Domestic Manufacturing Is a Meaningful But Incomplete Answer

Drug shortages remain a difficult to fix issue for the pharma industry and are an issue that can have devastating results. Often times, shortages hit because of an increased demand for the medication, leaving patients waiting for gaps in the supply chain to be filled.

Pharmaceutical Executive spoke with Marc Wagner, an FDA and life sciences attorney at Fox Rothschild, about the manufacturing and regulatory pressures that contribute to drug shortages. According to him, these shortages happen for a variety of reasons and there is single fix.

Instead, there are multiple steps the industry must take to prepare for increases in demand and pipeline disruptions. A major issue is the industry’s dependence on overseas production, which leaves the supply open to global pressures. According to Wagner, a majority of generic drug products are manufactured outside of the US, meaning that these sites may not be unable to pick the slack.

Click here for the video version of this interview!

Pharmaceutical Executive: What manufacturing issues continue to contribute to drug shortages?
Marc Wagner: Drug shortages are a multifactorial systems failure driven by many different factors — overseas dependencies, manufacturer incentives including pricing and reimbursement, and regulatory burdens among them. But to directly answer the question of why manufacturing issues contribute to drug shortages, I think we first need to take a step back and define what a drug shortage actually is, because that definition shapes everything we see in the drug shortage marketplace.

The answer largely depends on who you ask. The FDA maintains its own definition of a drug shortage — and as of today, the FDA lists 70 drugs as currently in shortage. The American Society of Health-System Pharmacists tracks drug shortages separately, and according to their metrics, the number is 188. That is a dramatic difference — one organization is reporting more than twice as many shortages as the other. Getting clear on the definition is therefore critical to understanding the dynamics and the true scope of the problem.

As for the manufacturing issues that contribute to shortages: quality control failures are a significant driver. But compounding that, as I mentioned, is our dependence on overseas sources for raw materials, active pharmaceutical ingredients, and in some cases finished dosage products. Complex global supply chains, combined with manufacturing quality challenges, can all converge to create or worsen drug shortages.

Pharmaceutical Executive: What bottlenecks slow manufacturer response to increased demand for production?
Marc Wagner: There are several bottlenecks contributing to drug shortages. One of the most significant is overseas API dependency and the complexity of the global supply chain.

I like to analogize drug manufacturing to baking a cake. When you bake a cake, you need sugar, flour, eggs, and other ingredients. You mix them together, put the pan in the oven, and your finished product is a cake. Drug manufacturing, while far more complex, follows a similar basic structure. You need starting materials — active pharmaceutical ingredients — which are the equivalent of your sugar, eggs, and flour. You combine those in a highly controlled environment, and the end product is a finished drug.

The critical difference is that drug manufacturers don't have a grocery store down the street where they can procure their active pharmaceutical ingredients. Much of the API used in the United States is sourced overseas, primarily from India and China. Transatlantic shipments take time on their own. It takes time to qualify API suppliers. And in many cases, shipments pass through intermediary countries before reaching their final destination — meaning there are multiple stops along the way before the ingredients needed to manufacture a drug actually arrive where they need to be.

Beyond supply chain complexity, there are significant bottlenecks when manufacturing problems arise and a manufacturer needs to scale up production. If a company needs to modify an existing facility, add a new manufacturing site, or change an API source, there are regulatory requirements that must be met. The manufacturer typically must obtain FDA approval through a prior approval supplement or another supplemental submission to its new drug application. I have seen manufacturing site approvals take as long as three to four years.

Adding new equipment creates additional delays. Any time a production facility installs complex drug manufacturing equipment — whether by adding a new production line or modifying an existing facility — the company must complete qualification and validation, including installation qualification, operational qualification, and performance qualification. Each of these steps takes considerable time before the equipment can be used in commercial drug manufacturing.

Pharmaceutical Executive: What role can 503B outsourcing and compounding pharmacies actually play in filling supply gaps?
Marc Wagner: State-licensed pharmacies compounding under Section 503A of the Federal Food, Drug, and Cosmetic Act, and 503B outsourcing facilities registered with the FDA, both play critical roles in helping to mitigate drug shortages. Neither type of compounding entity is a silver bullet — they cannot solve every drug shortage — but there is a meaningful role in the drug supply chain where these facilities can step in, provide gap supply, and help mitigate shortages for products on FDA's drug shortage list.

As a pharmacist by training, I have a natural affinity for compounding pharmacies and outsourcing facilities. And both Congress and the FDA have recognized these facilities in legislation, giving them the ability to compound drug products when those products appear on the drug shortage list.

Section 503A state-licensed pharmacies are permitted to compound what the FDA calls "essentially a copy" of a commercially available product — meaning they can compound the same drug a conventional manufacturer produces if that manufacturer's product is not commercially available.

Section 503B outsourcing facilities operate similarly. They are permitted to compound from bulk drug substance — active pharmaceutical ingredient — and can produce an exact copy of an FDA-approved product when that product is on the FDA drug shortage list. Congress has explicitly recognized 503B outsourcing facilities as an important tool for mitigating drug shortages.

We have seen both compounding pharmacies and outsourcing facilities step up during major shortage events. During the COVID-19 pandemic, they played an important role filling gaps in sterile injectable products used in hospital settings that were on the shortage list. More recently, both types of facilities stepped in to help address the GLP-1 shortages that emerged around 2022 and 2023. Both remain available and positioned to respond as new shortages arise.

Pharmaceutical Executive: What impact will the renewed focus on domestic manufacturing have on the supply chain?
Marc Wagner: Increasing domestic manufacturing — onshoring the production of pharmaceutical products in the United States — is certainly one important step toward further mitigating drug shortages. It is not a complete solution on its own, but it is a meaningful move in the right direction.

From a regulatory standpoint, the FDA simply has more resources to inspect domestic facilities than foreign ones. It is straightforward logic: an inspector traveling halfway around the world to conduct an inspection requires more time and more resources than an inspection of a domestic facility. Greater domestic manufacturing presence means more accessible, more frequent, and more efficient oversight.

Bringing API manufacturing back to the United States would further reduce shortage risk. As I noted earlier, pharmaceutical supply chains — and the supply chains for the ingredients that go into pharmaceutical products — are highly complex. The more we can localize those supply chains, the fewer opportunities there are for something to go wrong at any point in the manufacturing process.

Domestic manufacturing alone is not the complete answer to drug shortages, but increasing it and diversifying it will meaningfully reduce the risk.