thinking API companies.
From a social perspective, ensuring that pharmaceutical companies have steady supply and quick access to their API to support the lives of their patients in an equitable way. Ensuring that business is conducted in an ethical and compliant way, with proper quality and data privacy systems in place.
At Teva api, we’ve set ambitious ESG goals for ourselves. We’re putting a huge focus on minimizing our impact on climate change through reduced greenhouse gas emissions, including reductions in energy use and an overall increased use of renewable energy. Two of our main targets are to reduce facility water use by 10% by 2030, and to reduce greenhouse gas emissions by 25%.
ESG remains an emerging topic that will become more and more important with time.
Trend #4: Digitization
If the world was digitizing quickly before COVID, the pandemic shifted things into hyper drive.
People were suddenly spending even more time in front of their computers and mobile devices than before. When the pandemic first hit, digital tools were quickly deployed and virtual meetings replaced face-to-face interactions. It became more important than ever before to have a strong online presence.
For companies, having a comprehensive digital strategy became a differentiating factor in the marketplace. A well-developed corporate website is no longer sufficient. Companies must have a strong social media presence to better engage with their customers and understand them. Depending on the type of company, a customer portal may want to bring even more added value to the customer, with live data and information about their ongoing business.
So, how will all these trends influence the future of API production?
It’s hard to know. We cannot of course predict the future, and the trends we bring here are a result and analysis of our global presence and the support we provide to leading pharmaceutical companies, but we have outlined in broad terms how we see the market trending.
We see these trends as inevitably meaning closer partnerships between API producers and the pharmaceutical companies. R&D expertise, quality control and product purity are the result of know-how, hard work and common understanding. Data integrity requires the sharing of technologies and customized software. New APIs, no matter what technology is used to develop and manufacture them, require API producers to enter into very close working partnerships with the pharma companies
At the core of this relationship is partnership, trust, communication, and a dedication to quality, regulatory compliance and data integrity.
For a more detailed analysis of your particular area of API manufacture, compliance or data integrity please contact us. Our team of experts is on hand to help you with all your API needs.